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Philips profits, jobs cut
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April 17, 2001: 8:25 a.m. ET
Dutch electronics maker expects 2Q net loss; plans to cut up tp 7,000 jobs
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LONDON (CNN) - Philips expects to post a loss in the second quarter amid weaker demand and plans to slash up to 7,000 jobs, the Dutch firm said on Tuesday.
Europe's biggest electronics maker and third-biggest chipmaker said its semiconductor business has been especially affected by the downturn in the telecoms and personal computer markets.
The announcement was the latest in a spate of profit warnings and job cuts from the likes of telecoms equipment makers Motorola (MOT: Research, Estimates) and Ericsson (ERICY: Research, Estimates) and Silicon Valley giant Cisco Systems (CSCO: Research, Estimates).
Cisco announced late Monday that it plans to eliminate 8,500 jobs as part of cost-cutting measures as it warned that third-quarter results would be weaker than expected.
Phillips said first-quarter net profit, excluding exceptional gains, fell to  53 million, compared with 614 million in the year-earlier period as demand for its products was hit. Sales dipped 1 percent to 8.2 billion.
Analysts polled by Reuters had expected the Dutch company to report a first-quarter net profit from ordinary operations of 178 to 370 million, with consensus at 275 million.
"We see no signs that the slowdown in economic activity in certain parts of the world, particularly the USA, is near its end," the company said. "This will continue to cause low growth and high price erosion for some of the markets in which Philips is active."
Shares in Philips plunge
Philips, which last month warned of a 10 percent drop in first-quarter chip profit, gave no estimates for the second quarter net loss.
Shares in Philips plummeted 15.6 percent to 27.26 by early afternoon in Amsterdam.
Chief Financial Officer Jan Hommen said the pace of the slowdown had surprised Philips and its rivals.
"We have become a little bit more positive about mainstream consumer electronics, but we are still afraid to be very specific about semiconductors and components," he said, adding the chip division should outpace the industry by 5 percent.
Philips also said it would take a one-time 350 million ($311 million) charge in the second quarter to cover restructuring costs in its underperforming businesses in the components and consumer electronics division.
"The numbers blew me away... They have to decide what they're doing with PCC (the mobile phone handset unit)," said Navdeep Sheera, analyst at Schroder Salomon Smith Barney. "This isn't going to get better. Consumer electronics was the business they were meant to have been sorting out."
Philips said it has cut capital expenditure by 2.5 billion and will reduce it further if needed. The company said it plans job cuts of between 6,000 and 7,000.
Rival chipmaker STMicroelectronics (PSTM) is due to post its first- quarter results on Thursday while mobile phone network equipment and handset makers Ericsson and Nokia report their figures on Friday.
--from staff and wire reports 
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