Philips may scrap U.S. consumer electronics business

Koninklijke Philips Electronics NV will ax its U.S. consumer electronics unit if that business fails to meet short-term targets, Chief Executive Officer Gerard Kleisterlee has told a Dutch magazine...

"Early this year we completely replaced the management of CE (Consumer Electronics) in the U.S. In the summer we agreed on targets with those new people that have to be met in the short term," Kleisterlee said, in an interview for Elsevier magazine's Dec. 22 issue. He added that if the targets aren't met Philips would "simply end consumer electronics in the U.S."

Kleisterlee said the loss-making U.S. business has to be turned around within three years, but did not specify the targets. "We have to give it one more try," he said.

A Philips spokesman on Wednesday confirmed what Kleisterlee had said in the interview, and again declined to give specifics on targets.

Philips CE sells PC peripherals, including monitors, CD-RW (CD-rewriteable) drives, DVD+RW (Digital Versatile Disc) drives, MP3 players, PC cameras and sound cards. The division also sells audio and video equipment, such as stereo systems, VCRs and TVs.

Americans aren't buying Philips products, despite expensive marketing campaigns. The North American mainstream CE business reported an operational loss in the third quarter of this year, while all other regions, excluding charges, made a profit, according to Philips' financial report.

"We did not introduce the right products and our position in the sales channels was weak. There was never consensus within Philips on how to approach the U.S. consumer electronics market," Kleisterlee said.

Philips is one of the world's largest consumer electronics makers. The company has been struggling with falling demand, like many of its competitors. Sales at the unit, which accounts for about a third of Philips' overall sales, fell 18 percent year-on-year in the third quarter to 2.6 billion euros (US$2.4 billion).

Philips CE in the U.S. employs 2,300 people, Philips said. The company is restructuring worldwide and has announced it will cut over 10,000 jobs this year.