6. Philips Healthcare
$11.4 Billion ($33.7B total)
Frans van Houten, President & CEO
Ron Wirahadiraksa, Exec. VP & CFO
Gottfried Dutiné, Exec. VP & Global Head of Markets & Innovation
Stephen H. Rusckowski, Exec. VP & CEO, Philips Healthcare
Maarten de Vries, Chief Supply & Information Officer
NO. OF EMPLOYEES: 35,479 (121,398)
GLOBAL HEADQUARTERS: Amsterdam, Netherlands
“Sense and simplicity.”That’s the motto for Royal Philips Electronics N.V. It reflects an approach to business and the products the company manufactures. But when it comes to today’s business climate, well, we all know that sometimes finding year-over-year growth doesn’t always make sense and it usually isn’t simple—especially when you’re manufacturing mainstream consumer goods such as televisions and other household electronics. Over the past few years, Philips consumer business has taken a hit due to limited spending during the “Great Recession.”
But, as Philips’ management has been quick to point out, fiscal 2010 (which ended for the company on Dec. 31) was much better than 2009—in large part to the strength of its healthcare products such as ultrasound and home health.
Healthcare sales amounted to approximately $11.4 billion, which was 4 percent higher (in euros) than 2009. In 2009, sales dropped 2.7 percent. North America was the largest chunk of revenue at about $5.2 billion, followed by Western Europe at $2.7 billion. Earnings (excluding interest, taxes, depreciation, and amortization) were approximately $1.6 billion, up about 40 percent (again, in euros) compared with 2009. For the company overall, full-year sales rebounded strongly in the first half of the year and finished 2010 at approximately $33.7 billion, a 10 percent increase compared with 2009.
It was the year of “imaging” for Philips Healthcare. In 2010, the company unveiled a new approach to clinical collaboration that management said would “drive innovation and efficiency in radiology.” They call it Imaging 2.0. Executives are calling it “smarter collaboration through advanced technology,” and say it is designed to address one of the main problems in healthcare today—more consumers demanding quality healthcare, yet there is less money to treat them.
“Just as Web 2.0 redefined the way people connect, share and use the Internet, Imaging 2.0 represents a new world of possibilities for radiology science. It is about integration and collaboration, and new levels of patient focus and safety that can help clinicians achieve what was unimaginable just a few short years ago,” said Gene Saragnese, general manager of Imaging Systems for Philips Healthcare. “The radiologist can now integrate information from various sources to make a confident diagnosis and discuss it with all the clinical partners on the case—putting the radiologist at the center of clinical decision-making. This kind of collaboration and integration combined with major advancements in patient safety and comfort, all packaged to provide an excellent economic advantage for the radiologist, has triggered the next revolution in imaging: Imaging 2.0.”
The introduction of Imaging 2.0 coincided with a number of new product introductions in radiology. This year, Philips introduced the Ingenuity CT platform, which is designed to provide equivalent diagnostic image quality at up to 80 percent less dose. This advanced technology also has been incorporated into a new hybrid imaging system, the Ingenuity PET/CT, used to conduct studies in oncology imaging, cardiac perfusion and diagnostic CT.
Other innovations in imaging included:
• Ingenia MR, which is, according to the company, the first digital broadband magnetic resonance (MR) system that improves image quality while shortening MR exam times by up to 30 percent;
• Ingenuity PET/MR, the first new imaging modality introduced in 10 years that integrates the molecular imaging capabilities of PET (positron emission tomography) with the superior soft tissue contrast of magnetic resonance imaging;
• IntelliSpace Portal, a new multi-modality, multivendor workstation that uses advanced networking capabilities to facilitate collaboration between radiologists and referring clinicians, no matter the vendor; and
• iU22 xMATRIX Ultrasound, a new ultrasound system that allows clinicians to capture twice as much clinical information in the same amount of time without moving, turning or rotating the transducer, helping clinicians make more informed care decisions, and potentially minimizing the frequent repetitive stress injuries experienced in the field of sonography.
Going beyond just new product development, the company is reaching out to physicians—particularly in emerging markets—not just to grow their brand, but also to reinforce disease awareness. For example, there are more than one billion people suffering from chronic respiratory diseases worldwide, according to the World Health Organization. Of this group, an estimated 210 million have Chronic Obstructive Pulmonary Disease (COPD). Three million people died from COPD in 2005, and 90 percent of those deaths were in low- and middle-income countries, where effective strategies for prevention and control are not always implemented or accessible. Philips announced plans in 2010 to train 2,000 physicians in emerging markets on respiratory disease such sleep apnea and COPD. In India, Philips recently supported the setup of sleep labs in hospitals to help diagnose sleep disorders and treat patients.
Another factor in the company’s penetration into emerging markets has come through acquisitions of companies in very specific locales globally. In 2010, Philips purchased Shanghai Apex Electronics Technology Co. Ltd. in China, which makes ultrasound transducers. Financial details of the deal were not disclosed. Philips also purchased two healthcare firms in Brazil, an informatics company called Tecso Informatica and Wheb Sistemas, a provider of clinical information systems. Terms also were not disclosed for those deals.
Philips also purchased the Somnolyzer 24x7 software business from the Vienna, Austria-based Siesta Group. The Somnolyzer system provides automated measuring and scoring polysomnography for sleep disorder centers that Philips will roll into its Home Health unit, which grew out of the purchase of Respironics Inc. in 2008. Also acquired in 2010 was Israel-based CDP Medical Ltd., which makes picture archiving and communication systems that will become part of Philips imaging business. The company’s sixth purchase was medSage Technologies, a privately held company headquartered in Pittsburgh, Pa., that has developed a novel voice and email application that home care providers can use to interact with patients. The business became part of the Sleep business within Philips Home Healthcare Solutions.
2010 also saw a changing of the old guard. The announcements were made in 2010 and took effect this year. Frans van Houten replaced Gerard Kleisterlee—who retired—as president and CEO, while Ron Wirahadiraksa, who was chief financial officer at Philips Healthcare, replaced Pierre-Jean Sivignon, who left for personal reasons. Van Houten had worked for a semiconductor division of Philips that was sold.
“I am happy to see Frans return to our company,” said Kleisterlee, “Frans was a strong member of my team and a strong contributor in setting the direction of the company. I regretted to see him leave with the semiconductor spinout. Under his leadership, Philips’ future will be in very good hands.”
The fiscal year also brought high marks for the company in manufacturing and logistics. The Dutch Association of Investors for Sustainable Development (VBDO) has, for the third time, recognized Philips’ achievements in the area of “responsible supply chain management. Philips is ranked first among the forty largest publicly listed Dutch companies benchmarked for this award. Philips scores have shown continual improvement over the last four years, increasing from 62 percent in 2006, up to 77 percent in 2007, 85 percent in 2008, 90 percent in 2009 and 93 percent in 2010.
VBDO cited Philips’ dedication to supporting suppliers in improving their sustainability performance and by embedding supplier sustainability within the company strategy, “demonstrating that sustainability is a key enabler of value creation and growth.”
Following the award, Philips executives said the company planned to increase supplier collaboration across all its product lines.