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Philips to cut 1,600 jobs
AMSTERDAM, Netherlands (Reuters) -- Europe's biggest consumer electronics firm, Philips Electronics NV, announced 1,600 job cuts in its key semiconductors unit and a factory closure in the United States on Thursday to counter weak demand. A day after saying there was little to lift the global chip industry out of its slump, Philips said it would close its San Antonio facility in Texas and take a charge of 200 million euros spread across the first three quarters of this year. The move comes four months after Philips announced the closure of a semiconductor plant employing 600 people in Albuquerque, New Mexico, and lifted its shares over six percent. Philips, the third-largest maker of semiconductors in Europe, has struggled to boost its capacity utilisation rate to the 70 percent needed to break even. But it forecast the new moves would return the division to profit by the fourth quarter. It said in a statement the factory closures would cut overall capacity by around 20 percent, leading to a utilisation rate that would deliver positive operating results in the fourth quarter and still include capacity for growth. "While the news is good, it underlines our thesis that Philips will become an outsource semiconductor manufacturer. With capacity utilisation rates of 52 percent, they are trailing the industry, which has rates of about 80 percent on average," said Schroder Salomon Smith Barney analyst Navdeep Sheera. Shares rallyPhilips rose as much as 6.6 percent, outperforming a bounce in other cyclical and technology shares that coincided with a broader rally from six-year lows seen in Europe on Wednesday. At 0942 GMT, Philips shares were up 6 percent at 13.41 euros. They are down just under 20 percent this year. Demand for semiconductors -- used in consumer electronics products such as radios, cameras and mobile phones -- has remained sluggish as the industry attempts to recover from its worst-ever slump. Philips CEO Gerard Kleisterlee said on Wednesday there were still no drivers for growth in the semiconductor industry and said the year had started on a soft note, as expected, in some of the group's units. The highly-cyclical semiconductor unit -- employing 34,000 out of a total 170,000 workers -- is key to the profitability of Philips and has swung widely to produce some of the largest profits or losses among the group's main five divisions. In 2002 the unit lost 537 million euros while the company overall turned in a net loss of 3.21 billion euros. Boosted by the telecoms and Internet boom, the unit had made a 1.35 billion euro profit in 2000. Toughest challengeKleisterlee last month said the group's biggest operating challenge was its semiconductor unit, adding the company expected sales there to decline 10-12 percent in dollar terms in the first quarter. Philips said the restructuring would lead to annual cost savings of 200 million euros, but the savings would not be immediate. "With the ongoing softness in the industry, we still face a tough couple of quarters before our efforts will truly show through," the unit's chief Scott McGregor said in a statement. Sprawling conglomerate Philips, well-known for its light bulbs, shavers, DVD recorders, toasters and flat screen TVs but which is also active in monitors and hospital equipment, has been restructuring for a decade, shedding many activities and outsourcing low-margin manufacturing. Philips said it would also cut the time needed to produce chips through the activation of new IT systems, leading to annual savings of about 50 million euros. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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