Philips posted a surprise 1.3 billion euro ($1.8 billion) quarterly net loss, just weeks after profit warnings at two key divisions, due to weak consumer demand in Europe and the United States.
The Dutch group on Monday said it booked a 1.4 billion euro charge in the second quarter from writedowns on acquisitions at its healthcare and lighting divisions, reflecting a weaker market outlook.
The loss is the latest disappointment for Philips which last month warned of sharply lower second-quarter profits and slowing sales growth at both its lighting business and the toasters-to-shavers consumer division, citing tepid demand.
This is a wider signal that the consumer is not really recovering, said Hans Slob, analyst at Rabobank.
Philips is the world's biggest lighting maker, a top three hospital equipment maker, and Europe's biggest consumer electronics producer.
The world seems to be riskier place with a lot of volatility and overall GDP growth that has been slightly set back, Philips Chief Executive Frans van Houten told reporters in a conference call.
Philips on Monday said it would cut 500 million euros of costs through 2014 and announced a 2 billion euro share buyback program that will be completed in the next year.
The buyback helped the shares, analysts said, which were up 0.8 percent at 0830 GMT (4:30 a.m. EDT) compared with a 0.5 percent lower STOXX Europe 600 Personal & Household Goods index.
Philips shares have fallen 30 percent in the past twelve months versus a 16.5 percent rise in the sector index.
Van Houten stressed the group would not shut or sell any of its businesses as it seeks to cut costs.
Some bankers and analysts have said that Philips should get out of the entire consumer electronics division because it has struggled to compete with lower-cost Asian makers of consumer electronics and faces tepid consumer confidence and weak economic growth in Europe and the U.S.
Philips competes with Samsung and LG Electronics among others in consumer electronics, and with General Electric and Siemens in the hospital and lighting markets.
Philips said the impairments at its healthcare and lighting divisions reflected the weaker market outlook and lower profitability projections at four units.
It took a 450 million euro charge at its Respironics unit, which is involved in treating a condition known as obstructive sleep apnea in which the airways collapse during sleep and prevent proper breathing.
It also announced a 374 million euro charge at another healthcare business involved in monitoring patients at home, and charges of 304 million euros and 227 million euros for lighting systems used commercially and in the home, respectively.
Philips posted a 1.3 billion euro second-quarter net loss compared with an average forecast for a 72.8 million net profit in a Reuters poll of analysts.
Restructuring specialist Van Houten, who scrapped Philips' earlier growth targets when he took over as chief executive in April, set new medium-term goals for 2013 on Monday, including sales growth of between 4-6 percent, and earnings before interest, tax and amortization (EBITA) margins of 10-12 percent for the group.
Rabobank's Slob said that while the share buyback was positive, the overall outlook was disappointing.
The management admits Philips is a lower-margin business, he said, adding that he expected the new guidance to trigger more analysts' downgrades.
The vision 2013 is disappointing. It is low in terms of profitability and the EBITA margin of 10 to 12 percent is not impressive, said Petercam analyst Marcel Achterberg.
(Reporting by Gilbert Kreijger and Roberta B. Cowan; Editing by Sara Webb and Erica Billingham)