The next step in Philips' long revival
Will the reorganisation help Philips achieve its growth goals? Jan Willem Berghuis, a financial analyst at Kempen & Co., says he is convinced Philips can do it. The company has a debt-free balance sheet, so it could double earnings through acquisitions or share buybacks. Instead, it has said it plans to grow its operational margin from 7.5% to 10% organically by 2010.
Not long ago, Royal Philips Electronics (NYSE: PHG) was nowhere in the Chinese television market. However, as liquid-crystal display technologies have taken hold, the Dutch conglomerate's flat-screen TV unit has shot up to the no. 2 spot in one of the world's fastest-growing economies. Markets change, says chief executive Gerard Kleisterlee, and so can Philips.
The affable but intense CEO, who took office in 2001, looks to have accomplished the impossible: turning around the once-lumbering electronics giant and putting it back on a growth track. Now, he has laid out his plan for the next step in Philips' long revival.
At an Amsterdam, Netherlands, press conference on 10 September, Kleisterlee unveiled a reorganisation that will streamline the company into just three major units - and promises to double operating profits by 2010. Philips shares jumped 3.1% in Amsterdam trading on the news and closed up 4% in New York.
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