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Philips chip profit to fall
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March 20, 2001: 9:01 a.m. ET
Europe's No. 1 consumer electronics firm expects operating loss in main unit
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LONDON (CNN) - Philips said on Tuesday the weaker U.S. economy cut into its chip unit profit and forecast 10 percent lower earnings in the first quarter.
Europe's biggest consumer electronics maker also said it expects that its component and consumer electronics divisions will report "negative income from operations" in the period.
Philips, Europe's No. 2 semiconductor manufacturer, said the profit fall will come even as sales of semiconductors were expected to be 7 percent higher compared with the first quarter in 2000. The company also blamed the chip slowdown on profit worries within the telecom and computer-related industries.
The announcement was the latest in a spate of tech profit warnings from Intel (INT: Research, Estimates), the world's largest chipmaker, to Franco-Italian rival STMicroelectronics (PSTM) and French cell-phone and network equipment maker Alcatel (PFTE).
The Dutch company had warned last month that sales of semiconductors in the first quarter were expected to fall by some 15 percent versus the fourth quarter of last year. Philips on Tuesday gave no further figures on the first quarter sales.
Operational performance at Philips' lighting, domestic appliances and personal care, and medical systems divisions, was expected to be equal or better than last year, excluding acquisition-related charges, the company said.
Philips has cut back capital spending to adjust cost structures to the new market conditions.
Philips shares fell in afternoon Amsterdam trade to  31.60, down 2.9 percent on the day and more than 45 percent below their 52-week high of 58.30 hit in September.
Analysts said they the profit warning was pretty much in line with their expectations.
"It's not a great surprise, given what we've heard from other handset makers and chip makers," said Peter Knox, analyst at Commerzbank Securities in London.
Another analyst at an investment bank in London, who declined to be named, said he was concerned about the company's operating margins and that it was too easy for Philips to blame the loss in its components and consumer electronics division on the economy.
Philips spokesman Ben Geerts told CNN the company stood by its February forecast that its semiconductor sales would be above the market.
"For the year, we will outperform the market by five percent," Geerts said.
Philips is due to report its first-quarter results on April 17. 
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