Jan. 18 -- Royal Philips Electronics NV, the world's biggest maker of light bulbs and electric shavers, may say fourth-quarter profit rose 81 percent on gains from selling Taiwan Semiconductor Manufacturing Co. shares.
Net income may have increased to 1.23 billion euros ($1.8 billion) from 680 million euros a year earlier, based on the median estimate of 10 analysts Bloomberg News surveyed by telephone and e-mail. Revenue probably climbed 1.1 percent to 8.14 billion euros.
Chief Executive Officer Gerard Kleisterlee has sold most of Philips' semiconductor unit and shares in Taiwan Semiconductor to raise funds for acquisitions in the appliances, medical and lighting divisions. The Amsterdam-based company, also Europe's largest maker of televisions, announced or completed more than 10 billion euros of takeovers since 2005.
``The strategy will prove itself by definition,'' said Scott Geels, an analyst at Sanford C. Bernstein who has a ``market perform'' rating on the stock. ``Clearly, if the economy is slowing, you probably don't want to own those massively cyclical businesses.'' The company has said it will record about 1.03 billion euros of non-taxable gains from selling shares in Taiwan Semiconductor and LG.Philips LCD Co. It also will incur charges of 380 million euros for the sale of its 70 percent stake in MedQuist Inc. and the disposal of a majority stake in the chip unit in 2006.
Sales Growth
Sales growth was probably fueled by the units making lamps and appliances. Earnings before interest, tax and amortization, or Ebita, probably rose 8.1 percent to 798 million euros as profitability improved at the lighting unit, the survey shows.
Philips has sold more than two-thirds of its 16.2 percent stake in Hsinchu, Taiwan-based Taiwan Semiconductor, the world's largest customized-chipmaker, since saying in March it planned to divest its shares.
The Dutch company holds 19.9 percent of semiconductor-maker NXP BV after selling control of the unit to a group of buyout firms in 2006. Philips also sold a 13 percent stake in LG.Philips LCD, the world's second-largest maker of liquid-crystal displays, and now owns 19.9 percent.
``They're basically done,'' Geels said. ``Now it comes back to what people should always be looking at: growing sales and improving margins.''
Display Record
Seoul-based LG.Philips, the world's No. 2 maker of liquid- crystal displays, on Jan. 14 reported a record quarterly profit on surging demand for screens used in computers and televisions.
LG.Philips' fourth-quarter net income was 760 billion won ($811 million), compared with a loss of 174.3 billion won a year earlier. That beat the 654 billion-won median estimate of 17 analysts Bloomberg surveyed by phone and e-mail.
Philips fell 1.17 euros, or 4.6 percent, to 24.48 euros as of 10:20 a.m. in Amsterdam. The shares, which rose 3.3 percent last year, are down 17 percent this year, compared with a 12 percent slide in the benchmark Amsterdam Exchanges Index.
Of the 41 analysts covering Philips in the past year, 31 recommend buying the stock and five advise selling it, according to data compiled by Bloomberg.
Lehman Brothers Holdings Inc. today cut its rating to ``underweight'' from ``overweight,'' while also lowering its price target by 34 percent to 22 euros on concern over slowing economic growth.
`Risk' to Earnings
There is ``risk to 2008 earnings and 2010 targets as we believe current growth expectations for Philips' core business are optimistic against a potentially weaker macroeconomic environment,'' analysts including London-based Olubunmi Asaolu wrote in a report to clients today.
Kleisterlee, 61, received 2.54 million euros in total compensation in 2006, a 24 percent increase from 2005. The executive, who joined Philips in 1974, wasn't available for comment before the report, said company spokesman Arent Jan Hesselink.
Philips has said asset sales and a plan to increase debt will leave cash for takeovers in medical equipment and lighting. The company on Dec. 21 said it agreed to buy U.S. medical- equipment maker Respironics Inc. for 3.6 billion euros in its largest-ever acquisition.
Since 2005, Philips also completed or announced 10.2 billion euros of share buybacks. The company received more than 12 billion euros of proceeds from divestments over the same period.
Credit-default swap contracts based on Philips have risen 18 basis points to 64 so far this year, according to data compiled by Bloomberg. Credit-default swaps are used to speculate on a company's ability to repay debt. A rise indicates worsening perceptions of credit quality.
Standard & Poor's rates the company's debt A- and Moody's Investors Service rates it A3.
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