Royal Philips, the world’s biggest lighting company and makers of the Philip’s Hue Personal Lighting System (read CR’s Review here) is splitting up to focus on its healthcare and consumer goods business. The two segments will operate separately. The healthcare and consumer goods business will merge to become HealthTech, accounting to $19 BN in sales, while the lighting branch with be independent, accounting for $9 BN in sales. In the last few years, the lighting industry has undertaken major changes as it moves away from traditional incandescent bulbs to the more energy efficient LEDs. According to CEO Frans van Houten,
I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step for Philips, as we continue on our transformation.”
The restructuring is expected to save $129 MN in the next year, $257.7 MN in 2016. Van Houten claims to want to harness the growing market for health tracking devices by merging the health and lifestyle (consumer goods) businesses. The decision by Philips follows a movement by Siemans, known rival of the company, which also spun off its lighting unit last year.
Marc Hesselink, analyst at ABN in Amsterdam, says,
It’s a bold move…It shows the company’s focus on one point, health care.”
The decision by the Dutch company reflects the value of the growing health tracking industry. There are currently many health trackers on the market, including FitBit, Jawbone, and now the HealthKit software available with the new Apple IOS 8. Consumers more than ever want to take hold of their health, especially in the face of continuously rising rates of obesity and sedentary behavior in the face of busy office life.
Read more- “Philips Plans Breakup Focus on Health, Consumer Goods,” (Elco van Groningen, Bloomberg)