Philips to miss 2010 earnings target

Amsterdam: The largest European consumer electronics company, Royal Philips Electronics NV, has said that it will be unable to meet its target of doubling its earnings by the year 2010.

The company cited the weakening economy as a reason that impacted demand for consumer products, and said that losses or write downs during this quarter would lead to the first net loss since the beginning of 2003.

In a statement yesterday, Philips said it would cut the value of its stakes in companies such as the liquid-crystal display (LCD) manufacturer LG Display Co. Ltd and chipmaker NXP BV by around €1.1 billion during the quarter.

Analysts were reported as saying that the size of the disappointments announced were larger than what they had expected, since they had previously estimated a smaller impact on account of a more defensive portfolio.

Philips chief executive Gerard Kleisterlee said the speed and ferocity of the economic downturn is impacting Philips earnings, which has been exiting the semiconductor industry in order to better insulate itself against economic swings. Philip has decided instead to focus on industries like medical equipment and lighting.

An October announcement by the company said that it would go easy on its buy-back plan of around €5 billion in order to conserve cash. Prior to that, in April, Philips had said that its earnings before interest, tax and amortization (Ebita) should rise to 10 to 11 per cent of sales by 2010.