Philips cuts 4,500 jobs in bid to save £698m as profits tumble to 2-year low

Royal Philips Electronics has announced it is to cut 4,500 jobs as part of a plan to save £698m and boost earnings after quarterly profit fell to the lowest in almost two years.

Warwick AshfordWarwick Ashford is chief reporter at Computer Weekly. He joined the CW team in June 2007 and is focused on IT security, business continuity, IT law and issues relating to regulation, compliance and governance. Before joining CW, he spent four years working in various roles including technology editor for ITWeb, an IT news publisher based in Johannesburg, South Africa. In addition to news and feature writing for ITWeb’s print publications, he was involved in liaising with sponsors of specialist news areas on the ITWeb site and developing new sponsorship opportunities. He came to IT journalism after three years as a course developer and technical writer for an IT training organisation and eight years working in radio news as a writer and presenter at the South African Broadcasting Corporation (SABC).

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Royal Philips Electronics has announced it is to cut 4,500 jobs as part of a plan to save £698m and boost earnings after quarterly profit fell to the lowest in almost two years.

Earnings dropped to €368m (£321m) in the last quarter, down from €647m (£565m) a year earlier, but still beat the €341m average estimate in a Bloomberg survey of analysts. Revenue fell 1.3% to £5.39bn (£4.7bn), in line with estimates.

Philips shares have declined 35% in 2011 compared with a 19% decline by German rival Siemens.

Frans van Houten, chief executive officer at Philips, said the cuts are an inevitable step to revive Philips and respond to economic challenges.

The manufacturer also aims to pull out of television production by the end of 2011, and is reviewing management layers and staffing to reduce complexity, according to Bloomberg.

The planned cost-savings should help improve efficiency when Philips is battling slowing economic growth and competition from lower-cost manufacturers in Asia, the report said.

Philips said 60% of the savings are to come from the job cuts, while the remainder will come from other structural costs.

Van Houten plans to drive innovation through a €200m investment to move commercially successful products to market quickly.

"We are still in the early stages of a multi-year overhaul to become a more entrepreneurial and lean company," said Van Houten.

He has set a target of increasing earnings before interest, taxes and amortisation to 10% to 12% of revenue by 2013, on sales growth of 4% to 6%.

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