Europe's consumer electronics industry is growing dimmer by the day. First there was Finnish communications giant Nokia, whose profits tumbled 31% between April and June. Now, the Netherlands' Philips appears to be in serious trouble as well, according to its latest financial results.

The Dutch company announced that its sales will probably be lower than expected in two out of its three primary areas, lightning and consumer electronics. The downturn is mostly due to weak demand in Europe and the United States.

Philips' financial difficulties have been caused by the firm's intrinsic performance, but above all by weak consumption. There is no prospect of a very rosy picture for the European consumer goods industry. European people buy fewer electric razors and toothbrushes, and municipalities no longer have money to modernize theirs lightning systems.

What makes things worse is that 10 years ago, Philips decided to pull out from non-core sectors to focus on its three key fields of expertise. The company stopped, for example, manufacturing electronic components and mobile phones. Instead it stuck with electric razors, lightning and health care, sectors that are supposedly immune to recession.

Now Philips has stopped making televisions as well – its most dramatic demonstration to date that it is committed to its policy of refocusing. The company's approach over the past decade was hailed as a model for other electronics conglomerates to emulate. Not everyone did, however. Siemens, a German engineering conglomerate, continues to focus on equipment products.

What is happening to Philips lightning is particularly worrying because it is a field that is undergoing an electronic revolution with the introduction of LEDs (Light-Emitting Diodes). The new technology was supposed to make the industry expand. But competition from Asia competition and the slow progress of adopting new technologies is hindering its momentum.

The European industry, which was already taken aback by Nokia's incredible fall, did not need this extra headache. Philips has not made the same strategic mistakes as Nokia. It has not thrown itself at the feet of an American company in order to save itself from wreckage. Nonetheless, some observers are wondering whether Philips is going to meet with the same fate as Nokia. The next few months could prove to be critical for the company's future.

Read the original article in French.

Photo - chuwasg