Philips Electronics has announced it’s cutting 4,500 jobs as third-quarter net profits fell 85% to 76 million euros, down from 524 million euros a year ago.
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CEO, Frans van Houten, says the company needs to reduce its overhead costs in order to move forward.
“I don’t like to announce job cuts but it is necessary to make Philips a more agile and lean, entrepreneurial company. We want to invest in innovation and further market penetration that will help Philips grow in a profitable manner.”
Europe’s biggest consumer electronics producer has been hit by a combination of rising raw material costs, weak consumer confidence and sluggish growth in construction.
The company’s healthcare unit reported 7% third-quarter growth with developing markets and the United States doing well. But van Houten is concerned about Europe.
“We need to see decisive action from government and European leaders to stem the impasse with regard to the euro crisis.”
The electronics maker is continuing negotiations with Hong Kong-based TPV to sell off most of its TV business. While discussions are taking longer than expected, there are hopes they will be concluded next month.
Van Houten says there are no plans to sell off the company’s lifestyle entertainment business and is confident it has a good future, despite the economic uncertainty.
“We face the need to change the portfolio to more exciting and fast growing categories such as audio docking stations for mobile phones and iPads. This is in high demand and we see good growth in these categories, also in headphones, whereas the older categories of DVD players are less in demand.”
Philips’ share price has plunged almost 40% over the last year as it struggles to compete with lower cost Asian consumer electronics makers.
Bottom line: Philips CEO, Frans van Houten, says job cuts are necessary for future growth, as third-quarter net profits fall 85%.