STMicroelectronics, Philips expected to double profit, beating US rivals

Published Oct 16, 2000

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Paris - STMicroelectronics and Royal Philips Electronics, Europe's two biggest chip makers, were expected to double third-quarter profit, analysts said, faring better than North American rivals that blamed sagging sales on lower European demand.

While US companies such as Intel and Motorola recently cut their growth forecasts, STMicroelectronics and Philips, which have focused on more profitable chips found in products such as pocket organisers or digital cameras, are benefiting from surging demand for consumer electronics.

"STMicroelectronics and Philips are extremely bullish," said Steven Vrolijk, an analyst at ING Barings in Amsterdam. "The management of both companies sees the cycle stretching into early 2003."

STMicroelectronics and Philips have repeatedly said their performance would exceed overall growth in the semiconductor industry. Last month, STMicroelectronics said it expected the market to grow as much as 40 percent this year. Analysts estimate its full-year revenue could grow more than 50 percent.

Dataquest, a market researcher, said last week worldwide chip sales would jump 37 percent to $231 billion this year and then grow more slowly in the next two years. Dataquest expects a 28 percent sales growth next year and 14 percent in 2002.

According to an estimate of three analysts polled by Bloomberg News Amsterdam-based Philips was expected to report net income excluding exceptional items surged 97 percent to e736 million (R4,7 billion) tomorrow.

Dutch-registered STMicroelectronics which reports earnings on Wednesday, was expected to say third-quarter net income more than doubled to 0,38c a share, up from 0,15c a share a year earlier, according to analysts polled.

Philips's shares have outpaced Amsterdam's AEX index this year, gaining more than 27 percent. The stock was the third-best performer on the index. On Friday, Philips shares closed at e44,14, up 6,4 percent.

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