Once known for inventing the audio cassette in the 70s, Philips is now selling off remnants of its formerly dominant audio and video business division to focus more on high-margin products such as medical scanners and energy-efficient bulbs.
The former consumer electronics giant follows in the steps of other big European companies such as Germany's Siemens and France's Alcatel-Lucent, which have also exited the consumer electronics market in recent years. The move comes as Philips CEO Frans van Houten works through a companywide overhaul to cut 1.1 billion euros in costs and increase operational efficiency.
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Strong sales in the company's health sector helped shore up lagging profits in other weaker areas, resulting in a fourth-quarter profit of 875 million euros ($1.2 billion) that beat analysts' estimates of 866 million euros. Health care revenue grew 4 percent, while revenue from lighting also rose around 4 percent. Consumer lifestyle (household and personal care electronic products) drew the weakest sales, with growth stuck around 2 percent.
Within the health care products division, sales for equipment orders grew 4 percent, while home health care systems sales led with high single-digit growth. "We are extremely happy with 4 percent year-on-year growth considering the current economic challenges of the mature market," Steve Klink, press officer of Philips Corporate Communications, told DOTmed News.
Emerging markets such as Brazil, Russia, China, India and countries in Southeast Asia drove much of the sales within health care, garnering a robust 19 percent in comparable growth. On the other hand, ongoing economic woes flattened sales in saturated markets such as Europe and the U.S., with a 1 percent decrease in comparable growth.
Overall, revenue from the health care sector made up 41 percent of the company's group revenue in the fourth quarter. Moving forward, Klink said, Philips anticipates U.S. uncertainty around the fiscal cliff will have an impact on profits, but said they expect to see sales even out later in the year. "We expect to compete in this challenging environment by developing innovations that will alleviate pressures on health care systems all over the world — not just in U.S. or Europe but also in growth geographies," said Klink.
Competitors Siemens and General Electric also beat earlier estimates with quarterly earnings boosted by a rise in sales in the health care market, including a stronger-than-expected showing from the U.S. market as well as growth in emerging markets such as China.
Echoing long-term shifts of other big electronics players, Samsung has also recently made the leap into the health care market, announcing Monday that it has acquired NeuroLogica, a U.S. CT scanner manufacturer.