Philips third-quarter earnings drop

Dutch conglomerate Philips Electronics reported disappointingsales and earnings last month, prompting renewed talk that a restructuringcould be in the cards for the Eindhoven company. The company'snew president, Cor Boonstra, has told analysts that he will eitherturn around or divest units that aren't performing to expectations.

For the third quarter (end-September), Philips reported earningsof 123 million Dutch guilders ($72.2 million), far below net incomeof 539 million guilders reported in the same period a year agoand below analysts' expectations. For the nine months to date,Philips has reported net income of 359 million guilders ($210.7million), compared with 1.866 billion guilders in the same periodlast year.

Sales increased 9% in the company's professional products andsystems division, which includes Philips Medical Systems InternationalBV, while the division posted a loss of 79 million guilders ($46.4million).

Philips said an anticipated recovery of sales and income hasnot materialized. Income was affected by negative developmentsin the semiconductor industry, as well as by costs associatedwith its entry into consumer communications.

In a meeting with analysts, Boonstra said he would aggressivelytackle the company's profitability problems. Philips said it wouldtake a pre-tax charge of 1 billion guilders ($587 million) inits fourth quarter as part of its recovery program, although thecompany declined to state what specific actions it would take.