Philips 2Q profit drops 54% despite Strong Sales

Philips Electronics said on Monday that profit in the second quarter has dropped by 54 percent in spite of good business in emerging markets. The Biggest European television maker blamed the profit plunge on low-prices in the U.S. and its damaged stake in a microchip maker that it no longer runs.

The decline in profit is so steep because high earnings were recorded during this period last year as the company made big gains from the sale of its stake in Taiwan Semiconductor Mfg.

Net income dropped to €720 million ($1.14 billion) or 71 cents a share, from €1.57 billion, or €1.41 a share, a year earlier, said the Amsterdam-based company.

Sales went up 6 percent to €6.46 billion, above analysts' expectations of €6.35billion. Analysts had forecast a profit of €183.5 million.

The company said that selling off its stake in Taiwan Semiconductor Manufacturing, under a plan to reduce its holding in the firm to zero by 2010, produced just €780million, €440 million less from €1.2billion in the second quarter last year.

Also, it recorded a 299-million-euro impairment charge for NXP Semiconductors, the chip section which is now controlled by private-equity groups.

Although, the Euro 2008 football tournament helped TV sales in Europe, chief executive, Gerard Kleisterlees said the company recorded its biggest quarterly loss from TVs in more than a year as prices in the United States dropped amid competition from Sony and Samsung Electronics.

The Dutch company has been thinking of implying cost-cuts at the television business, and has said that it will cut more than half of the 526 jobs at a flat-panel TV plant in France and that Funai Electric will make and sell televisions under the Philips brand in the United States.

However, Kleisterlees remained optimistic about the sales results, saying they proved the company's resilience “in a rapidly deteriorating macro-economic environment.”

Pierre-Jean Sivignon, Philips' chief financial officer, said he expects emerging markets to continue to do well, an area of much concern during a presentation to investors.

Experssing confidence in the business from emerging markets, Pierre-Jean Sivignon, Philips' chief financial officer said that they do not see retardation at this point.

"We saw a blip in China in May, certainly the earthquake must have impacted the economy, but Thailand, Indonesia and Vietnam are doing better for us," he said.

Philips Electronics shares rose 7.1% in Amsterdam trading, though they're down nearly 36% over the past year.