breaking with tradition, philips splits off lighting
The Dutch enterprise group, which started producing light bulbs before 123, is taking a bold step to expand its lighting business --
Profits in the health care and consumer sectors.
Putting the lighting business in a separate company is part of Philips\'s broader strategy to move from lower-margin consumer electronics to faster growth
The health care market is growing mainly in emerging Asian markets.
The decision to split the company in two marks a clear breakthrough in the company\'s origins in the southern Dutch town of Eindhoven, gerrard Philips and his father Frederick founded one of the earliest manufacturers of incandescent lamps in 1891.
Philips, which invented audio boxes and CDs, grew into a world --
The leading electronics company has grown to its 1960 s, but it has been relentlessly pulling out of some of the less profitable businesses like audio and video, vinyl records and television.
Philips chief executive Frans Van Houten, who announced the split on Tuesday, said it was unclear whether the lighting business would be sold to investors or listed on the stock exchange, but the move will provide better returns for investors.
\"I do appreciate the scale of the decisions we are making, but now is the time to take the next strategic steps for Philips,\" Van Houten said . \".
\"Great companies need to reinvent themselves, we can do that, we can stay relevant, we can grow, we can stay successful.
It takes courage, but it is a path we have been preparing.
Van Houten declined to comment on whether any new company would be the target of the acquisition: \"Our decision was not due to concerns about what other companies would do.
\"The Philips split will take 18 months, which will make it easier for the two companies to raise money and invest,\" he said.
The new structure will save 100 million euros ($128. 5 million)
Next year, 2016 will be 0. 2 billion euros.
The company expects the cost of restructuring to be EUR 50 million from 2014 to 2016.
Philips\'s move is to overhaul long-
Last week Bayer, Germany, said it would spin off its plastics business and focus on higher-margin businesses --
Siemens, German engineering giant (SIEGn. DE)
Split its bulb maker and Philips rival Osram (OSRn. DE)last year.
Philips stock prices in the market poor performance, down 9% this year, up 2. 4% to 24
07 euros traded in Amsterdam.
Hans Sloan, Rabobank analyst, said splitting the company is good for valuation: \"This will eliminate group discounts and I always use a 5% discount for the sum of part valuations.
Philips said in July that it would combine its light-LEDs (LED)
And the car lighting department in a stand.
As the world switches from incandescent lamps to more efficient and durable lights, light companies focus on the LED boom.
\"The overall dynamics of the lighting market are changing,\" Van Houten said on Tuesday . \".
\"Value is shifting to systems and services\", including, for example, the management of complete lighting systems for cities and companies.
But the price war on LED bulbs is hurting profits, Philips and Osram (OSRn. DE)
We are scrambling to develop new technologies and open up new market segments.
Philips has a history of building and stripping successful companies, including ASML, a chip device manufacturer (ASML. AS)
It is now larger than Philips and Polygram, a music label and film company merged with Universal.
Philips says its latest move will create two markets
HealthTech, a leading company selling 15 billion euros, and lighting, both use the Philips brand.
Philips said it would take seven-
Incorporate the billion euro lighting business into an independent legal structure and consider various options for direct access to the \"alternative ownership structure\" of the capital market.
Philips stated in its revised outlook that adjusted earnings before interest, taxes, depreciation and amortization (EBITA)
The second half of 2014 is expected to be slightly lower than the same period a year ago.
In the health care business, the core profit in the second half of 2014 is now also expected to be lower than the core profit reported in the second half of 2013.