The ratings on Koninklijke Philips Electronics N.V. (Philips) continue to reflect the company's diversified business portfolio and solid positions in several core business segments--which partly offset its weak profitability in consumer electronics, as well as its exposure to the cyclical and capital-intensive semiconductor industry. The recent strengthening of Philips' positions in the medical-equipment industry has allowed it to mitigate sharply deteriorated profitability and debt-coverage measures, primarily attributable to difficult market conditions in 2001. Philips enjoys a diversified business portfolio, which includes challenging high-tech sectors (such as semiconductors and the competitive, low-margin consumer-electronics business), as well as stable and cash-generative activities (such as lighting, domestic appliances, and medical systems). Over the past three years, the group has extensively restructured its activities.
