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

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 %

Sales

PCE 5 %

NOC

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%

DVD5%

VCR TV-VCR

9%

MobilePhone

7%

* PCE incl. PCMS

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

< # 3

Philips position

CTV

VCR/TV-VCR

DVD

Total A/V

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

Latam Apac (excl. Japan)North America

Europe

Audio

42%

5%

7%

19%

% total 30% 30% 22%5%

MonitorsBranded2)

15%

MonitorsOEM

11%

Monitors (incl. OEM)

87%

73%

#1 #1

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

100%

#1#1 DVDR

#1

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

02 Jan-Sep

02Jan-Sep

02 Jan-Sep

02 Jan-Sep

CTV VCRAudio DVDRDVD-VMonitors

39.0

8.5 7.89.9

01

10.6 10.5 12.09.8 9.9

01 01 01 01

8.8*

01

9.4*

02 Jan-Sep

01

62.3

TV-VCR

19.919.7

02 Jan-Sep

# 1 or 2# 3

< # 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

HRM

People & competences

+ +

+

+

Globalbrand

strengthPrice

+

+Global

portfolioleadership

++

+

+

+ NOC

Cost

Revenue

IFO

EPR*

* EPR = EVA

+

+ -

-

Cost mgt & asset

productivity

Customer Pull Generation



Globalbrand

strength

+

Price+

+Global

portfolioleadership

++

Revenue

IFO+

EPR*

* 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

55”

44”

CRT PTV

Front ProjectorLCD TV-Monitor

TM

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

STUDY

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

STUDY

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

AP

AP

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

802.11b

802.11b802.11a

LCD TVMonitor AV Receiver

802.11a

LCD TVMonitorAV Receiver

802.11a

AV

802.11a

802.11b

Ethernet

AV

PVR, DVD

Data Casting

Internet802.11b

Multimedia RC

WirelessSpeakers

DVB-T

• 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

CTV

Video

Audio

Eu US China India Bras

Philips

Benchmark Brand Strength *

CTV

Video

Audio


Sony

CTV

Video

Audio


Panasonic

Very strong(BS>100)

Strong(65<BS<100)

CTV

Video

Audio


TMM

CTV

Video

Audio


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


+

+

+ NOC

Cost

IFO

EPR*

* EPR = EVA

-

-

Cost mgt & asset

productivity

Operations

Operational Excellence:Cost Management

Implementation of industrial blueprint

Non-BorderzoneBorder zone

Assy China

Outsourced

2000 2003

0

50

100

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

>100

30-5012 5

# of Philips owned assembly plants

Operational Excellence:Asset Productivity

Continuously increase asset productivity

0

5

10

15

20

25

30

35

Cash Conversion Cycle

34

23

40

5

10

15

20

Inventory Turns

0

5

10

15

20

25

1998 2000 2002e

NOC turns

12

810

>25

116

…working with negative NOC in some businesses will increase

1998 2000 2002e 1998 2000 2002e


Operations

HRM

People & competences

+ +

+

+

Globalbrand

strengthPrice

+

+Global

portfolioleadership

++

+

+

+ NOC

Cost

Revenue

IFO

EPR*

* 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%

7,085

-274 -3.9 %

- 644-9.1%

6,339

150.2%

150.2%

2002Sept YTD

Total Sales

IFO exspecial items% of sales

IFO incl.Special items% of sales

2001Sept YTD

2002Sept YTD

7,085

-274 -3.9%

-644-9.1%

6,339

150.2%

150.2%

PCE2001

Sept YTD2002

Sept YTD

1,627

-130-8.0%

-130-8.0%

1,509

-85-5.6%

-97-6.4%

North America2001

Sept YTD2002

Sept YTD

5,458

-144-2.6%

-514-9.4%

4,830

1002.1%

1122.3%

Rest

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!”

Date post:	14-Mar-2018
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