Consumer Electronics - Philips consumer insights Target segments ... • Access & Enjoy your...

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Consumer Electronics

Gottfried DutinéExecutive Vice President and Member of the Board of Management

Agenda

• Philips Consumer Electronics:Position and Strategy

• Key Business Drivers

• Financials

• Conclusions

Agenda

• Financials

• Conclusions

Philips Consumer Electronics (PCE)* within Royal Philips Electronics

* PCE incl. PCMS

PCE 31 %

PCE 5 %

PCE 15% Employees

PCE 21 %

Operational CF 2001

2001 PCE* Revenue Portfolio

Europe51%

Nafta26%

AsiaPacific14%

Latam9%

Total sales: Euro 10.1 Bln

Acces-sories

3% Others3%

Monitors21%

Audio15%

CTV37%

VCR TV-VCR

MobilePhone

* PCE incl. PCMS

Market Position YTD Sept. 2002 # 1 or 2# 3

Philips position

VCR/TV-VCR

Total A/V

World (Incl. Japan)Total (Excl. Japan)

Latam Apac (excl. Japan)North America

Europe

% total 30% 30% 22%5%

MonitorsBranded2)

MonitorsOEM

Monitors (incl. OEM)

#1 DVDR#1 DVDR #1 DVDR#1 DVDR

#1#1 DVDR

Priority on Profitability & Value Creation

Value Market Share ’01-’02 YTD Sept. (World - excl Japan)

* Monitors World share defined as:Total sales / Total market incl. OEM Sources : GfK, Intelect, AC Nielsen, G9, ZYK, Trade Int., Electros, Afardo.

02 Jan-Sep

02Jan-Sep

02 Jan-Sep

CTV VCRAudio DVDRDVD-VMonitors

8.5 7.89.9

10.6 10.5 12.09.8 9.9

01 01 01 01

02 Jan-Sep

TV-VCR

19.919.7

02 Jan-Sep

# 1 or 2# 3

Philips position

Philips Consumer Electronics -Ambition

• Be ‘the’ brand people think of first when they imagine the most rewarding digital entertainment, communication and information experiences possible

• Be category leader (No.1) in: digital displays, optical storage, wireless connectivity

• Be Top 2 player with value market shares (MS) >10%in all covered markets

• Be a premium brand with brand index >100 in every product-market combination

• Achieve the corporate objectives(RONA >30%, positive CF, positive EPR)

Philips Consumer Electronics -Strategy Highlights

• Transform into marketing-oriented organisationbuilt on speed

• Maximise Customer Pull through – Global brand strength– Global portfolio leadership

• Become Best in Class in cost management &asset productivity

• Drive passion to win & personal commitment to excellence

Agenda

• Financials

• Conclusions

Operations

Key Business Drivers for creating Shareholder Value

People & competences

Globalbrand

strengthPrice

+Global

portfolioleadership

Revenue

* EPR = EVA

Cost mgt & asset

productivity

Customer Pull Generation

Globalbrand

strength

Price+

+Global

portfolioleadership

Revenue

* EPR = EVA

Customer Pull Generation -Our Business Logic

Business creationSeamless integration of product, consumer and trade marketing

Philips brand foundation

Productivity(Business & Consumer)

Personalexpression

(Personal domain)

Homeentertainment(Home domain)

Targetsegments

VisionVision

Brand promiseBrand promise

Enhancing quality of daily life:Meaningful innovations

Intuitive solutionsInspiring design

Deep consumer insightsTarget segments

Consumer&

technologyknow-how

Display• Flat,slim,wide• Picture quality• Design

Storage• Compatibility• Convenience• Convergence

Connectivity• Broadband• Wireless• Interactive

Customer Pull Generation -Focus area: Products

Global Portfolio Leadership

Personalexpression

(Personal domain)

Targetsegments

VisionVision

Consumer&

technologyknow-how

Global Portfolio Leadership Displays: Flat, Slim, Wide

Pixel Plus X LightFrame X

LCOS PTV Range 2003

CRT PTV

Front ProjectorLCD TV-Monitor

Range 2003

Global Portfolio LeadershipStorage: Optical playback & recording, multiformat, Portable Infotainment

8 cm CD/DVDapplications

HD – DVD and Blue Ray disc applications

DVD-SACD PortableMP3 player

HDD jukeboxAV applications

FashionDSC products

Microlifestyle design

HTiB applications

DVD slim design

DVD+RW

Global Portfolio Leadership Connectivity: wireless – AV streaming

Detachable monitor

Entertainment tablet

Dig. TV to TV link

Streamium

IP enabledproduct range

I - Pronto

Philips Connected Home Entertainmentin 2003

LCD TV

Monitor

A/VHDD

I-Pronto

LIVING ROOM KITCHEN

CHILDREN”S BEDROOMMASTER BEDROOM

DVD+RW with HDDand PCMCIA slot

(Media Server)

TV-to-TV LinkTransmitter

Digital PC-to-TV Linkand/or

Digital TV-to-TV LinkReceiver

Detachable Monitor PCMCIA

Streamium® MicroPCSolid state Audio

Fashion DSCproducts

8/12cmeXpanium CDP

Mobile Phonewith Bluetooth

Home Theatre

PCMCIA

WirelessBroadband

Home Network(802.11x)

BroadbandGateway /

Router + Wireless

Access Point

PCworkstation

LCD TV

Monitor

A/VHDD

I-Pronto

LIVING ROOM KITCHEN

CHILDREN”S BEDROOMMASTER BEDROOM

DVD+RW with HDDand PCMCIA slot

(Media Server)

TV-to-TV LinkTransmitter

Digital PC-to-TV Linkand/or

Digital TV-to-TV LinkReceiver

Detachable Monitor PCMCIA

Streamium® MicroPCSolid state Audio

Fashion DSCproducts

8/12cmeXpanium CDP

Mobile Phonewith Bluetooth

Home Theatre

PCMCIA

WirelessBroadband

Home Network(802.11x)

BroadbandGateway /

Router + Wireless

Access Point

PCworkstation

Philips Connected Home Entertainmentin 2003

Consumer benefits of Philips Connected Home solution:

• Access & Enjoy your favorite content from any source anywhere in the house • Unlock Internet and PC content in a friendly and relaxed CE manner• Make accessing content a more personalized and rewarding experience• CE user interface/installation/convenience • Incremental build up of network/no need to waste past investments

Connected Home: Live test in Singapore

Server / ContentRouter

Master Bedroom

Kitchen

Bedroom

Living Room

Bathroom

Audio Streamium

802.11a/b

Multimedia Streaming to Broadband TV

Multimedia Streaming from PCs

DVB-TStreaming Video

From Internet/Server

DVB-T Broadband TV

Broadband Modem

Entertainment Tablet

MultimediaStreaming

to Broadband TV

Entertainment Streamer AV Streaming

802.11aMPEG 2

802.11b

802.11b802.11a

LCD TVMonitor AV Receiver

802.11a

LCD TVMonitorAV Receiver

802.11a

802.11b

Ethernet

PVR, DVD

Data Casting

Internet802.11b

Multimedia RC

WirelessSpeakers

• Eco design of all products on all environmental attributes

Green Flagships outperforming competition in 5 green focal areas

• Green supply chain management

Energy

Weight

Recyclability

Packaging

HazardousSubstances

Global portfolio leadership …whilst enhancing environmental performance of our products

Digital Architecture Platform

DVD - Recorder

Key Product categories

Upmarket CTV

Customer Pull Generation -Focus area: Brand

Global Brand Strength

Personalexpression

(Personal domain)

Targetsegments

VisionVision

Consumer&

technologyknow-how

*) Brand strength (BS) = top 3 consideration + 3 x preference

Source: FOCUS/CMI June-July 2002

Eu US China India Bras

Philips

Benchmark Brand Strength *

Panasonic

Very strong(BS>100)

Strong(65<BS<100)

Samsung

Medium(35<BS<65)

Weak(BS<35)

HOME ENTERTAINMENTHome environment:

Relax and enjoy PERSONAL EXPRESSIONPersonal environment:

Create and interact

PRODUCTIVITYBusiness and consumer:

Be efficient and enjoy

Driving our Business Creation including Go To Market

With a focus on three experience domains

* EPR = EVA

Cost mgt & asset

productivity

Operations

Operational Excellence:Cost Management

Implementation of industrial blueprint

Non-BorderzoneBorder zone

Assy China

Outsourced

2000 2003

'80-'90 '90-'00 2000 2005

30-5012 5

# of Philips owned assembly plants

Operational Excellence:Asset Productivity

Continuously increase asset productivity

Cash Conversion Cycle

Inventory Turns

1998 2000 2002e

NOC turns

…working with negative NOC in some businesses will increase

1998 2000 2002e 1998 2000 2002e

Operations

People & competences

Globalbrand

strengthPrice

+Global

portfolioleadership

Revenue

* EPR = EVA

Cost mgt & asset

productivity

People & Competences -Key Improvement Programs

• Strengthen people development programsin the competence areas:– Marketing & sales– Product development/design– Supply chain management

• Intensify programs for building leadership competences• Focus on differentiation & rewarding of performance• Reinforce HR systems & programs like PPM, e-HRM, etc• Drive BEST

Agenda

• Financials

• Conclusions

Summary FinancialsConsumer Electronics € million

Total Sales

IFO exspecial items% of sales

IFO incl.Special items% of sales

2001 2001Sept YTD

10,071

-290-2.9%

- 671-6.7%

-274 -3.9 %

- 644-9.1%

150.2%

2002Sept YTD

Total Sales

IFO exspecial items% of sales

IFO incl.Special items% of sales

2001Sept YTD

2002Sept YTD

-274 -3.9%

-644-9.1%

150.2%

PCE2001

Sept YTD2002

Sept YTD

-130-8.0%

-85-5.6%

-97-6.4%

North America2001

Sept YTD2002

Sept YTD

-144-2.6%

-514-9.4%

1002.1%

1122.3%

Summary FinancialsConsumer Electronics € million

Agenda

• Financials

• Conclusions

Achievements so far

Product portfolio• Growing market shares in our focus areas of digital Display,

Storage, Connectivity• Leader in DVDR• Leadership recognized by experts:

Emmy, EISA, IF Design, “Best ever…”

Operational Excellence• NOC turns >25• Inventory turns = 12• Cash conversion cycle = 4

Financials• € 290 mln IFO improvements YTD September versus 2001

and improvements continue….

Future Improvement Opportunities

Customer Pull generation:• Brand strength:

– Accelerate shift from analogue to digital– Focus on experiences

• Portfolio leadership: Achieve/Extend leadership in digital D,S,C– Display: Flat, Slim, Wide– Storage: win in DVDR– Connectivity: win in wireless

Profitability• USA: towards profits in 2004• Continuous cost management• Improve structural profit levels

Top Line Growth• USA• China• Digital displays• DVDR• Mobile products• Internet enabled products

“By creating and marketingunique experiences, weat Philips will lead the

change in the consumerelectronics business.

We believe the next few yearsare going to be an exciting time…

and we are looking forwardto meeting the challenge!”

Consumer Electronics - Philips consumer insights Target segments ... • Access & Enjoy your...

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