Recovery at Philips Electronics Stalls Amid Crises, U.S. Setback
Philips Electronics NV's two-year financial recovery ground to a halt as the company reported an 853 million guilder ($437 million) operating loss for the fourth quarter.</br></br>The economic crisis in Asia and parts of Latin America, as well as a costly fiasco in the U.S. mobile phone market, took a big toll on Philips's results, reversing a 1.16 billion guilder operating profit in the yearearlier quarter. The loss partly reflects two billion guilders in charges and provisions taken to cover such problems.</br></br>Reflecting the difficult market conditions, sales fell 6% to 19 billion guilders from 20.3 billion guilders. Net income, however, jumped to 10.32 billion guilders from 2.67 billion guilders, buoyed by onetime gains largely related to the sale of Philips's 75% stake in PolyGram NV to Canada's Seagram Co.</br></br>Philips warned that it expects to report lower earnings during the first two quarters of this year, while a possible recovery would have to wait until the second half of the year. Philips will "return to double-digit growth of earnings per share" in 1999, Chief Executive Officer Cor Boonstra vowed at a news conference in Amsterdam.</br></br>Analysts said Philips still has plenty of upside potential left. While its entry into the mobile phone market proved disastrous, the company has gained consumer electronics market share in Asia, bolstered its brand name in the U.S., expanded a highly succesful semiconductor business and bolstered its balance sheet by disposing of noncore businesses such as PolyGram.