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November 4, 1993

THE CUTS BEGIN TO PAY OFF FOR PHILIPS, BUT THERE ARE STILL MORE TO COME

By CBR Staff Writer

Reporting much more healthy nine-month figures, Philips Electronics NV said its earnings were helped by a capacity shortage in components and semiconductors for televisions, personal computers and portable communication devices, adding that an overhang of components last year was followed by a shortage this year, helping operating profit in the components and semiconductors division to surge 123% to the equivalent of $398m in the nine months.But operating profit in professional products and systems slumped to $27m from $218m in the nine months, because of a lower level of investment in telecommunications infrastructure in Germany, in France and the UK, and the company will shed a large number of jobs at its German subsidiary (see front). Operating losses in consumer electronics were stemmed a little, to $135m, but the company asserts that Germany – particularly its Grundig subsidiary, where it is bidding to buy out the majority – is still a big problem. The company says it will be selling further companies in order to reduce its debt next year, its target being a debt-to-equity ratio of 40:60 against 52:48 at the end of September. Philips is adding another $210m to its provisions against further possible losses.

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