Philips to Separate Lighting Arm Into New Company

Royal Philips NV is to split off its lighting division to create two separate companies, the latest in a string of radical restructurings by one of Europe’s best-known corporations.

Philips, which began as a lighting company back in 1891, said Tuesday that “independence” would make it easier for the lighting arm – widely regarded as the dominant seller of LED lighting products – to enter new markets.

“I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step,” CEO Frans van Houten said.

Philips, he added, would be open to considering “various options for alternative ownership structures” for the lighting arm – which could include seeking a separate stock-market listing for it or selling it directly, in part or whole.

Philips will be left with a “lifestyle” division, which may be most familiar to consumers. It makes a range of household products, such as coffee makers and shavers. That will be combined with its health-care division, which makes high-tech medical equipment.

The health and consumer lifestyles businesses had joint sales of 15 billion euros ($19.3 billion) in 2013, while the lighting arm had sales of 7 billion euros.

Both the lighting and “HealthTech” company will continue to use the Philips brand.

Tuesday’s announcement follows a decision by Philips in June to spin off yet another major chunk of its operations: its lighting components arm, which services many industries that need specialized lighting parts – notably automakers. The components deal is not yet finalized.

On the company’s finances, Van Houten said Philips expects the breakup to cost 50 million euros in charges through 2016. However, he said it will save 300 million euros annually by that time. Van Houten did not discuss details of likely job cuts.

The company also warned that it expects its operating profit in the second half of 2014 to be lower than in the second half of 2013, due to legal costs and “softness in multiple markets,” although lighting operations in North America and Europe are strengthening.

This article appeared in print in the September 24th, 2014 edition of Hamodia.