Struggling Dutch electronics giant Philips N.V. will bolster its half-year results by including the 3.09 billion guilder ($ l.62 billion) sale of its 35% stake in Matsushita Electric Corp.
Philips completed the sale on May 31 to Matsushita of Japan, its partner in the joint venture. But in a report filed this week to the Securities & Exchange Commission in Washington, the Eindhoven-based company said resulting profits — estimated to be 1.1 billion guilder ($ 500 million) — will be offset by “provisions expected to be made in connection with certain businesses which are projected to be discontinued or sold.”
Set up in 1952, MEC, which produces semiconductors, television screens and lighting projects, has 22,000 employees.
The two partners decided to end the joint venture because of “the growth and the geographic spread of MEC’s activities,” according to Philips. The fact that Philips only held a minority stake without management responsibility also influenced the decision, Philips president Jan Timmer said.
The MEC stake is expected to brighten Philips’ half-year results, following several years of decline. The firm blames the worldwide consumer electronics slump, plus price erosion in Europe, for a continued slide in sales and profits. The half-year results will be announced Aug. 5.
For the first quarter of this year, Philips reported a net profit of $ 54.2 million, on turnover 2% lower than the same period in 1992, at $ 7.2 billion. Even though net earnings were some 36% lower than in the previous year, the news surprised many analysts who had expected the losses to be much heavier.
Combined net income across all Philips’ product lines dropped by 36%, to $ 56 .8 million, compared to 1992. The heaviest losses –$ 31 million before tax — were recorded by the consumer electronics division, a 7% drop from 1992’s performance, while the biggest gain –$ 121 million before tax — was in components and semiconductors, up 67%.
Philips says earnings and sales will remain pressured as a result of continuing recession in Europe. The company refuses to provide a full-year forecast because it says there is no sign of improvement in its major European markets.
The concern now has some 257,500 employees worldwide. It expects to cut 10, 000-15,000 jobs this year, most outside the Netherlands.