There are a few resounding themes coming out of Europe's high-tech bellwethers this week: Tough economic conditions prevail around the eurozone, and the picture for the rest of the year looks fuzzy.
Three of the region's biggest companies -- Royal Philips Electronics, Siemens, and STMicroelectronics -- reported mixed sales and earnings results and provided cautious guidance on what likely lies ahead.
Crediting its ongoing restructure efforts, Dutch-based Koninklijke Philips Electronics N.V. beat estimates for the June-ending second quarter, reporting a 5 percent year-over-year sales increase to $7.3 billion (€5.9 billion) while net income rose to €167 million. Sales in the healthcare and lighting segments were the main drivers, as was an 11 percent jump in "growth geographies," which accounts for 35 percent of the company's total revenue.
Even though the last quarter was a bright spot, uncertainty is still the talk of the day. During a call with analysts, Philips CEO Frans van Houten said:
There is no denying that the global economy is weaker now than it was just three months ago, especially in Europe which, by the way, accounts for approximately 25 percent of our revenue. We continue to take actions to mitigate the risks from the increased economic headwinds globally, and as we are a case of self-help, we remain confident in our ability to further improve our performance towards our mid-term targets in 2013 and beyond.
Over in Germany, Siemens AG (NYSE: SI; Frankfurt: SIE) had even less rosy news. The company's fiscal third-quarter order intake was sharply below analysts' estimates, as was its net profit of €832 million, which consensus anticipated to come in at about €1.3 billion, according to a Wall Street Journal news report. In a statement, Siemens said orders were about €17.8 billion, 23 percent below the prior-year period. On the plus side, quarterly revenue was up 10 percent year-over-year, to €19.5 billion, but favorable currency translation effects accounted for five percentage points of that growth.
Peter Löscher, Siemens' president and CEO, offered this bleak picture in the statement:
The deceleration of the world economy has increased in the past few months. We see growing reluctance among our customers regarding capital expenditures and stronger economic headwinds, especially in our industrial short-cycle businesses. Therefore our focus above all is on increasing our productivity and efficiency. Given the deteriorating environment it becomes more difficult to achieve our guidance for the fiscal year.
And lastly, STMicroelectronics NV (NYSE: STM) posted second quarter revenue of $2.15 billion, down from $2.57 billion a year ago, but up sequentially 6.5 percent and generally in-line with what most analysts were expecting. The company noted that ST's wholly-owned businesses saw a sequential increase of 4.4 percent while the wireless product segment grew about 19 percent. On the earnings side, the chipmaker posted a net loss of $75 million compared with net income of $420 million last year.
The chipmaker is forecasting only 2.5 percent revenue growth for the current third quarter, blaming weaker demand. In a conference call, CEO Carlo Bozotti noted that the company had weaker bookings in the last part of the second quarters and that the global macroeconomic climate is softening.
ST, which also said it plans to cut capital expenditure by 25 percent this year, has been impacted by Nokia's poor performance. One of ST's biggest customers, Nokia's weakened market position has cut ST's sales by about $1 billion a year, Bozotti said.
None of this was what any of us wanted to hear, but we all knew it was coming. The economic doldrums in Europe are hanging around, we know, but for how much longer?