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The year 2001 wasn't a good one for Philips Electronics NV. On February 8, the Dutch electronics giant reported a massive $2.26 billion (2.6 billion euros) loss for the year, blaming slowing demand for both finished consumer goods and raw semiconductors. Philips is one of the few companies with an equal presence in both markets.

The loss was Philips' first full-year negative result in a decade, and followed a record net income of $8.35 billion (9.6 billion euros) for 2000. Despite offering some of the most innovative technology, Philips products failed to excite consumers in 2001, an unsuccessful year for the electronics industry as a whole. Philips' consumer electronics business was off about 15% for the year, partially due to a severe slump in North American sales following the events of September 11. The loss also reflected a one-time charge of $1.48 billion (1.7 billion euros) for restructuring and other write-offs, according to the announcement.

Coping with the changing economy has been a challenge for Philips, which last year reduced its workforce by about 10%. A total of 18,000 workers lost their jobs, most of them in the company's finance and information technology divisions. Philips plans to cut 3000 more jobs this year, and in January announced the closing of its picture tube plant in Ottawa, Ohio, about sixty miles from Toledo. The shuttering of the plant, which makes "jumbo" CRTs for Philips' largest direct-view television sets, will idle 1200 workers.

The picture tube plant will be relocated to Mexico, where Philips will do most of its television and monitor assembly. The move is part of a campaign announced in April 2000 to reduce costs by as much as 25%. Philips executives hope to bring the company back to profitability this year. "I would be very surprised if we don't make it into the black this year," CEO Gerard Kleisterlee stated at an Amsterdam news conference. Rising interest in digital television will boost demand for Philips' set-top converter boxes, Kleisterlee believes.