Philips Issues a Profit Warning

Royal Philips Electronics, Europe’s biggest electronics company, said its key semiconductor business will earn less than expected in the first quarter and its full-year earnings will fall short of earlier growth forecasts. The company cited the slowdown in the U.S. economy and gloomy forecasts by European companies that use its semiconductor chips. Philips said it expects income from semiconductors to fall 10%, although sales in the division will rise 7%. It expects the components and consumer electronics division to report a first-quarter operating loss, but made no specific forecast. For the year, the company still expects to outperform the semiconductor market by 5%, but said it will fall short of its target of a 15% growth in earnings. “What’s surprising is not the profit warning itself, but that Philips felt it didn’t need to say anything about this until now,” said Rabobank analyst Frits de Vries.