Philips posts $1.4 billion loss

AMSTERDAM, the Netherlands -- Philips Electronics, Europe's biggest consumer electronics group, posted a second-quarter loss of 1.36 billion euros ($1.37 billion) as it slashed the value of its stake in Vivendi Universal.

The loss announced on Tuesday dwarfed the 770 million euro loss it made during the same period a year ago. Philips, which owns a 3.5 percent stake in Vivendi, has been forced to write down the value of its stake in the world's second-largest media company after the French company's stock fell more than 70 percent this year.

Philips, which has seen its stock fall more than 30 percent this year, owned 11 percent of Seagram, the owner of Universal Studios and music group, which was bought by Vivendi in 2000. Since then Vivendi has fallen on hard times leading to the ousting of its chief executive Jean-Marie Messier.

Excluding the impairment charge, Philips made a profit of 171 million euros ($172 million), as sales rose 4 percent to almost 8 billion euros.

The company, which is also Europe's third-largest chipmaker and biggest maker of light bulbs, offered hope to a battered technology sector, saying it expected an improvement in the second half in "virtually all" its sectors.

A recession in the United States, Japan and German at the back end of 2001, excess supply of chips and other goods has caused many problems for Philips. The Dutch company posted its largest full-year loss of 2.6 billion euros since 1996 in February as demand for chips and televisions slumped.

But Chief Executive Gerard Kleisterlee, who refused to take up his entitlement to a 2002 bonus, has moved to slash more than 12,000 jobs and sell some businesses to save as much as 1 billion euros annually.

"Despite challenging circumstances, Philips has been able to extend the improving trend into the second quarter when excluding the impairment charges. Cash flow from operations was strong, margins improved, and comparable sales showed positive growth for the first time since the fourth quarter of 2000,'' Kleisterlee said in a statement.

Its semiconductor business made a loss of 64 million euros in the second quarter but that was less than the 255 million loss racked up in the same period a year ago. The chip sector suffered its worst slump in history last year amid chronic overcapacity and falling demand.

The company's results were boosted by a better-than-expected performance in non-consolidated items, especially its flat-panel screen-making joint venture with South Korea's LG.

"Philips came in above our estimates and above consensus. It was a solid performance. I think they may have taken a slight step backwards on outlook, but it's very difficult to predict,'' Schroder Salomon Smith Barney analyst Navdeep Sheera told Reuters.