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Philips outlines plans to split into healthtech, lighting solutions cos

Poornima Joshi Eindhoven | Updated on October 02, 2014

Lifestyle businesses to be integrated under Philips Healthcare

The Dutch electrical appliances group Royal Philips has formally elaborated its plans to separate into two separate entities with healthtech products amounting to a larger chunk of the company’s focus. Philips Healthcare will incorporate the company’s consumer lifestyle businesses into one entity while lighting, which is the traditional focus of the 113-year-old company, will be the second entity amounting to approximately one-third of the company’s international focus.

Philips, a household name around the world for home appliances, already has in recent years stripped down its business to focus more on advanced lighting technology and on medical technology for which margins are strong and less vulnerable to competition from emerging markets. Philips Chief Executive Officer Frans van Houten launched the company’s Innovation Experience, 2014 this week at the company’s headquarters in Eindhoven with a formal announcement of the contours of the decision to separate the company, which has been the focus of much speculation of late.

Both companies will continue to use the Philips name, the company said, noting that its HealthTech business had sales of 15 billion euros ($19 billion) in 2013 and its lighting business sales of seven billion euros. Details on how its lighting business will be split off into a separate legal structure are to be announced in 2015.

“Last week, we made the historical announcement that Philips is going to transform into two strong and focused companies — one focused on the HealthTech opportunity, the other on Lighting solutions. This is the next logical step in our journey. It will position both companies for long-term market leadership, enabling them to innovate and address customer needs even better and faster,” Frans van Houten said.

“What we are seeing is the merging of the consumer and professional healthcare spaces. To lead a good life, consumers want to monitor and manage their health, be it the air they breathe, the food they eat or their personal hygiene. Governments are looking for ways to deliver better and more affordable healthcare beyond the hospital walls. To this end, they are encouraging healthy living, preventive health and remote support of people with chronic diseases. They also want to empower healthcare professionals to co-operate more effectively and deliver better diagnoses and treatments,” said the Philips CEO, emphasising the company’s focus on healthcare.

He made it clear that the Healthcare and Customer Lifestyle businesses will function as part of one entity while Lighting will be a completely different entity.

“To enable this revolution, healthcare has to be delivered as an integrated service across the entire continuum of care. This runs from health living and prevention, to diagnosis and treatment, recovery and home-care. The portfolios of our Healthcare and Customer Lifestyle businesses already span this continuum. By merging the two and working from a unified vision and strategy in a single company, we create a stronger foundation for future growth and innovation,” van Houten said.

He said Lighting has to have a separate focus to make appropriate investments to boost growth and drive profitability.

“The lighting industry is experiencing the largest transformation since the invention of the light bulb. LEDs and connected lighting technologies are catalysing the shift from lighting products to lighting solutions and systems. While still valuable for the illumination it provides, light will increasingly create social and economic value by making buildings and cities safer, more beautiful and energy efficient. By turning Lighting solutions into a separate entity with direct access to financial markets, we will accelerate this even further,” the Philips CEO added.

Published on October 02, 2014

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