Philips 2006 Annual Report Download - page 67

Philips Annual Report 2006 67
The fundamentals of sustainable value creation
The dynamics of the consumer electronics industry are
changing rapidly. With the shift from analog to digital,
increased broadband penetration offering a variety of
on-demand services, as well as an expansion of digital
‘eco-systems’ – the seamless sharing of content between
devices – consumers now have unprecedented access to
a wide selection of services on multiple devices, whether
at home or on the move. Coupled with this, there are
a number of highly competitive entrants in the consumer
electronics industry that include new Asian brands as
well as established IT players offering PC-based devices
which provide alternative access to traditional consumer
electronics services in the living room.
Responding to these changes, CE has for a number
of years been focusing on an asset-light strategy and on
reducing its operating capital and organizational costs in
order to drive sustainable performance and value creation.
Philips Consumer Electronics’ vision is to help create
a world where consumers enjoy great lifestyle
entertainment experiences and services whenever
and wherever they want.
In 2006, Consumer Electronics (CE) was made up
of fi ve businesses: Connected Displays, Entertainment
Solutions, Peripherals & Accessories, Home Networks
and Mobile Phones*.
CE develops and brings to market products such as its
fl agship HD-ready FlatTV with Ambilight, wireless audio
centers for streaming music wirelessly around the home,
Home Theater in a Box (HTiB) systems, DVD, DVD+RW
and hard-disc recording systems; VoIP (Voice over Internet
Protocol) cordless digital phones; HD and IPTV (Internet
Protocol TV) set-top boxes; universal remote controls,
digital photo displays, and peripherals and accessories such
as headphones, cables and recordable media, as well as
amBX peripherals – accessories that add light, sound and
wind effects for immersive gaming experiences. In addition,
CE offers consumers integrated propositions that
combine its products with content and services, such
as
its VoIP phone together with Skype™ and MSN™.
CE’s mission is to ensure that it brings meaningful
and relevant innovation to consumers’ lives, consistent
with Philips’ brand promise of “sense and simplicity”.
The division’s income is derived principally from two
sources: products & services and licenses. The division
employs approximately 14,500 people worldwide.
It maintains sales and service organizations in more
than 50 countries and, while the majority of production
is outsourced, retains manufacturing operations in France,
Belgium, Hungary, Mexico, Argentina and Brazil.
Progress on objectives
The Annual Report 2005 defi ned a number of strategic
objectives for CE for 2006 and beyond, with the focus
on sustainable profi tability, competitive advantage and
long-term value creation. Key drivers in this regard
include a focused portfolio, value creation in high-value
markets, the implementation of differentiated business
models, integral customer management, and development
of the capabilities and competencies of CE personnel.
The progress made in these areas is discussed below.
Philips continues to drive innovation in digital home
communication by providing a full range of handsets and devices
that enable crystal-clear voice calls via the internet. In 2006 Philips
introduced the world’s fi rst Skype™ DECT phone that works
without a PC to communicate via the internet.
On February 12, 2007, Philips announced the full divestment
of its mobile phones business to China Electronics Corporation
(CEC) in conjunction with a fi ve-year brand licensing agreement.
*
54 The Philips sectors
Consumer Electronics
86 Risk management 100 Report of the Supervisory Board 110 Financial Statements