Proving the Business Case for the Internet of Things

Philips to split into HealthTech, Lighting businesses

Iain Morris
September 24, 2014
Dutch technology giant Philips has announced plans to split itself into two organizations focused on serving opportunities in the healthcare technology and lighting markets respectively.

The company said the split would sharpen its strategic focus, with the new HealthTech business combining the existing healthcare and consumer lifestyle units, and the creation of Lighting marking a natural progression of efforts to combine the LED components and automotive lighting activities.

Both companies will continue to use the Philips (Amsterdam, Netherlands) brand, said the company in a statement.

Philips said that HealthTech would be able to capitalize on the convergence of professional healthcare and consumer end markets – illustrated by the growing adoption of remote monitoring technologies.

The company already claims to have taken a leading position in a number of healthcare fields, including oral healthcare, healthcare informatics, ultrasound diagnostics, cardiac care and home healthcare, serving a total addressable market worth about €100 billion ($128.8 billion).

“I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step for Philips, as we continue on our transformation,” said Frans van Houten, chief executive of Royal Philips. “To become the global leader in HealthTech and shape the future of the industry, we will combine our vibrant healthcare and consumer lifestyle businesses into one company.”

“At the same time, giving independence to our Lighting solutions business will better enable it to expand its global leadership position and venture into adjacent market opportunities,” added van Houten. “Both companies will be able to make the appropriate investments to boost growth and drive profitability, ultimately generating significantly more value for our customers, employees and shareholders.”

Philips expects the new structure to generate €100 million of additional savings in 2015 and another €200 million in 2016, but says it will incur approximately €50 million in annual restructuring costs between 2014 and 2016.

The arrangements should also spur revenue growth, allowing the newly created companies to better address their respective opportunities.

Last year, Philips’ combined healthcare businesses generated around €15 billion in revenues, while its lighting solutions businesses made around €7 billion.

“Philips is uniquely positioned to help reshape and optimize population health management by leveraging big data and delivering care across the health continuum, from healthy living and prevention to diagnosis, minimally invasive treatment, recovery and home care,” said van Houten. “The combination of our healthcare and consumer lifestyle portfolios and the integration of the data from the connected products on Philips’ cloud-based digital health platform illustrate our opportunity to capture growth in an increasingly connected world, where societies are looking for more effective and lower cost health solutions.”
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