Philips cuts CD-RW order by 40 percent
By Bloomberg News
December 14, 2000, 11:25 a.m. PT
AMSTERDAM--Royal Philips Electronics, has cut this year's order to Ionics to produce rewritable CD drives by 40 percent as demand for personal computers lags.
Philips, Europe's largest consumer-electronics maker, reduced its order with the Philippine electronics assembler and exporter from 450,000 units to 268,000 units, according to Ionics. Philips, the world's biggest maker of rewritable CD (CD-RW) drives, awarded Ionics a contract in July to produce as many as 10 million drives a year, Ionics said.
PC-related companies such as Compaq Computer, Gateway, Apple Computer and chipmaker Intel have issued warnings of lower fourth-quarter earnings as demand for personal computers wanes, and U.S. economic growth slows.
"Besides the problems in the PC market, things aren't going too well in the communications industry and, on top of that, there's a slowdown in the U.S. economy," said Marco Schram, an analyst at Delta Lloyd. "These developments have negative consequences for Philips."
Ionics vice president Judy Qua said the company's profit won't be affected by the cut in production, although analysts at RHB Research said the cut could reduce Ionics's earnings by as much as 19 percent. In 2001, Ionics said, it expects to make between 6 million and 7 million units for Philips.
Philips spokesman Hans Driessen declined to comment on the level of production of CD-RW drives by Ionics next year or on the value of the contract.
Fifty percent of Philips' CD-RW drives are built into new computers, Driessen said, and the other half are sold separately in stores to customers who add them to computers they already own, also known as the after-market.
"We acknowledge lower production volumes in the fourth quarter due to lower growth of PC production, but we expect the demand for the after-market to continue," he said. "Philips is less hurt in that respect."
Philips's components business, which includes the optical-storage unit that makes the CD-RW drives, made up 11.9 percent of Philip's sales of $27.8 billion (31.5 billion euros) in 1999. |
