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Philips expects a rebound somtime in the second half

Royal Philips Electronics NV, Europe's largest maker of consumer electronics, said it expects an improvement in "virtually all" its businesses in the second half.

The Amsterdam-based company's second-quarter loss widened to 1.36 billion euros (US$1.37 billion) after it wrote down the value of its stake in Vivendi Universal SA by 1.52 billion euros.

Excluding writedowns and other one-time items, the company earned 171 million euros, more than analysts expected.

"Saying that earnings in the second half will be better than in the first half is exactly what the doctor ordered for today's market," said Rob Koenders, a money manager at Eureffect BV in Amsterdam, which owns Philips shares. "With a story like this, I'm buying Philips."

The company returned to profit at its consumer electronics business and had a narrower loss at its semiconductor unit. Second-quarter sales rose 3.9 percent to 7.99 billion euros. The shares rose as much as 1.20 euros, or 5.2 percent, to 24.40 euros in early trading.

Philips still expects a full-year profit, excluding the Vivendi writedown, spokesman Jeremy Cohen said in an interview.

Philips' sales slumped 15 percent last year and the company had a record loss as consumers delayed purchases of TVs and DVD players and businesses reined in spending on semiconductors and components for cellular phones and computers. Chief Executive Officer Gerard Kleisterlee cut 9 percent of the workforce to try to save 1 billion euros by the second half of next year.

In the second quarter, the operating loss at the chip unit narrowed to 64 million euros from 255 million euros in the year-earlier period.

Sales at the division -- which counts handset maker Nokia Oyj among its clients -- fell 2 percent from the year-earlier period, while they rose 10 percent from the first quarter. The division used 60 percent of its manufacturing capacity in the quarter, compared with 50 percent in the first quarter.

The consumer electronics unit -- the company's largest -- returned to an operating profit in the second quarter, even as sales fell 7 percent to 2.35 billion euros. Philips is the world's third-largest maker of consumer electronics, trailing two Japanese rivals -- Matsushita Electric Industrial Co, which sells the Panasonic and National brands, and Sony Corp.
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