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Chip profits leap in Europe
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July 18, 2000: 5:43 a.m. ET
2Q earnings surge at Europe's leading chipmakers
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LONDON (CNNfn) - Two of Europe's largest high-technology firms reported bumper second-quarter earnings Tuesday, as the booming market for semiconductors boosted the bottom line. Chipmakers' shares fell, however, with analysts saying some investors were selling to take advantage of share-price gains in the past two weeks
Royal Philips Electronics NV reported that revenue in the quarter ended June 30 rose 25 percent to  9.12 billion ($8.5 billion), while earnings excluding one-time items rose to 699 million from 274 million in the same quarter last year. Analysts had forecast profit of 642 million,  according to Reuters.
Philips booked substantial profits from asset sales, particularly the divestment of a stake in chip equipment maker ASM Lithography Holding NV, taking its net quarterly earnings to 3.6 billion, or 2.71 per share. Gains in operating earnings were driven by consumer electronics, components and semiconductors. The only blot on the landscape was its technology consulting arm, which fell to a small first-half loss.
The current year "is shaping up to be a record year in every aspect: sales, income from operations...we will meet all our financial objectives this year," Philips said in a statement. Nevertheless, its stock fell 4 percent to 53.90 in Amsterdam.
In the first half of 2000 Philips generated operating income of 1.39 billion, up 60 percent from a year earlier. Semiconductors provided the largest individual contribution to operating earnings in the first half, almost doubling to 565 million. Earnings at the lighting division grew 16 percent to 367 million, while the consumer electronics unit's contribution jumped to 203 million from 63 million last year.
French chipmaker STMicroelectronics, which competes with Philips in the semiconductor business, made similarly bullish noises as it posted a doubling in second-quarter profit.
"We anticipate that the company's operating margin for the third quarter will be above the record level achieved in the second quarter," said Chief Executive Pasquale Pistorio. He attributed the better financial performance to a higher prices, strong demand and internal improvements to the company's cost base and structure.
STM said revenue for the three months to the end of June rose 58 percent to $1.88 billion, while net income soared 175 percent to $336 million, or $0.37 per share, up from $0.14 a share the previous year.
Pistorio boasted that STM's first-half profit of $575 million was 5 percent more than the company's 1999 full-year profit. He said demand was "robust", especially in the consumer and telecom divisions, vowing that the company would continue to spend heavily on research and development.
STM (PSTM) stock fell 1.7 percent to 70.75 in Paris. 
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