Philips sounds a high-tech warning

Philips sent a shiver through Europe’s high-tech industries this week when it revealed the impact of the economic slowdown on its financial performance.

The Dutch electronics giant said the ‘rapid and remarkable’ downturn in the PC and telecoms sectors had hit trading at its components, consumer electronics and semiconductor divisions.

Philips plans to shed up to 7,000 jobs worldwide and warned that it expects to make a loss in the second quarter of 2001.

Its first-quarter figures showed a staggering decline over the past year. In the three months to March, Philips made a net profit of £65m compared to £699m for the same period in 2000.

Sales fell 1.5% to £5bn and its profit margin was slashed by half to 4% as weakening demand pushed down prices.

A statement from the board left little room for short-term optimism over the state of its key markets. ‘We see no signs that the economic slowdown in certain parts of the world, particularly the US, is near its end,’ it said.

‘This will cause low growth and high price erosion to continue for some of the markets in which Philips is active.’

The company said it had cut capital expenditure and would reduce it further if necessary.

Other high-tech companies have also issued dire warnings. but the scale of Philips’ bad news appeared to take the markets by surprise. The company’s shares fell 10% on early trading in Amsterdam to around £17.25.