Great Expectations

At the annual shareholders meeting of N.V. Philips, the Dutch electronics conglomerate, President Cor van der Klugt, 65, wowed the crowd with visions of increased profits for the upcoming year. That was seven weeks ago. Less than three weeks later, the company had to admit that operating profits for the first quarter had nose-dived: an anemic $3.3 million on revenues of $7.1 billion, vs. $123.9 million for the same period last year. Management was stunned and shareholders panicked. They raced to dump their stock, driving Philips shares down 17% in two days.

Something had to go, and last week the Philips board, led by Chairman Wisse Dekker, decided that it was Van der Klugt. The 40-year veteran was forced out. Philips, Dekker admitted at a hastily called news conference, was suffering a "crisis of confidence, the worst thing that can happen to a corporation." He then named as Van der Klugt's successor Jan Timmer, 57, chief of the firm's consumer-electronics division.

The earnings debacle was caused partly by fluctuations in the values of the British pound, U.S. dollar and Japanese yen, which left Philips with an estimated $110 million in currency-related losses. But there were other problems. Philips' computer division, for example, has been struggling for years in an increasingly competitive market, and lost money during the most recent quarter.

Timmer is known as a tough manager who demands tangible results. After 31 years with Philips, he became president of Polygram International, the company's recorded-music subsidiary, in 1983 and quickly transformed it from a money loser into one of the firm's standout successes. Timmer's reputation as a tough turnaround specialist was confirmed four years later when he moved the consumer-electronics division into the black through a combination of staff cuts and a stronger emphasis on marketing.

As Timmer takes charge, analysts expect to see more layoffs and other aggressive forms of cost cutting. But that rare commodity, confidence, may be returning: as soon as Timmer's appointment was announced, Philips stock nudged up 1 point, to 18 5/8.