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Philips to cut more costs
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January 8, 2002: 6:29 a.m. ET
Dutch consumer electronics company plans to save $890M as it restructures
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LONDON (Reuters) - Philips, Europe's biggest consumer electronics company, said on Tuesday its restructuring could save  1 billion ($890 million) annually.
The savings, expected by the second half of 2003, are a big increase on its previous target of cutting 300 million from the company's overhead costs of 1.2 billion.
Philips said on Tuesday it plans to achieve its target by shedding 12,000 jobs, that's 1,000 more than it originally announced last year, by the end of 2002 and other operational improvements.
Philips Chief Executive Gerard Kleisterlee made the comments on savings in an interview published in Tuesday's Wall Street Journal Europe, and spokesman Jeremy Cohen confirmed them.
The company, which expects to post a loss for 2001, will report its full-year results on February 7. Philips stock rose 1.2 percent to 34.00 in midday Amsterdam trading on Tuesday.
Analysts said the upbeat comments from Philips were extremely positive for the share, but said they expected the company to only meet the ambitious targets if the economy, and in particular the semiconductor industry, turned around.
The chip sector in 2001 suffered the worst slump in its history, amid chronic overcapacity and falling demand. Many industry participants expect the gloom to ease in 2002, after moves by several chipmakers in recent weeks to raise contract prices.
"Some of these (Philips) cost savings come from overhead and some from operational improvements in the units. Philips will need a lot of help from factors outside of its control to meet these numbers," said ING Barings analyst Steven Vrolijk.
Philips' Kleisterlee also said analysts were wrong to speculate that Philips' chip unit may form a joint venture with either ST Microelectronics or Infineon. Instead, he said, the company could buy a smaller chipmaker.
"We are not looking at a merger, but at any given time I have a list of at least five semiconductor makers that we'd like to acquire," Kleisterlee said. 
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