UPDATE 3-Philips warns on TV unit, pressure mounts on new CEO

* Expects Q1 EBITA loss of between 100-120 mln euros

* Says pricing pressure remains severe

* Chinese brand delay resolved, no news of new deals

* TV business won’t break even in 2011

* Shares down 1.8 pct

(Recasts, adding company, analyst comments, details)

By Roberta B. Cowan

AMSTERDAM, March 28 (Reuters) – Dutch electronics group
Philips (PHG.AS: Quote, Profile, Research) said its struggling TV business will again fail
to break even this year, raising pressure on new management to
strike a major licensing deal or sell the unit.

The company has been hit by fierce competition from ever
cheaper television brands, made worse by the fact that it has
high levels of stock to shift. It is under pressure to sell or
close the TV unit, or speed up the process of farming it out via
brand licensing deals.

Monday’s profit warning comes in the same week that outgoing
chief executive Gerard Kleisterlee hands the reins over to
company veteran Frans van Houten, while Ron Wirahadiraksa will
replace Pierre-Jean Sivignon as chief financial officer.

Although both new chiefs are experienced in restructuring
and cost cutting neither have spoken publicly about their plans.
Analysts say Van Houten has stressed the TV business, which also
notched up losses last year, should cease to be a distraction.

Philips said on Monday its TV business would report an
operating loss of up to 120 million euros ($169 million) for the
first quarter, more than double the fourth quarter operating
loss of 67 million and up from a year-ago 19 million euro loss.

“We have a guidance for the full-year to break even and
because of the loss in the first quarter it’s unlikely we will
reach that target,” said company spokesman Joost Akkerman.

Shares in Philips, which competes with U.S. giant General
Electric (GE.N: Quote, Profile, Research) and Germany’s Siemens (SIEGn.DE: Quote, Profile, Research), fell 1.8
percent by 1020 GMT to underperform Amsterdam’s AEX index
(.AEX: Quote, Profile, Research), which was up 0.1 percent.

Peter Olofson, an analyst at Kepler, said he was surprised
at the scale of the TV unit’s decline, having expected it to
report an operating loss similar to that reported in the fourth
quarter last year.

He noted Philips was left with excessive TV inventories
because demand ahead of the World Cup last summer was much
weaker than expected and now Philips is stuck with having to
reduce prices — effectively selling off old stock cheaply to
make room for new TVs due to come out in the second quarter.


Philips warned in January that inventory in its television
business would cause “some headwind” in the early part of 2011
and blamed weak TV sales then for disappointing fourth quarter
results. It also reported a delay with its brand licensing
agreement with TPV (TPVH.SI: Quote, Profile, Research) in China. [ID:nLDE70N051]

Akkermans said on Monday the problems with TPV had been
resolved, but would not discuss whether the company was working
on new licensing agreements, beyond the ones it has with Funai
(6839.T: Quote, Profile, Research) in the United States and Videocom in India.

He reiterated the firm was looking at various options to fix
the TV problem, but did not elaborate. He also said the company
had not so far seen any impact on its TV business from
components shortages relating to Japan’s earthquake and tsunami,
which have affected the electronics industry supply chain.

SNS Securities analyst Victor Bareno said the latest warning
showed the difficulty Philips has had in turning the TV business
around and stressed the company should take “radical action.”

“We expect the new management to announce in the short term
a disposal of the largest part of the remaining TV business in
the form of a brand licensing agreement,” Bareno said.

He said such a move would boost the company’s share price
given the current drag on margins, growth and outlook from the
TV business.
(Additional reporting by Aaron Gray-Block; Editing by Sophie
($1=.7100 euros)

UPDATE 3-Philips warns on TV unit, pressure mounts on new CEO