Philips is to break its 120-year-old company in two, creating a stand-alone lighting business and merge consumer and healthcare divisions into a 15-billion euro business. As Ivor Bennett reports the new structure the move is meant to bring cost savings of 300 million euros over the next three years.
Is this the light bulb moment for Philips? After 120 years, the Dutch electronics giant is splitting into two. On one side will be lighting; on the other, healthcare and consumer. The announcement the latest attempt by Philips to adjust to a shifting landscape. Reuters Breakingviews' Dominic Elliott. SOUNDBITE (English) DOMINIC ELLIOTT, COLUMNIST, REUTERS BREAKINGVIEWS, SAYING: "Certainly it makes sense and they can't just sit there doing nothing. but i think there will be a bit of a conglomerate discount persisting and that's because lighting is just going to take a while to turn around. You've got to wait for this shift to start to play out you've got to try and turn yourself into more of a consulting business for lighting because that's where the money's going to be made. You kind of sell a big system." The same goes for healthcare and consumer. Philips hoping to capitalise on a market that's become increasingly fitness conscious. SOUNDBITE (English) DOMINIC ELLIOTT, COLUMNIST, REUTERS BREAKINGVIEWS, SAYING: "Your Apple iwatch or your phone is going to give you a lot of health data. So there is a natural fit there but I think these things will take time. So we won't see i don't think a sudden bump in the share price today, we probably won't see that start to tick up for a while, it's going to take time." Philips predicts the new structure will bring savings of 300 million euros between now and 2016. While the cost of restructuring will be about half that. Breaking new ground is nothing new for Philips. The company, after all, pioneered the compact disc. In this case though it may take more than just the flick of a switch.