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Philips Considers Selling Its Home Appliance Unit Valued at $2.5 Billion

UTC by Bhushan Akolkar · 3 min read
Philips Considers Selling Its Home Appliance Unit Valued at $2.5 Billion
Photo: Philips

Philips has been struggling to see sustainable growth in the electronics market, and now it plans to sell its home appliance unit to focus more on the healthcare division where it sees a great future potential.

Dutch multinational conglomerate Philips is planning to review its portfolio as per the latest reports. On Tuesday, Bloomberg reported that Philips is considering the sale of its Home Appliance Unit Royal Philips NV.

This domestic appliances division of Philips registered $2.6 billion sales last year selling coffee machines, air purifiers and air fryers. While reviewing its future options, Philips said that carving out this business from its portfolio will take another 12-18 months.

Philips CEO Frans van Houten said that his company is currently focusing on making health-care equipment. In an interview with Bloomberg, Van Houten said:

Divesting the business will “help reinforce Philips’s own focus on health technology as we are able to boost that portfolio further. This business is not a strategic fit for our future as a health technology leader”.

Philips has a disappointing quarterly growth as the earnings from medical scanners and monitors plummeted. In recent years, the company decided to spin-off its electronics business, especially its lighting and consumer electronics divisions. Besides, the company is working on position itself now as a specialized health technology company.

By selling its electronics division, Philips wants to free up funds to invest further in health-care. In this space, the Dutch conglomerate will be competing with some established players like Seimens Healthineers.

“We are committed to finding a good home for this business, as we expand and invest in our consumer health and professional healthcare-related businesses,” said Van Houten.

Overhauling Businesses to Secure Its Future

On Tuesday, January 28, Philips reported its fourth-quarter results i.e. for Q4 2019. The company growth at 3.3% was short of the market estimates of 5.2%. Thus, Philips shares dropped over 3%% in the early trading hours today. At press time, Philips’s share is trading 43.00 EUR per share.

As the company CEO, Van Houten has some big responsibility ahead of him to bring the company back on track. The long going U.S.-China trade war disturbed the company’s trade tariffs and hurt the company’s overall supply chain. However, the company saw a growing demand for its wireless monitor’s division as profitability widened to 19.4% amid signs of improving productivity.

But now that the trade-war concerns are easing up, the market is facing the wrath of the coronavirus outbreak in China. The Asian economic giant alone contributes 15% revenue for Philips. This can further spiral into dropping consumer confidence and supply chain disruption, says Houten.

“It’s early days but we all need to be concerned,” the CEO added. The company is taking all precautions for its employees in that area he said.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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