More than just a tough climate in the data processing sector can be blamed for creating management weaknesses at Philips: it seems that many of its top staff are becoming increasingly exasperated because of internal problems Philips is not prepared to face up to, reports Computerwoche. The situation at the German Philips Kommunication Industrie AG has reached a head, with operating profits for the year crashing 65% to $28m and net profit falling to $22m from $45m; in the same period, sales have fallen 3% to $1,076m. PKI chairman Manfred Conrad blames disastrous price wars in the office and information technology sector, but insiders are more inclined to find other faults, namely that both the mother company and the German arm were too late in moving into the personal computer market because it was thought that these machines would be competing with mid-range computers. Instead, it is thought that the attempt was made to bind what were once considered captive Philips customers even more closely to the company – a practice that had brought Philips success in the 1970s. Nonetheless, heads of the Nurnberg-based PKI repeat that they are not expecting the situation to change at the moment, because the market is still only seeing slow growth rates, and the price war shows no sign of letting up in the foreseeable future. Meanwhile, those close to the company are convinced that the problems are more of Philips’ own making – but like Nixdorf, its German operations are a victim of employment laws that make lay-offs a last resort after the condition of the firm has already become critical to terminal.