The head of Philips Consumer Communications quit last week amidst the company’s announcement it doesn’t expect to break even this year.
PCC President and Chief Executive Officer Mike McTighe resigned from those positions effective Oct. 1.
When Lucent Technologies Inc. and Philips Electronics N.V. hatched the consumer communications joint venture last year, they may have been expecting by now to be making strides toward the goal of being one of the top three wireless handset manufacturers. Instead, the company in the last several months slowly has backed off that goal and now says its failure to break even this year is “mainly the result of delays in the introduction of new products.”
“A small number of new products in the field of mobile telephony have been delayed until November this year and the beginning of 1999,” said Ben Geerts, a spokesman at Philips International B.V.
“Product development in the field of wireless technologies is extremely complicated,” continued Geerts. “The delay has been caused by difficulties in matching the right technologies to the required specifications. This is taking longer than expected.”
Geerts declined to say when the company expects to break even.
The company’s first quarter results were disappointing. The wireless handset business lost $124 million, and company officials said the joint venture was about one year behind expectations.
Philips’ second quarter was disappointing as well. Most notably, income from operations in the overall consumer products sector fell to about $3.4 million from $105 million last year. Philips attributed the decrease to continuing losses at PCC, although it noted an improving trend in that segment.
Continued delays could prove costly for the company. Although many manufacturers have been late to market with products, analysts earlier this year said Philips would need to have quality products on the shelf by the beginning of the fourth quarter in order to be competitive.
Phillip Redman, senior analyst, wireless/mobile communications research and consulting at the Yankee Group, Boston, in June said Philips would be in trouble if it didn’t have new phones on the shelf by September or October.
The announcement that Philips would be later than that with products, however, doesn’t eliminate their chances of being competitive, said Redman, because most other manufacturers are late as well.
“There’s still potential on the long haul,” said Redman. “In the short term, though, it will really affect their business.
“There are still a lot of synergies that they need to take advantage of,” continued Redman. “They need to capitalize on those synergies.”
Analysts have said Philips and Lucent were having a difficult time marrying the management of the two companies as well as their products. Asked whether the integration of Philips and Lucent has been more difficult than expected, Geerts simply said, “Yes.”
McTighe is the second high-level executive to exit the consumer communications group in the last year. Osmo Hautanen, president of the Americas region, left the company in March.
McTighe joined Philips in 1995 and in October of last year became CEO of the consumer communications joint venture. Thom Swartsenburg, chief operating officer of PCC, will become CEO.
The board of management of Royal Philips Electronics said the decision was made “in full agreement between Mike McTighe, Philips and the board of PCC.”
