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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000891836-01-000058.txt : 20010223
<SEC-HEADER>0000891836-01-000058.hdr.sgml : 20010223
ACCESSION NUMBER:		0000891836-01-000058
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010208
FILED AS OF DATE:		20010214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			KONINKLIJKE PHILIPS ELECTRONICS NV
		CENTRAL INDEX KEY:			0000313216
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600]
		STATE OF INCORPORATION:			P7
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		
		SEC FILE NUMBER:	001-05146-01
		FILM NUMBER:		1544311

	BUSINESS ADDRESS:	
		STREET 1:		REMBRANDT TOWER AMSTELPLEIN 1
		STREET 2:		1096 HA AMSTERDAM
		CITY:			THE NETHERLANDS

	MAIL ADDRESS:	
		STREET 1:		REMBRANDT TOWER AMSTELPLEIN 1
		STREET 2:		1096 HA AMSTERDAM
		CITY:			THE NETHERLANDS

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PHILIPS ELECTRONICS N V
		DATE OF NAME CHANGE:	19930727
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>0001.htm
<DESCRIPTION>FORM 6-K
<TEXT>


<HTML>
<HEAD>
<TITLE>Form 6-K
</TITLE>
</HEAD>
<BODY>

<P ALIGN=RIGHT>
<B>2001 - 2</B>
</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>

<CENTER>

SECURITIES AND EXCHANGE COMMISSION<BR>
&nbsp;<BR>
Washington, D.C.<BR>
20549<BR>

<HR SIZE=1 NOSHADE WIDTH=75>
&nbsp;<BR>
<B>FORM 6-K</B><BR>
&nbsp;<BR>
<B>REPORT OF FOREIGN ISSUER</B><BR>
&nbsp;<BR>
Pursuant to Rule 13a-16 or 15d-16 of the<BR>
Securities Exchange Act of 1934<BR>
&nbsp;<BR>
For the period commencing October 17, 2000 through February 8, 2001<BR>

<HR SIZE=1 NOSHADE WIDTH=75>

&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
<B>KONINKLIJKE PHILIPS ELECTRONICS N.V.</B><BR>
&nbsp;<BR>
&nbsp;<BR>
<HR SIZE=1 NOSHADE WIDTH=150>
(Name of registrant)<BR>
&nbsp;<BR>
&nbsp;<BR>
Rembrandt Tower, Amstelplein 1, 1096 HA Amsterdam, The Netherlands
&nbsp;<BR>
&nbsp;<BR>
<HR SIZE=1 NOSHADE WIDTH=300>
(Address of principal executive offices)<BR>
&nbsp;<BR>
&nbsp;<BR>
Name and address of person authorized to receive notices<BR>
and communications from the Securities and Exchange Commission:<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Andrew D. Soussloff, Esq.<BR>
Sullivan &amp; Cromwell<BR>
125 Broad Street<BR>
New York, New York 10004

</CENTER>

<P>&nbsp;</P>
<HR NOSHADE SIZE=4>
<PAGE>

<P>&nbsp;</P>

<P>
This report comprises a copy of the press released entitled <I>&#145;Philips
announces record earnings for 2000; sets new financial targets&#146;</I>, dated
February 8, 2001.
</P>

<P>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf, by the
undersigned, thereunto duly authorized at Amsterdam, on the 8th day of February,
2001.
</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>

<P ALIGN=CENTER>
<B>KONINKLIJKE PHILIPS ELECTRONICS N.V.</B><BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/ C. Boonstra<BR>
&nbsp;<BR>
<B>C. Boonstra</B><BR>
(President,<BR>
Chairman of the Board of Management)<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/ J.H.M. Hommen<BR>
&nbsp;<BR>
<B>J.H.M. Hommen</B><BR>
(Executive Vice-President,<BR>
Member of the Board of Management<BR>
and Chief Financial Officer)
</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<HR NOSHADE SIZE=4>
<PAGE>


<P>
<b>February 08, 2001</b>
&nbsp;<br>
&nbsp;<br>
<b>Philips announces record earnings for 2000; sets new financial targets</b>
&nbsp;<br>
&nbsp;<br>
</P>

<p><u><b>The year 2000</b></u></p>

<ul>
  <li><b>Income from continuing operations: EUR 9,602 million (EUR 7.31 per share)
- - excluding special one-time gains, EUR 2,564 million (EUR 1.95 per share)</b></li>
  <li><b>Nominal sales growth: 20% / Comparable sales growth: 11%</b></li>
  <li><b>Income from
operations: EUR 4,281 million, 11.3% of sales - excluding one-time gains: EUR
2,900 million, 7.7% of sales</b></li>
  <li><b>RONA: 35.7% - excluding one-time gains: 24.2%</b></li>
</ul>
<p><b>The year 2000 was a record year for Royal Philips Electronics in almost every
respect. Aided by favorable economic conditions worldwide and a strong US
dollar, the Company benefited from strong demands for its products, especially
components and semiconductors. Sales were up by 20%, and the overall
profitability of continuing operations improved further, enabling the Company to
meet the targeted objective of 24% return on net assets. Net income from
continuing operations amounted to EUR 9,602 million, of which EUR 7,038 million
came from one-time gains. The Company generated cash flow from operations of EUR
2,996 million and enjoys a balance sheet with only 12% net debt. A proposal will
be submitted to the General Meeting of Shareholders to declare a dividend of EUR
0.36 per common share (1999: EUR 0.30).</b></p>
<p><b><u>New Financial Targets</u></b></p>
<p><b>Philips also announces that its new financial performance objectives for the
medium term are:<br>
- - to deliver average annual sales growth above 10%<br>
- - to
increase income from operations from approximately 8% of sales to 10% of sales<br>
- -
to produce average annual growth of earnings per share of 15%<br>
- - to generate
positive cash flow<br>
Achieving these targets will lead to a return on net assets
(RONA) of over 30%.</b></p>
<p><b>&quot;I am delighted to say that Philips made an excellent start to the new
Millennium,&quot; commented Cor Boonstra, President and CEO of Philips.
&quot;All our divisions improved their performance in 2000, leading to the
record results announced today. Our efforts over the past four years are clearly
bearing fruit, as we become a profitable high-growth technology company with
strong cash flow and sustainable market leadership positions. By setting and
meeting tough financial targets, we have regained our credibility with the
financial community.&quot; Gerard Kleisterlee, President-designate said:
&quot;Today we have committed ourselves to a set of even tougher targets for the
coming years, in order to continually improve our performance, further building
growth, profitability, and shareholder value.&quot;</b></p>
<p><b><u>The fourth quarter of 2000</u></b></p>
<ul>
  <li><b>Income from continuing operations: EUR 2,792 million (EUR 2.16 per share)
- - excluding one-time gains and incidental after-tax charges: EUR 802 million
(EUR 0.61 per share), a 46% increase over the fourth quarter of 1999</b></li>
  <li><b>Nominal
sales growth: 15%/ Comparable sales growth: 7%</b></li>
</ul>
<p>Income from continuing operations in the fourth quarter amounted to EUR 2,792
million (EUR 2.16 per share) compared to EUR 687 million (EUR 0.51 per share) in
the corresponding period of 1999. Included in income are an after tax gain of
EUR 1,115 million from the exchange of Seagram shares into Vivendi Universal
shares, and a one-time gain of EUR 1,072 million resulting from the merger of
Origin with Atos. The fourth quarter of 1999 included a gain of EUR 92 million
(EUR 0.07 per share) from Taiwan Semiconductor Manufacturing Company (TSMC)
related to the conversion of Eurobonds into equity, and a one-time gain of EUR
44 million (EUR 0.03 per share) related to the sale of a portion of JDS Uniphase
shares. Excluding the above items, and a number of incidental after-tax charges
of EUR 197 million (EUR 0.15 per share), income from continuing operations came
to EUR 802 million (EUR 0.61 per share), compared with EUR 551 million (EUR 0.41
per share) in the fourth quarter of 1999, representing a 46% increase.</p>
<p>Sales in the fourth quarter came to EUR 11,007 million, a 15% nominal
increase on the year before. Changes in consolidations, had a lowering effect of
2% on sales, particularly related to the deconsolidation of Origin. Currency
fluctuations, in particular the appreciation of the US dollar and the Japanese
Yen versus the euro, had a significant positive effect of 10%. Sales growth in
Q4 on a comparable basis was 7%, compared to 4% in the year earlier. Sales
growth in Q4 was headed by Semiconductors with 42% increase in euros. Most other
sectors posted also significant increases. Components' sales increased only
marginally on the year earlier quarter, suffering from weakness in the PC
industry, affecting sales for monitor displays (CRT and LCD) and Optical
Storage. Sales growth in euros was particularly strong in North America and
Latin America at 25% and 20% respectively. Other regions also posted
double-digit growth. Price erosion in the fourth quarter, at 5%, compares
favorably to the 7% in the corresponding quarter in the year earlier. Volume
growth in the fourth quarter was 12%.</p>
<p>Income from operations in the fourth quarter was EUR 1,949 million (17.7% of
sales). Income included a gain of EUR 1,072 million related to the merger of
Origin and Atos. Excluding this item income amounted to EUR 877 million (8.0% of
sales) compared to EUR 531 million (5.5% of sales) in 1999. Main improvements
came from Semiconductors and Mainstream CE, more than doubling income from
operations. Medical Systems included a write-off for in-process R&amp;D of EUR
44 million, resulting from the aquisition of ADAC Laboratories. Also included
were charges for amortization of goodwill and other intangible assets for
MedQuist of EUR 28 million. Lower income of Components in the fourth quarter was
related to weaker performance within Optical Storage. Income of Consumer
Communications was impacted by lower than expected sales growth of new products,
resulting in an unfavorable mix and a drop in contribution margin, and included
a loss of EUR 22 million related to the discontinuation of the TDMA activities.
In Digital Networks extra obsolescence charges of EUR 22 million were booked,
mainly due to weak sales of set-top boxes in North America. The loss in
Specialty Products' income was entirely due to the impairment of the goodwill
and other intangible assets amounting to EUR 35 million related to VCS, a US
based speech technology company bought in 1999. Lower income from Licenses was
attributable to a number of non recurring items amounting to EUR 15 million. In
Miscellaneous, provisions of total EUR 23 million were recognized in respect of
already disposed activities. In the fourth quarter the build up for the
provision for the jubilee fund amounted to EUR 55 million.</p>
<p>Financial income and expenses in the fourth quarter were EUR 902 million. The
fourth quarter included the gain on the exchange of Seagram shares into Vivendi
Universal shares for EUR 966 million. Excluding this item, the financial income
and expense amounted to a negative amount of EUR 64 million compared to a
negative EUR 13 million in the year earlier period. The difference mainly
relates to the gain on the sale of JDS Uniphase shares of EUR 44 million in the
last quarter of 1999.</p>
<p>Income taxes in the fourth quarter were EUR 83 million in 1999 compared to
EUR 130 million in 2000. This mainly related to the withholding tax of TSMC of
EUR 47 million for the year 2000. Excluding this item, income taxes came to EUR
83 million. This is relatively low, as a result of tax-exempt transactions in
relation to Atos Origin and Seagram.</p>
<p>Philips' results relating to unconsolidated companies amounted to EUR 94
million in the quarter, versus EUR 269 million last year. Last year's income
included a EUR 92 million gain related to the conversion of TSMC Eurobonds into
equity. Disregarding this item, results relating to unconsolidated companies
declined by EUR 83 million, mainly due to lower performance of LG.Philips LCD
Co., of which the contribution was break-even in the last quarter compared to a
profit of EUR 123 million a year ago, while TSMC contributed strongly to the
results. Philips' share in the results of Atos Origin will be included in
Results relating to unconsolidated companies on a delayed basis of three months,
from January 1, 2001 onwards.</p>
<p>The share of third-party minority interests in the income of Group companies
amounted to EUR 23 million in 2000, compared to EUR 17 million in 1999.</p>
<p>Net income amounted to EUR 2,792 million (EUR 2.16 per share) versus EUR 687
million (EUR 0.51 per share).</p>
<p><b>The year 2000</b><u><br>
Sales and income from operations<br>
</u>Sales in 2000 grew to EUR 37,862 million,
20% higher than the EUR 31,459 million in 1999, which in turn was 3% higher than
in 1998. The growth was particularly strong at Semiconductors (55%), Components
(22%) and Medical Systems (22%). Currency fluctuations, primarily the strong
appreciation of the US dollar (16%) against the euro, had a positive effect of
9% on nominal sales. Various changes in consolidation had on balance a neutral
effect. Positive effects came from the consolidation of, among others, MiCRUS,
MedQuist and Optiva Corporation. Deconsolidations related mainly to AC&amp;M as
of July 1 and Origin as of October 1, 2000. Excluding these effects, sales
growth in 2000 was 11%, comprised of 16% volume growth partially offset by 5%
price erosion.</p>
<p>Income from operations in 2000 totaled EUR 4,281 million, or 11.3% of sales,
as compared to EUR 1,751 million, or 5.6% of sales in 1999. Included in income
were one-time gains of EUR 309 million related to the sale of the AC&amp;M
business and a gain of EUR 1,072 million related to the exchange of Origin
shares into Atos Origin shares. The largest increase in income was realized by
Semiconductors, whose results more than doubled compared to 1999, reflecting the
strong upturn in the market. Moreover, overall price erosion decreased
significantly, while improved efficiency and cost control had a positive impact
on income. In addition, reduced pension costs had a positive effect of EUR 403
million on income. All divisions contributed to this year's operational result
improvement. Income from operations in 1999 was favorably impacted by EUR 169
million income from the divestment of Conventional Passive Components.</p>
<p>Financial income and expenses amounted to income of EUR 1,988 million in 2000
compared to EUR 32 million in 1999. Net interest expenses increased from EUR 129
million in 1999 to EUR 167 million in 2000, mainly as a result of higher net
debt level of the Philips Group. Financial income in both 1999 and 2000 includes
gains from the sale of marketable securities. During the year 2000 Philips sold
a portion of the JDS Uniphase shares that were received upon the sale of Philips
Optoelectronics in 1998. The income from the sale amounted to EUR 1,207 million.
Moreover, Seagram shares were exchanged for Vivendi Universal shares. The shares
in Seagram were obtained upon the sale of Philips' 75% stake in PolyGram in
1998. The income from the exchange of Seagram shares amounted to EUR 966
million. In 1999 a gain of EUR 117 million was realized on the sale of a portion
of the JDS Uniphase shares.</p>
<p>Income tax charges totaled EUR 570 million in 2000, compared to EUR 336
million in 1999. This corresponds to an effective tax rate in 2000 of 9%, down
from 19% in 1999. The lower effective tax rate in 2000 primarily resulted from
various tax-exempt transactions (positive tax effect of 13%). The Company
expects the effective tax rate to go up to approximately 25% next year.</p>
<p>Results relating to unconsolidated companies in 2000 totaled EUR 3,970
million, compared to EUR 409 million in 1999. Income in 2000 was favorably
impacted by a number of one-time gains. A substantial portion of the ASM
Lithography Holding N.V. (ASML) shares was sold, resulting in a gain of EUR
2,595 million, while Philips' 33% interest in Beltone Electronics was exchanged
for GN Great Nordic shares, resulting in a transaction gain of EUR 122 million.
In 2000 several equity transactions by TSMC resulted in a net gain of EUR 680
million. Excluding these items, results relating to unconsolidated companies
amounted to EUR 573 million, which was considerably higher than the previous
year, primarily due to TSMC's strong performance in the favorable semiconductor
market. Although income from LG.Philips LCD Co. improved over last year, it
should be noted that 1999 contained only six months of operations compared with
the full year in 2000.</p>
<p>The share of third-party minority interests in the income of Group companies
amounted to EUR 67 million in 2000, compared with EUR 52 million in 1999. The
increase is attributable to the improved results of FEI Corp and the China
operations.</p>
<p>Income from continuing operations in 2000 improved to an all-time high of EUR
9,602 million (EUR 7.31 per share), compared with EUR 1,804 million (EUR 1.31
per share) in 1999. Excluding one-time gains, income from continuing operations
was EUR 2,564 million (EUR 1.95 per share) in 2000, which is EUR 1,007 million
higher than income of EUR 1,557 million (EUR 1.13 per share) in 1999. The
results for 2000 include an especially strong contribution from Semiconductors
and Components, whose income doubled over prior-year levels. Lighting and
Domestic Appliances delivered record results. The 2000 results benefited from a
good performance by TSMC.</p>
<p>Net income in 2000 amounted to EUR 9,602 million (EUR 7.31 per common share)
compared to EUR 1,799 million (EUR 1.31 per common share) in 1999.</p>
<p><u>Sales and income from operations per sector<br>
</u>Sales in the <b> Lighting</b> sector
totaled EUR 5,052 million, an increase of 11% over last year. Currency movements
had a positive impact of 8% on sales. Volume growth was 6%, which was partly
countered by increased price erosion (4%). The strongest sales growth was
achieved by the business unit Automotive &amp; Special Lighting through
successful product introductions and market developments. Income from operations
of EUR 668 million in 2000 represents an improvement of almost 11% compared to
1999 and was mainly the result of the strong sales growth, slightly offset by a
net restructuring charge of EUR 17 million. The largest income improvement was
realized by the Lamps business, especially in Europe.</p>
<p>Sales in 2000 in <b> Consumer Electronics</b> totaled EUR 14,683 million, an increase
of 18% in the year. Changes in consolidation had a minor negative effect of 1%,
while currency movements had a positive effect of 9% on nominal sales. Sales
volume increased by 18%, partly offset by an average price decrease of 8%.
Digital Networks and Consumer Communications recorded the strongest sales
increase. Sales of Mainstream CE products were edged up by Consumer TV, Branded
Monitors and DVD Video, whose sales more than doubled. Digital Networks recorded
sharply higher sales, benefiting from the strong demand for set-top boxes. The
substantial rise in Consumer Communications is led by significant growth of GSM
sales in Europe and Asia Pacific, reaching more than 13 million handsets in
2000. Sales growth in Specialty Products was driven by Remote Control Systems,
Speaker Systems and Broadband Networks. Income from operations in 2000 in the
sector Consumer Electronics increased to EUR 374 million, or 2.5% of sales, up
from EUR 258 million (2.1% of sales) in 1999. The considerable increase was
mainly attributable to the turnaround to a break-even situation at Consumer
Communications, due to higher GSM volume, new product introductions resulting in
a more favorable mix and tight cost control. License income increased, mainly
due to the higher number of licenses in new programs. As from June 2001 onwards
license income will be negatively impacted due to the expiring CD-Audio patents
in Europe and Asia Pacific. This is expected to be partly compensated by higher
income from CD-R/RW and DVD. Income from Mainstream CE benefited from the higher
sales level, especially in the Monitor business and tight cost control. At
Digital Networks, the positive contribution from certain satellite applications
was more than offset by large start up costs in the cable segment and in new
technologies for the delivery of electronic content, both focused on the North
American market. The decrease in income from operations for Specialty Products
primarily resulted from charges related to the impairment of identified
intangibles and goodwill, related to Voice Control Systems.</p>
<p>Sales in the <b> DAP</b> sector in 2000 totaled EUR 2,107 million, representing 18%
growth. Currency movements had a strong positive impact of 8% on nominal sales.
Consolidation changes had a positive effect of 4%. Volume growth, at 8%, was
partly countered by an average price decrease of 2%. The sales growth is mostly
attributable to the Male Shaving and Grooming business, reinforcing global
market leadership. The Food and Beverage and Home Environment Care businesses
also achieved strong increases. Sales at Oral Health Care were favorably
impacted by the acquisition of Optiva Corporation in October, 2000. Income from
operations increased by approximately 30% to EUR 287 million, primarily from
Male Shaving and Grooming and the success of Quadra Action, while Food and
Beverage improved its profitability significantly as a consequence of portfolio
rationalization and strict cost control.</p>
<p>Sales in the <b> Components</b> sector totaled EUR 4,562 million in 2000, a sharp
rise (22%) on the year before. Changes in consolidation had a negative effect of
5%, particularly related to the divestment of AC&amp;M as of July 1, 2000.
Currency movements had a positive effect of 13% on nominal sales. Volume growth
was 20%, partially offset by a 6% reduction in average selling prices. The
larger part of the sector's growth was realized in Optical Storage, whose sales
were more than 80% higher than the year before. In addition, strong growth was
realized by Flat Display Systems, notably Mobile Display Systems. Income from
operations almost doubled from 1999's EUR 286 million to EUR 569 million. In
2000 the divestment of AC&amp;M had a positive effect of EUR 309 million, which
was partly offset by the EUR 78 million net restructuring charges related to
Display Components and Flat Display Systems. Income in 1999 was positively
impacted by the EUR 169 million gain on the divestment of Conventional Passive
Components, partly offset by the restructuring charges of EUR 38 million in
relation to the Active Matrix Liquid Crystal Displays (AMLCD) business.
Excluding restructuring charges, all businesses except Flat Display Systems
improved their performance in 2000, with Optical Storage posting a major
improvement, especially in the first half of the year.</p>
<p>Sales in the <b> Semiconductors</b> sector in 2000 came to EUR 5,879 million, an
increase of 55% over 1999. Through the acquisition of MiCRUS as from June 1,
2000, sales increased by 3%. In addition, 2000 contains the full-year sales of
VLSI, compared to seven months in 1999 (effect +8%). Furthermore, currency
movements had a substantial positive effect of 14% on nominal sales. Volume
growth was 33%, while average prices decreased by 3%. Price erosion was
substantially lower than in the previous year, reflecting strongly improved
markets. All businesses improved due to the steep overall growth, most
predominantly Telecom Terminals and Emerging Businesses. Income from operations
in 2000 more than doubled the 1999 amount and totaled EUR 1,346 million. The
main reason for the improvement was the substantially higher sales level in all
businesses due to the general upturn in the industry which led to shortages in
the market during the year. Through the acquisition of MiCRUS capacity was
increased.</p>
<p>Sales in the <b> Medical Systems</b> sector in 2000 totaled EUR 3,031 million,
representing 22% growth. The acquisition of a majority of the shares in MedQuist
as of July 1, 2000 lifted sales by 8%. In addition, currency movements had a
positive effect of 10% on nominal sales. Volume growth was 7%, while prices on
average decreased by 3%. Income from operations in 2000 amounted to EUR 169
million, compared to EUR 181 million in 1999. The acquisition of ADAC resulted
in a fourth quarter charge of EUR 44 million for the write-off of the in-process
R&amp;D obtained in this strategic acquisition. Excluding amortization of
goodwill and other intangibles related to the acquisitions of MedQuist and ADAC
in 2000 and ATL Ultrasound in 1998, income was EUR 308 million, which was a EUR
89 million improvement over 1999. Income from operations of ATL Ultrasound
improved over 1999.</p>
<p>Due to the Atos Origin merger, sales of <b> Origin</b> have been consolidated for
nine months only in 2000 and came to EUR 717 million. The merger with Atos
resulted in a gain of EUR 1,072 million, bringing total income for the year to
EUR 1,063 million.</p>
<p>Sales in the Miscellaneous sector in 2000 totaled EUR 1,831 million,
representing a 16% increase over 1999. Changes in consolidation had a downward
effect of 4%, while the appreciation of currencies had a positive effect of 8%.
Sales growth was particularly strong at EMT, FEI and Philips Enabling
Technologies Group. Income from operations in 2000 came to a loss of EUR 113
million, or 6.2% of sales, which compared with a loss of EUR 94 million, of 5.9%
of sales in 1999. The income of the Miscellaneous activities was adversely
affected by provisions of EUR 93 million for settlement for activities that were
stopped.</p>
<p>Income from operations in Unallocated came to a loss of EUR 82 million in
2000, compared to a loss of EUR 413 million in 1999. In 2000, income was
positively impacted by EUR 406 million reduction in pension costs, as compared
to EUR 124 million in 1999.</p>
<p><u>Geographic developments<br>
</u>Geographically, sales growth in 2000 was strong in
all regions, in particular in Asia Pacific. Sales in Asia accelerated strongly
and ended 29% above the year before, with all sectors contributing, especially
Semiconductors. The sharp upturn in Europe (16%) was driven by Semiconductors,
Components and Consumer Electronics. In addition, Latin America recorded
substantial positive growth, recovering from the weak sales in the years before.
The recovery is headed by Brazil, benefiting from the upturn in economic
conditions in that country. North America recorded a 21% increase in sales,
attributable to the strong rise of the US dollar and the new acquisitions in the
region.</p>
<p>Income from operations in 2000 improved in all regions. Europe, Asia Pacific
and North America showed strong increases in income, driven by the favorable
developments at Semiconductors. North America was also positively influenced by
the strong US dollar. Furthermore, income in Europe increased due to the reduced
pension costs in the Netherlands, while both Europe and Asia Pacific were
positively affected by the gains on the transactions with Origin and the
AC&amp;M business. Latin America became profitable again, fully reflecting the
higher activity level at Components.</p>
<p><u>Cash flows and financing<br>
</u>The cash flow from operating activities in 2000 of
EUR 2,996 million exceeded the level of EUR 1,913 million in 1999. The increase
in cash provided by operating activities is attributable to the increased
profitability of the Company, partially offset by higher working capital
requirements of the Company's growing businesses. Expressed as a percentage of
sales, inventories at the end of 2000 were 13.9% of sales, compared to 14.5% a
year earlier.</p>
<p>Cash flow from investing activities in 2000 required EUR 2,404 million,
versus EUR 3,834 million in 1999. During the year 2000, Philips invested EUR
3,209 million in businesses operating in strategic areas where Philips wants to
improve its global market position (1999: EUR 2,993 million).</p>
<p>In 2000, the net cash flow used for financing activities amounted to EUR
2,038 million, of which EUR 1,673 million was used for a 3% share reduction
program. In 1999, the net cash flow used for financing activities was EUR 2,606
million, of which EUR 1,490 million was used for the 8% share reduction program.</p>
<p>The net debt to group equity ratio amounted to 12:88 at the end of 2000,
compared to a ratio of 6:94 at the end of 1999.</p>
<p><u>Employees<br>
</u>The number of employees at the end of 2000 totaled 219,429, which
is 7,445 lower than the position at the end of 1999. The reduction is
principally attributable to consolidation changes, reflecting a total decrease
of 10,621 employees. The most significant divestment was that of Origin,
involving a reduction of 15,906 employees. Geographically, the headcount
increased in Europe, Asia Pacific and Latin America, while falling in North
America.</p>
<p><u>Outlook<br>
</u>The Company has formulated its new performance objectives for the
medium term:</p>
<p>1. Sales growth of better than 10% average per annum<br>
2. Income from
operations to grow from approximately 8% of sales to 10% of sales<br>
3. Growth of
earnings per share of 15% on average per annum<br>
4. Positive cash flow</p>
<p>Achieving these results will lead to a return on net assets (RONA) of over
30%.</p>
<p>For the year 2001, the Company is observing a slow down in economic activity
in some areas of the world, particularly the USA. Furthermore, the markets for
PCs and related products and the telecom markets are showing signs of temporary
oversupply. This will cause some of the markets for Philips products to show
lower growth and higher price erosion in 2001, certainly in the first half of
the year.</p>
<p>We will keep capital expenditures below the level of 2000, while we continue
to support the high growth opportunities of our businesses with a focus on
Semiconductors, Components and the digital parts of Consumer Electronics. This
will be supported by acquisitions, which may temporarily dilute earnings until
the synergies can be reached that are foreseen in these transactions.</p>
<p>We will continue to improve our operational efficiency and devote more
attention to closer cooperation between different businesses, where this creates
synergy advantages for the Company. The total effect of growth and efficiency
will keep the number of employees at about the same level.</p>
                <p>We will continue our approach to further tighten business controls and
enhance value-based management.</p>
<p>Amsterdam, February 8, 2001<br>
Board of Management</p>
<p><i><br>
Media inquiries: Ben Geerts, Philips Corporate Communications, tel: +31 20
5977215</i></p>
<p>&nbsp;</p>
<p><i>'Safe Harbor' Statement under the Private Securities Litigation Reform Act of
1995 This document contains certain forward-looking statements with respect to
the financial condition, results of operations and business of Philips and
certain of the plans and objectives of Philips with respect to these items. By
their nature, forward-looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, levels of consumer
and business spending in major economies, changes in consumer tastes and
preferences, the levels of marketing and promotional expenditures by Philips and
its competitors, raw materials and employee costs, changes in future exchange
and interest rates (in particular, changes in the euro and the US dollar can
materially affect results), changes in tax rates and future business
combinations, acquisitions or dispositions and the rate of technical changes.
Market share estimates contained in this report are based on outside sources
such as specialized research institutes, industry and dealer panels, etc. in
combination with management estimates.</i></p>


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