Royal Philips Electronics NV reported second-quarter profit that exceeded analyst estimates as chief executive officer Frans van Houten considers the strategic options for its business making MP3 players and consumer multimedia devices.
Earnings before interest, taxes, amortization and one-time items were 504 million euros (US$609 million) compared with 395 million euros a year earlier, the Amsterdam-based company said in a statement yesterday. The average estimate of three analysts surveyed by Bloomberg was 434 million euros.
Van Houten is in his second year as CEO, with the task of tackling struggling consumer-electronic businesses against a backdrop of deteriorating economies. The company is reviewing “various business models” for its Lifestyle Entertainment division to drive more value, and has signed a distribution agreement in North America with Funai. It is too early to draw any conclusions on future strategy for the unit, the CEO said.
“Importantly, Philips is considering the strategic options for its Lifestyle Entertainment business, which we find a positive development,” Kempen Research analyst Erwin Dut said in a note. “Clearly Frans van Houten is taking decisive action in addressing underperforming assets early.”
Shares in Philips rose as much as 5.6 percent to 17.12 euros, the biggest intraday jump since April 23. They traded at 17 euros as of 9:28am. Prior to yesterday, the shares had dropped 0.4 percent this year, valuing the company at 16.9 billion euros. Siemens AG was down 6.4 percent, while General Electric Co had advanced 11 percent.
Sales of 5.89 billion euros beat a 5.58 billion euro analyst prediction.
Philips already sold the Senseo coffee brand to Sara Lee, divested real-estate and appointed new managers for health care and lighting units as it competes with Siemens and General Electric. The audio, video and multimedia business generates about 2 billion euros in sales, Dut said.
The Dutch electronics maker, which also makes hospital scanners and other medical equipment, plans to keep its lighting division, even as a close competitor opts to divest its bulb division. Siemens is poised to sell its competing lighting division when markets improve.
Philips’ market share in LED lighting has now overtaken its position in traditional bulbs and there are opportunities as the new technology gets more widely adopted by governments and consumers. Philips won a contract to upgrade street lighting to LED in the Belgian city of Mechelen.
More improvements to profitability will come through in the second half and into next year and next year’s goals remain unchanged, Van Houten said in an interview.
“Overall, the cost-saving initiatives are on track, resulting in improved operational performance,” Van Houten said.