Philips NV (Netherlands)

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A one-time pioneer in the consumer electronics market, Philips is the biggest such company still headquartered in Europe, but it has been forced to concede defeat in most of the most lucrative sectors of market as a result of intense competition from more agile competitors from the US and South Korea. It has effectively withdrawn altogether from what were once leading positions in flat screen TVs and home video and audio entertainment. Any products in those sectors which still carry the Philips name are produced under license by other manufacturers. In a marketplace now dominated by brand names, Philips has an ever-lower profile, especially in the US. Instead, the group has attempted to restructure for growth by slimming down to its core businesses.The current strategy is to eliminate traditional consumer electronics altogether, and reposition as a health technology specialist with a range of products from domestic personal care devices up to professional medical imaging appliances and services for hospitals. It began the process of demerging its lighting division as a separate company in 2015.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 25th Sept 2014: The slow and steady dismantling of what was once one of the world's leading electronics groups continued. Dutch group Philips announced plans to combine its healthcare and remaining consumer electronics businesses and spin off lighting as an independent company, probably during 2016. It has already divested a string of other units over the past decade including semiconductors and TVs. At the same time, the group issued its second profit warning in three months. CEO Frans van Houten acknowledged that the group was facing similar problems to those already experienced by Nokia and other companies that failed to keep pace with the rapid changes within the technology environment.

Adbrands Weekly Update 21st Nov 2013: Dutch electronics group Philips has restored the shield background to its corporate banner, as well as the stars & radiowaves motif that has been largely absent from its identity since the end of the 1960s. Interbrand and Ogilvy collaborated on the project. As usual in such cases, all sorts of design philosophy has been quoted to justify the overhaul (and its price tag), such as the use of the mathematical "golden ratio" to position the elements of the new logo. Most observers, however, will see it as only a modest and retro-style refresh of the earlier design. 


Brands

Philips Consumer Lifestyle Norelco
Senseo Philips Lighting
Sonicare Avent
Philishave Philips Healthcare

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Background

Free for all users | see full profile for current activities: The company was founded in 1891, when Gerard Philips established a factory in Eindhoven, southern Holland, to make incandescent bulbs, quickly becoming Europe's biggest manufacturer of carbon-filament lamps. While Gerard managed the factory, brother Anton took charge of international sales, establishing a presence in the US and France in the early years of the 20th century. The group soon added sizeable research facilities to its plant, which quickly came to dominate - as it still does - its home town (although the HQ is now in Amsterdam). Inevitably, research led to new discoveries, and Philips moved into X-ray tubes and radio products after the First World War. In the 1920s, the company made some early experiments in television, and began manufacturing radios in 1927. The familiar Philips logo made its first appearance at this point, a group of wavy lines and stars, representing radio signals passing through space. In the 1930s, the group began manufacturing X-ray products in the US.

By the end of the decade, Philips employed 45,000 people worldwide, and was becoming a major force in consumer electrical goods. In 1939, the group launched its first electric shaver, the Philishave. Jacob Schick had invented the first electric razor in 1928 in the US; Remington followed suit in 1937. However the Philishave was the first European model, and also featured a unique rotary cutting blade, far more effective than the US technology. Despite the outbreak of World War II, Philips was able to persuade the invading German army to allow them to continue production of electric shavers because of the general shortage of shaving soap. As a result this new technology quickly made its way back to the German market, and later into the US, when returning American soldiers brought home Philishave razors at the end of the war. To build on the popularity of these shavers, Philips established a US shaver factory in 1948, under the name of Norelco. To counter the launch of the first German electric razor by Braun in 1951, as well as improvements in Schick and Remington's models, the company doubled the effectiveness of its rotary system, adding a second and then a third cutting blade. 

By this time, the group's two biggest subsidiaries in the US and UK operated as separate companies, although Philips owned the majority stake through various trusts. (Philips UK was reacquired in 1955, but Philips North America continued to be independent until 1987). The company also pioneered development in transistor technology and became heavily involved in recording and transmission of television pictures. Philips was among the first companies to recognize the manufacturing potential of Japanese businesses, forming a joint venture with Matsushita in 1952 to make electronic components. That partnership gave Philips European rights to Matsushita's pioneering VHS video recording technology, and it was the first company to launch a VCR home video recorder. Other key developments during the 1960s and 1970s were the introduction of energy-saving light bulbs and optical discs. The group also became a leading manufacturer of household appliances including washing machines and dryers.

However, it was in audio technology where Philips launched some of its best known products. In 1963, the company introduced the modern cassette tape to replace old fashioned reel tapes. The group became increasingly involved in all aspects of sound software and hardware. PolyGram was established in 1972 to manage its increasingly wide-ranging recorded music interests, and tape recorder and microphone businesses Magnavox and Signetics were acquired in 1974. Other inventions in sound storage led to the launch in 1982 of the compact disc in a manufacturing partnership with Sony. 

Despite the massive worldwide success of the compact disc format - Philips and Sony still share a royalty of 5 US cents on every CD sold - the company overextended itself during the 1980s. Japanese companies had come to dominate consumer electronics, and a series of unsuccessful and expensive new product launches from Philips only contributed to its loss of market share. Following the grant of a royal warrant from the Dutch monarchy, the group changed its name to Koninklijke (or "Royal") Philips Electronics in 1991. However, performance slipped dramatically, and newly appointed chairman Cor Boonstra initiated a tough restructuring process to bring the group back on course. Several businesses were sold including its domestic appliances business (to Whirlpool), Magnavox and the Matsushita VCR joint venture. The group pulled out of computers in 1995 and sold its main cellular communications business to AT&T the following year. In 1995, the group wrote off $478m in restructuring costs.

The sale of PolyGram for $10.2bn in 1998 was the biggest divestment, and part of the proceeds were used to acquire medical imaging business ATL Ultrasound. In 1999, Philips teamed up with Sun and Sony to develop internet-based home entertainment products. Philips and Sony were already partners on a project to launch a DVD audio format for audio. However by the mid 1990s, the DVD format had been hijacked by rival companies. Instead, Philips and Sony renamed their process Super Audio CD, launched in 1999 after seven years of development. However take-up of the new system was very limited, compared to the huge success of CDs. The group also consolidated its hold on the chip market, mounting a hostile takeover of VLSI Technology for $1bn, and taking a 50% stake in LG Group's LG LCD flat panel display manufacturing division.

In 2000 Philips increased its interest in medical technology with a 60% stake in MedQuist, a US-based remote transcription service for doctors. Philips paid around $1.2bn for the stake. Later that year the group paid $1.7bn for the Healthcare Solutions Group of Agilent Technologies, the US supplier of test and measurement equipment, as well as $426m for the Nasdaq-listed Adac Laboratories, a leader in nuclear imaging systems used mainly in diagnosing heart disease and cancer. Philips' IT consulting subsidiary Origin was merged with its French rival Atos. The deal gave Philips just under half the equity in the combined group, which became Europe's third largest IT services group. Those shares were later spun off.

Philips also announced it was merging its market-leading television tube business with LG's cathode ray division into a combined entity specialising in display technology. The new company overtook Samsung to become the world's #1, with a 29% market share. Yet the group continued to be plagued by the worldwide slump in semiconductor prices. This led to the group reporting its first ever quarterly loss during 2001. New chairman Gerard Kleisterlee announced the group would cut investment in its chip business, and announced up to 7,000 job cuts. However the medical systems division continued to expand, acquiring Marconi Medical Systems mid-year for $1.1bn.

Philips withdrew from mobile phone manufacturing in 2002, transferring its interests in several stages to China Electronics Corporation. In 2004 it acquired Gemini Industries, a leading US manufacturer of consumer electronics and PC accessories, followed by Power Sentry which makes surge protectors and battery back-ups for computers in 2006. Also that year, Philips came under investigation in Germany over allegations that senior staff had bribed store managers from leading electrical retailers with gifts worth up to E2,500 in return for more shelf space for Philips products. Almost 120 current and former staff of Philips and leading stores were implicated in the affair. See full profile for current activities


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