Standard&Poor's affirmed its single-'A'-minus long-term and 'A-2' short-term corporate credit ratings on Koninklijke Philips Electronics N.V. (Philips) on July 16, 2002, following the Dutch diversified technology group's release of its second-quarter 2002 results. The outlook remains negative. Although Philips' second-quarter results continue to demonstrate weak sales in its semiconductor, components, and consumer electronics divisions--resulting in low operating margins--improving free cash flow generation and slightly reduced debt are viewed as positive signs for the medium term. Cost cutting and focusing on working capital have helped the group to mitigate the impact of continued sluggish market conditions across its main businesses. Philips should be able to maintain its current credit quality, which is underpinned by a diversified business mix, if
