Philips expects chip loss

June 15, 2001 Posted: 0939 GMT

LONDON (CNN) -- Philips Electronics said it expects its chip business to post a second-quarter operating loss of about $151 million as sales slow.

Europe's biggest consumer electronics company warned on Friday it expects a "significant loss" for the whole company in the second quarter. Chief Financial Officer Jan Hommen declined to offer further guidance.

For the full year, Philips expects to make a small net loss or come close to break-even. Philips said revenue from it semiconductor unit, Europe's No.3 chip maker, would fall by between 20 and 25 percent from the first-quarter.

The warning comes a day after its bigger rival STMicroelectronics (PSTM) forecast second-quarter sales would fall to between $1.55 billion and $1.60 billion, down 16 percent on the same period a year ago.

Texas Instruments  (TXN: Research, Estimates) reiterated on Wednesday an earlier profit warnings that second-quarter profit would decline 20 percent, compared to the first three months of the year.

"There is no sign of a recovery" in the semiconductor industry, Hommen said.

Philips, the Dutch maker of everything from flat-screen TVs and computer chips to toasters and light bulbs, said revenue fell "as a result of continuing weakness in it key markets" and a glut of chips in stock after demand for mobile phones and satellite set-top boxes declined.

Philips's mobile phone, laser optics and set-top boxes businesses account for up to 18 percent of its chip units revenue, Hommen said.

Hommen said the company would reduce its semiconductor inventories by 100 million after racking up 200 million worth of chips in stocks in the first-quarter.

As a result of the lower revenues, Philips plans to take a one-time pretax restructuring charge of about 90 million to pay for the transfer of a production line from Albuquerque to Fishkill in the U.S.

The charge comes on top of a 350 million charge Philips Eelectronics said it would take in April to reorganise its businesses and pay for the loss of 7,000 jobs.

Philips said it would also take a decision on the future of the mobile phone business later this month. The company may follow the example of rivals Alcatel (PCGE) and Sweden's Ericsson and dispose of or operate their wireless handset businesses at arms length.

Shares in Philips Electronics fell 5.7 percent to 27.98 in early Amsterdam trade.

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