In the same week that German ERP vendor SAP AG said the fallout from the Asian crisis had impacted its business to a greater degree than expected, Dutch electronics conglomerate Royal Philips Electronics NV revealed yesterday that it suffered a downturn in its Asian businesses in the first half, and it expects its end-of-year figures to reflect the ongoing turmoil in that region. The company’s figures were, in general, positive ones, with second-quarter net profits up 38%, at the equivalent of $513m on sales up 3.8% at $8.9bn, while the mid-term net rose 58.7% to $1.29bn on revenues up 7% at $17.7bn. Of the first-half net income, $509m were in extraordinary items, primarily relating to the sale of Philips Car Systems to the German company Mannesmann VDO and Optoelectronics to Uniphase Corp. The numbers fell short of analysts’ expectations, such that Philips’ share price dropped slightly after the results were published: its stock was down 1.16% at $85.50 in early trading in New York. In common with other companies, there is a marked difference in their performance from one geographic region to another. In Philips’ case, while income from the European operations ‘increased sharply, predominantly in Germany, Austria, UK, Belgium and Iberia’, there was a downturn in North America, due mainly to Philips Consumer Communications, the company’s 60/40 association with Lucent in fixed and mobile equipment. It was in Asia, which is responsible for 21% of group turnover, that poorest results were seen, however, with sales in the five worst-hit countries coming in at 25% below the same period last year. Asia also took its toll on Philips elsewhere in the world, as its Latin America also showed a loss, which ‘fully originates from Brazil’, where the government was obliged to take recessive measures in October and November to ward off contagion from the Asian financial markets’ meltdown. The problems in Asia are more fundamental and longer lasting than was anticipated, Philips admits, acknowledging that its performance in the second half will be in part dependent upon how far economic developments in Asia affect the rest of the world.
