Philips aims to double Profit

Philips Electronics Monday proclaimed it would initiate restructuring in order to raise earnings before interest, taxes and amortization to as much as double per share by 2010 from 2007. Philips is targeting a volume growth of more than 6 per cent per year between 2008 and 2010. However, the company does not intent to sack any workers in the process.

“There will be no forced redundancies because we believe with the normal turnover that we have ... that we all can do that in a natural way,” said Royal Philips Electronics president and chief executive officer Gerard Kleisterlee.

The Electronics Company calls the planned reorganization as Vision 2010, which will condense its activities down to three core divisions: Philips Healthcare (medical equipment), Philips Lighting (lights) and Philips Consumer Lifestyle (consumer products).

According to the Dutch company the move would help save between 150 million euros (206.58 million dollars) to 200 million euros (275.47 million dollars) in expenses.

For fiscal year 2006, medical systems comprised 27% of group revenue, lighting made up 22% and appliances 10% and consumer electronics accounted for 40% of the revenue.

The fastest growth was recorded in the Appliances segment which was the most profitable.

The Eindhoven-based company is attempting to shift focus to Asia as it expects tremendous growth from the region. As of now, Asia accounts for only a fifth of Philips' global revenue but Philips is positive it will make a bigger contribution very soon.

“Asia should grow well within double-digits, and in a number of years, I want to see Asia contributing well beyond 25% of our global revenue,'' Kleisterlee said.

While Philips appliances are doing well in Asia, Kleisterlee believes the healthcare business needed to be extended ‘downwards’ in order to have more products with basic specifications as populous economies of China, India and Indonesia need simple and fundamental equipment for rural clinics and hospitals.

With high expectations from the growing economies in Asia, Philips is moving a large share of resources to the region.