Philips Plans Break Up to Focus on Healthcare, Consumer Goods
Bloomberg News
Royal Philips NV (PHIA) Chief Executive Officer Frans van Houten plans to break up the 123-year-old company to focus on health-care equipment and its range of consumer goods spanning shavers to air purifiers.
Philips will create a single division called HealthTech from its healthcare and consumer goods operations generating 15 billion euros ($19 billion) in sales, the Amsterdam-based company said today in a statement. Lighting will become a standalone company with 7 billion euros in revenue, and a new ownership structure will be considered.
Van Houten, who took the helm in 2011, will go before analysts and investors in London today to outline his reasoning for splitting up a company that's symbolizes the Netherlands' contribution to technology, innovation and industry.
'I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step,' the CEO said in the statement.
Van Houten, in his fourth year at the helm, has been focusing the company on more profitable businesses to keep up with competitors such as General Electric Co and Siemens AG. Earlier this year, the company sold its television division and the DVD and multimedia divisions and announced creating a standalone company from its lumileds and automotive lighting.
Philips climbed 3 percent to 24.21 euros at the open of trading in the Dutch capital today.
The market for lighting, led by Philips, is shifting from basic demands for products to more complex systems and services, and separating the company will enable it to have a sharper focus and investment strategy, van Houten said.
Philips reiterated 2016 goals, including a compound annual growth rate for comparable sales of 4 percent to 6 percent, with an earnings before interest, taxes and amortization margin of 11 percent to 12 percent. A purge on costs to raise profitability will lead to an extra 100 million euros in savings next year, rising to 200 million euros in 2016.
To contact the reporters on this story: Andrew Noel in London at anoel@bloomberg.net; Elco van Groningen in Amsterdam at vangroningen@bloomberg.net
To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Andrew Noel, Kim McLaughlin
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