Philips 2004 Annual Report Download - page 29

The structure of the Philips Group
Koninklijke Philips Electronics N.V. (the ‘Company’ or ‘Royal
Philips Electronics’) is the parent company of the Philips group
(‘Philips’ or the ‘Group’). Its shares are listed on the stock markets
of Euronext Amsterdam and the New York Stock Exchange.
Listings of the Company’s shares on the Frankfurt Stock Exchange
and Euronext Paris were terminated in 2004. The management of
the Company is entrusted to the Board of Management under the
supervision of the Supervisory Board. The Group Management
Committee, consisting of the members of the Board of
Management, chairmen of product divisions and certain key
officers, is the highest consultative body within Philips, and its task
is to ensure that business issues and practices are shared across
Philips and to implement common policies. Philips addresses its
overall corporate governance structure in the section Corporate
governance on pages 195 to 208.
The activities of the Philips Group are organized in 6 operating
product divisions, each of which is responsible for the
management of its business worldwide, being Medical Systems,
Domestic Appliances and Personal Care, Consumer Electronics,
Lighting, Semiconductors and Other Activities.
Philips delivers products, systems and services in the fields of
medical systems, domestic appliances and personal care, consumer
electronics, lighting, and semiconductors. At the end of 2004,
Philips had approximately 140 production sites in 32 countries and
sales and service outlets in approximately 150 countries, and
employed about 162,000 people and recorded sales of EUR 30
billion in 2004.
Business overview
Philips is focusing on strengthening its existing core activities,
including by means of selected acquisitions and the disposal of
activities that are under-performing and not essential from a
strategic viewpoint. Furthermore, Philips engages from time to
time in cooperative activities with other companies. Please refer
to the section ‘Cooperative business activities and unconsolidated
companies’ on pages 40 and 41 of this Annual Report.
Strategic alliances are also important to Philips. For example, in
2004 the alliance with Nike for sport products was expanded, and
a partnership was entered into with InBev, one of the global
leaders in the beer market, for a home draft beer system,
PerfectDraft.
After the multi-billion dollar acquisition program in the Medical
Systems division in recent years, the focus now lies on value
realization by the transformation from the supply of specific,
stand-alone clinical applications to a total patient ‘care cycle’. The
focus on the care cycle also allows the division to strengthen
relationships with healthcare providers, based on adding value to
the quality and effectiveness of the care they can deliver.
In 2004, Philips set up a manufacturing and R&D venture for
medical systems with Neusoft Group Ltd. of China (‘Neusoft’).
The venture, Philips-Neusoft Medical Systems Co. Ltd., focuses on
developing and manufacturing medical imaging systems for the
Chinese and international markets. In Europe, Philips Medical
Systems and Société Générale Equipment Finance set up a venture
to provide financing to customers in certain major countries in
Europe for the purchase of medical equipment produced by
Medical Systems, as was done in the United States with Rabobank
Group’s subsidiary De Lage Landen in 2002.
The Domestic Appliances and Personal Care (DAP) division offers
consumers propositions that meet their needs in the area of home
management and personal wellness. The division aims to achieve
and consolidate leadership in its target markets through the global
Philips brand and other brands.
Over the last few years, the Consumer Electronics (CE) division
was repositioned for future profitability and cost-effectiveness. In
2002, the most important divestment was the sale of most of
Philips Contract Manufacturing Services (PCMS) to Jabil Circuit
Inc., a global leader in Electronic Manufacturing Services (EMS).
This agreement is part of the strategy to focus on selected
activities to support the long-term goals of CE as it continuously
seeks to minimize the assets allocated to it through optimized
supply chain management, an Original Design Manufacturing
(ODM) business philosophy and outsourcing. In 2004, the Kwidzyn
TV factory in Poland was also sold to Jabil. In 2004, Philips acquired
Gemini Industries, the leading North American supplier of
consumer electronics and PC accessories.
In December 2004, Philips and TPV Technology Limited signed a
Letter of Intent for the PC monitor and entry-level Flat TV
segments, pursuant to which the parties agreed that TPV will take
over the operation of Philips’ existing OEM monitor business, and
Philips will focus on the marketing and sales of its own branded
monitor and Flat TV products.
28 Philips Annual Report 2004
Information on the Philips Group