Dutch electronics group Philips said it would likely miss a target to break even at its television business in 2011, heightening pressure on the firm to strike a licencing deal for the unit.
Philips said the TV business would report an operating loss of up to €120 million for the first quarter, more than double the fourth quarter 2010 operating loss of €67 million, due to severe pricing pressure and high inventories.
"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," spokesman Joost Akkermans said.
Philips has been hit by fierce competition from cheaper television brands, made worse by the fact that it has high levels of stock to shift.
It is facing pressure from investors to sell or to resolve the problems at the TV unit, but Philips says it must restore it to profitability first and is looking to sign brand licencing deals which would outsource parts of the business.
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 in China.
Mr Akkermans said 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 in the United States and Videocom in India.
Mr Akkermans reiterated the firm was looking at various options to fix the TV problem, but did not say whether this meant brand licensing agreements or divesting the TV business outright.
SNS Securities analyst Victor Bareno said the latest warning showed the necessity "to take even more radical action" by not only cost cutting, but taking steps such as a new brand licencing deal.
Mr Bareno said the business was proving "very difficult" to turn around and its unpredictable nature was having a "very negative" impact on the profile of the group.
Reuters
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