Philips to Focus on “Lifestyle”

The technology market is a winner-takes-all where the winner makes money for a while and all the others lose. That’s what Gerard Kleisterlee, CEO of Philips, stated about the CE market and how he wants to move away and toward other more attractive markets. 10 days ago, Kleisterlee confirmed the sale of Philips’ semiconductor business to a consortium of private-equity firms: Kohlberg Kravis Roberts, Silver Lake Partners, and Alpinvest Partners for Euro 6.4 billion (~US$8.1 billion).

Maybe this is the reason Philips announced that it would sell its equity stake in LG.Philips LCD (LPL). LPL is not only not a CE brand, it’s a mere supply of LCDs to brands like LG Electronics (LGE) and Philips. Philips will concentrate on becoming a major CE brand and continue to divest its capital currently in technology ventures. Its involvement in Taiwan Semiconductor Manufacturing Company (TSMC) is also planned to be dissolved.

Philips will probably capitalize on a worldwide trend: health. With the world’s population aging the health industry is expected to grow leaps and bounds. The company recently won US FDA approval for its HeartStart defibrillator that electrically shocks a stopped heart to restart it, for the home. These defibrillators have been traditionally found only at hospitals and will help toward reducing hospital costs and gaining a bit more control of your own health. I hope they continue toward this trend in empowering the consumer to control more of his/her health. Recently, Philips acquired Avent, a British company that makes breast-feeding and baby-care products that is very popular with mothers with newborns.

Although Philips is a strong brand in the EU, in the US, it is only strong in a few niche markets. For instance, in the area of electric toothbrushes, there really aren’t any competitors with its Sonicare products. Philips will need to really focus on a certain market to convince US consumers that it is a serious brand. Up to now, it has dibble-dabbled in too many markets for anyone to take it seriously. Would you purchase a $1500 LCD TV from a toothbrush maker? Or vice versa? Philips will need to focus. Related to this, I look forward to Philips improving upon Avent’s products and making our lives that much easier because parents will always appreciate more help in making childcare a bit easier.

Source: Times Online UK, Philps (Sonicare), Philips (Heartstart)

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