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Philips Forecasts Full-Year Loss at Television Unit on Lower Prices

Royal Philips Electronics NV, Europe’s biggest maker of consumer electronics, said its television business will post a full-year loss because of price declines and a delay in a Chinese licensing agreement.

The division’s loss before interest, taxes and amortization will total 2 percent to 3 percent of sales, with revenue amounting to about 3 billion euros ($3.9 billion), the Amsterdam-based company today said in a statement. The manufacturer had forecast earlier that the unit would break even. Philips maintained its companywide full-year forecast.

“High stock levels in retail and strong price erosion” for television sets, along with an “unforeseen” postponement in a brand-licensing agreement with TPV Technology in China will cause the loss at the television business, the company said.

Philips said in October that it was “cautious” about revenue development in fourth quarter, citing “patchy” consumer sentiment. Revenue at the consumer-lifestyle division, which makes electric shavers and televisions, was hurt by “weak demand” in some markets in the third quarter.

Philips rose as much as 35 cents, or 1.7 percent, to 21.14 euros as of 9:12 a.m. in Amsterdam trading. The stock has gained 2.2 percent this year.

Licensing Production

The company has limited losses from television activities by contracting out production to other companies, including Osaka, Japan-based Funai Electric Co., covering the North American market, and Videocon Industries Ltd. in India. Philips said it expects to complete the planned agreement with TPV by the end of this year.

“We will further strengthen our sector’s position in emerging markets and will continue to take action to bring our television business to profitability,” Pieter Nota, head of the consumer lifestyle division, said in the statement.

Philips said it’s sticking to a group forecast for earnings before interest, taxes and amortization to significantly exceed 10 percent of sales. The outlook includes the loss at the television division.

TV accounted for 37 percent of the consumer lifestyle division’s sales in the 12 months through September, a decline from 51 percent in 2000. TV operations generated 13 percent of group sales compared with 25 percent in 2005.

To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net.

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net

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