There was a mixed reaction among analysts to the additional action announced yesterday by Philips to become more competitive against its two main Far Eastern rivals - Samsung and Sony - and to two top level departures from the management board.
Some analysts believed the decision to increase restructuring charges from 1.85bn guilders to 2.57bn guilders (pounds 835m) should yield solid benefits next year, while others doubted whether it would be enough to resolve the company's problems. The mixed views caused Philips' share price to bounce around between 76.5 and 79.9 guilders after the announcement.
Peter Wortle, an analyst at Delta Lloyd Bank, said: "The figures were not as good as expected, but not terribly disappointing. It is a good idea Philips is taking all the charges now ... 1997 will probably still be tough, but in 1998 the effects of all the restructuring should start working out."
The restructuring charges - of which 725m guilders related to the troubled Grundig business in Germany - culminated in the company booking a net loss of 590m guilders for the year, a stark contrast to the 2.52bn guilders profit made in 1995. And before the restructuring costs, the loss in the fourth quarter was 81m guilders as almost all of Philips' businesses recorded declines.
Commenting on the results and on prospects, Mr Boonstra said 1996 was "disappointing'' as sales rose just 6 per cent to l 69.2bn guilders and costs rose faster. In 1995, sales rose 11 per cent.
He said that positioning Philips for growth "cannot be done by cutting alone" and added that he would be ready to implement a growth strategy by year-end.
He reiterated his policy of weeding out the company's under-performers and loss-makers. "While this process is not yet complete, it is on schedule, and we are rapidly disposing of activities that absorb profits, cash and management time."
Dudley Eustace, Philips' chief financial officer, said Grundig cost the company about 1.2bn guilders in 1996, exclusive of operating losses. The Dutch electronics maker has set aside 600m guilders to buy itself out of an agreement to bear Grundig's losses and pay the founding family trust a yearly dividend, irrespective of results.
Beside severing ties with Grundig since becoming president, Mr Boonstra has closed the Superclub International chain of video stores, decided to sell the cable television business and to find a partner for the multi- media business.
His strategy virtually opposes the vision of Jan Timmer, his predecessor, who yesterday resigned from Philips' supervisory board - a move that analysts construed as a protest against Mr Boonstra's actions.
Mr Boonstra, however, dismissed claims that the departure of Frank Carruba, a management board member, that was also announced yesterday was a sign of top-level discord. He has agreed to continue to work for Philips as a consultant.Reuse content