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Royal Philips to miss 2006 CE target

Posted: 07 Dec 2006     Print Version  Bookmark and Share

Keywords:consumer electronics  target  sales  NXP  Philips 

Royal Philips Electronics is set to miss its 2006 target of four per cent operating margins in the consumer electronics (CE) division, which generates about 40 per cent of group sales. It said it would be "slightly shy" of this year's target.

The company also revealed at a meeting with analysts early this week that it has scrapped plans to make mobile personal navigation systems, citing tough competition and a saturated market that meant that the initiative would not be profitable. Philips said in June that it was planning to make its own navigation devices and enter the business by the end of this year.

Despite these setbacks, Philips insisted that its two main consumer businesses, CE and domestic appliances and personal care, are on track to achieve their targets for the next year.

Additionally, Philips announced further cost-cutting measures and indicated it is constantly looking at "targeted acquisitions" in CE peripherals and accessories—a business the company says that is achieving double-digit growth and EBITA (earnings before interest, taxes and amortisation) margins of eight per cent to 10 per cent.

"After 8 consecutive quarters of profitability, I believe we've shown our asset-light business model is the right strategy for succeeding in the highly-competitive consumer electronics market," noted Rudy Provoost, CEO of Philips Consumer Electronics.

The company also said it will cut about Rs.454.29 crore ($99.8 million) in service and management costs by the end of next year and reiterated its targets for its main business units. The cuts would come mainly through "simplification of the country management structure, removal of a regional management layer and the transfer of staff to NXP to establish their corporate centre", Philips said in a statement.

- John Walko
EE Times Europe

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