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?
Exactly Flyingscot. This is not 2001 when the economy sank deep into a pit. This is a measured slowdown. Perhaps all of us should take a deep breath and calm down.
Goldman Sachs Chief European Economist Huw Pill exposes a terrible irony about the eurozone in a video filmed this month: at the signing of the Maastricht Treaty, both those who loved and hated the prospect of a European Monetary Union actually thought that the euro would see a crisis that would test its structural basis eventually. The key difference between their viewpoints consisted of their approval or rejection of the progress that would need to happen to make the euro area sustainable, and whether the populace would actually consent to go through with such reforms.
@Flyingscot, i think Jennifer has used the right adjective "fuzzy" for the rest of the year picture. I like fuzzy picture than a clear rosy or damp scanrio as fuzzy signify hope.
FlyingScot - Right... the news is somewhere in the middle of the road and it's not much different than the news we've been hearing all along. The odd thing is that Wall Street seems to react as if the earnings news is a surprise and forgot that executives keep providing cautious outlooks.
I just wonder, in electronics, there are many experts more than capable to regulate power source, signal feedback, etc. Why not our economists worldwide could find a way to regulate our economy cycles ? I am very sure it is possible to stabilize our economy cycles, one way or another way.
I think what matters more is where you cut spending on rather than how much you cut. If you cut down on the investments, you're aiming for a further decline in your economy. So you need to be careful about where the cut is taking place. Often this is the hardest decisions for governments to take.
The outlook is not super rosy but neither does it look disastrous. I imaging the big players will be able to manage their way through the abyss and hopefully come out stronger.
Daryl - Good point. Big question is how to eliminate this debt? Countries keep trimming budgets in the name of austerity, but a serious dilemma emerges: When are you trimming fat and when are you trimming bone? Trimming fat is ok, but if you trim too much bone, countries won't be able to stand and hold their weight.
elctrnx_lyf - Yes, it's all part of a cycle. The unfornatuate part is that we keep creating these more extreme cycles of extended feast and extended famine, coupled with unsustainable spending and then severe belt-tightening. Have to believe there is not a more moderate middle ground that would create greater stability and economic predictability.
AzmatMalik - Your observations are spot on, and like Bolaji mentioned these are the kinds of conversations we all should having - how can we add a dose of reality back to expectations.
A new report shows that most of the worrisome issues that the supply chain industry has been dealing with for years are not new, but there are some new concerns that need answers. Here’s a look at what keeps supply chain professionals up at night.
When it comes to shipping supplies from China to Europe, trains might be the most cost-effective way companies have available to them. DHL is looking to jump on that bandwagon.
For many dealing with the enormous task of tracking,
reporting, and resolving issues associated with
potential counterfeit parts, there is a collective
hope that 2013 will bring clearer guidance on what
needs to be done by whom and when.
A necessary foundation for moving efficiently at real-time speed, supply chain analytics is still very much at the beginning stages of development at many companies.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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