Philips issue bigger than apnea thing: “Layers need to be removed”

Philips issue bigger than apnea thing: “Layers need to be removed”

“Philips is in a crisis,” said CEO Roy Jakobs. It was learned today that the company made a loss of 1.6 billion euros last year. After 4,000 layoffs a few months ago, another round of 6,000 layoffs was announced around the world.

According to CEO Jakobs, the company should focus more on the application and quality of products, with a strong focus on patient safety. Because that’s where it went wrong. Foam in apnea devices can break down and potentially harm the patient’s health.

Jakobs says the structure needs to be simplified to better grasp the organization. Fewer projects, more focus on safety and quality. This also means: fewer staff for research teams and fewer staff positions at headquarters.

More than cost reduction

According to ING analyst Marc Hesselink, the plans for the coming years look good. And he sees more than just cutting costs at Philips: “The first round of layoffs has served to cut costs, but these 6,000 employees are leaving on purpose. Previously, the structure was extremely complex. It should be easier See, that’s better, but they take things even further. The plans make a lot of sense now, it really depends on how the implementation goes.

Equity market analyst Corné van Zeijl can well imagine Philips and CEO Jakobs announcing this. “They focus on what will change in the organizational structure. However, that doesn’t change the fact that this is just a savings restructuring. By reducing costs, you increase your profit margin.”

“separation process”

As a result, the once-great Philips continues to decline, says investigative journalist Marcel Metze, who has written several books about the company. “The big turning point was in the 1980s. Philips had become a technology group with many different branches. There was a logic to pruning back then, for example, to combine production areas.”

However, Metze says that after this point, Philips started to make wrong strategic decisions. “The cutlery was sold and Philips began to do less research and innovation.” Among other things, the chip machine division, which is now developing under the name ASML, has been sold. Other areas such as music technology have been overtaken by newcomers like Apple, in part due to less innovation in this area.

Eventually the company split so that lamp production – where it all started – no longer falls under Philips. “This is a disintegration process that we have observed, which now appears to be entering its final phase. “Without the protection of other profitable industries, Metze is much more vulnerable to the whims of the market when things go wrong.” “Then you get into a situation where you cut out the research work while the dividends still go to shareholders.”

It is noteworthy that CEO Jakobs has been working in the personal health division of Philips for several years. Van Zeijl: “He started there in 2018, so he is partially responsible for the problems. Normally you see that when someone gets into trouble they have to leave, but Jakobs just got promoted at Philips.”

The last three months of last year have been a little better for Philips. When this was announced, Philips shares briefly rallied, keeping investors happy. At least for now, because it all depends on how the sleep apnea issue is handled. “This is crucial for long-term success,” says analyst van Zeijl. “Philips hasn’t been in great shape lately. And you have to organize it differently within yourself, otherwise you will continue to run into the same problems.”

Marc Hesselink agrees. “But the problem is bigger than the apnea thing, otherwise there would be no need for such a big action. The layers need to be removed.”

According to the ING analyst, growth is not Philips’ problem. This is reflected in the quarterly figures today. “You also made a good choice to continue in medical devices. The future lies here.”

Source: NOS