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Falling TV Sales Bring Down Philips' Profits

Sagging sales, especially in the U.S., dragged down first-quarter profits, as Royal Philips Electronics reported net income nearly 20 percent lower than analysts had forecast.

AMSTERDAM, Netherlands (AP) -- The television age appears to have faded somewhat for Philips, the Dutch company that carries a global reputation for its home electronics.
Sagging TV sales, especially in the United States, dragged down first-quarter profits, as Royal Philips Electronics NV reported net income of 219 million euros ($347 million), nearly 20 percent lower than the 273 million euros analysts had forecast.
Net profit was down 75 percent from 875 million euros in same period last year -- a quarter boosted by a 733 million euro sale of a semiconductor manufacturer.
Chief Financial Officer Pierre-Jean Sivignon said there was stiff competition in the TV market.
''The U.S. remains the black spot, but when we look at the quarter it was tough all across,'' he said in a conference call.
Europe, where the Philips brand is much stronger than in North America, also lost money on TV sales, and is unlikely to show any profit for the rest of the year, he said.
As TV sales lag, Philips has taken aggressive action. Last week it announced a five-year licensing deal with Funai Electric Co. Ltd. of Japan to market the Philips brand in North America. Philips is taking a charge of 125 million euros to cover the cost of the transfer and other steps to boost TV sales.
Sivignon said Philips had no immediate plan to find a similar solution in Europe, but was keeping its options open. For the time being, it is focusing on cost efficiencies for TVs -- a product it has been developing since 1925.
This quarter included a gain of 83 million euros ($131 million) for the partial sale of LG Display, Philips said.
Shares fell 3 percent to close at 23.18 euros ($36.78).
The company's growth area was in medical systems, like ultrasound and other imaging equipment. It was helped by the acquisition of Respironics Inc., which makes products to help people with sleep disorders. Comparable sales for the division grew 5 percent over the same quarter in 2007, and equipment orders were up by 9 percent, the company reported.
Lighting grew by 3 percent in comparable sales, it said. Philips is the world's largest maker of light bulbs, and energy-saving devices is now about half its portfolio of products.
Analyst Jurgen Smits van Oyen of Petercam said the quarterly results were unimpressive, but no cause for excessive concern. Consumer products were disappointing, but that was balanced by ''positive surprises'' in health care.
''On balance, we believe the company has released a fairly decent set of results given the economic circumstances,'' he said.
Chief executive Gerard Kleisterlee said the company's performance was strong across most sectors. ''Unfortunately our results are clouded, more than we like, by the adverse situation in our TV business'' and lower revenue from license agreements.
Kleisterlee said he was confident about Philips' progress in 2008 and that it was on target to meet its 2010 goals to increase earnings per share before interest, taxes and amortization to 10 percent or more.
Philips said it expected a further softening in mature markets, and will focus on investing in emerging areas and on integrating recent acquisitions.
''Essentially, it was a good start to the year,'' said Sivignon, excluding the sale of stakeholdings and disappointing TV sales. ''We look forward to an encouraging second quarter.''
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