TV hurts Philips profit, weak economy looms

By Niclas Mika

AMSTERDAM (Reuters) - Philips Electronics reported a bigger-than-expected 28 percent drop in quarterly core profit on Monday, as its television business sank deeper into the red, and warned of slowing economic growth in mature markets.

The Dutch maker of lightbulbs, x-ray machines and electric toothbrushes saw its shares (PHG.AS: Quote, Profile, Research) (PHG.N: Quote, Profile, Research) fall as much as 3.7 percent, extending losses on Friday sparked by an unexpected profit drop at U.S. rival General Electric (GE.N: Quote, Profile, Research).

First-quarter earnings before interest, tax and amortization (EBITA) fell to 265 million euros ($419 million) -- down from 370 million the year before and compared with an average of 306 million euros in a Reuters poll of 14 analysts.

"Our results are clouded, more than we like, by the adverse situation in our TV business, significantly lower incidental license income and some acquisition-related charges," Philips Chief Executive Gerard Kleisterlee said in a statement.

The company's TV business is suffering from tough competition, especially in the United States, from low-cost rivals such as Taiwanese Amtran's (2489.TW: Quote, Profile, Research) Vizio brand, but it was also loss-making in Europe in the quarter.

Philips said it expected "some mature economies" to soften in the wake of a global credit crisis.

"It is a situation we are watching, the economy, and if there are things to be done we would do them without wasting time," Chief Financial Officer Pierre-Jean Sivignon said.

Philips may scale back its branding campaign or trim some research and development spending, he said.