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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
• Philips Consumer Electronics:Position and Strategy
• Key Business Drivers
• 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
• Philips Consumer Electronics:Position and Strategy
• Key Business Drivers
• 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
Key Business Drivers for creating Shareholder Value
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
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
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
Entertainment tablet
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
Entertainment tablet
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
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
*) 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
Eu US China India Bras
Sony
CTV
Video
Audio
Eu US China India Bras
Panasonic
Very strong(BS>100)
Strong(65<BS<100)
CTV
Video
Audio
Eu US China India Bras
TMM
CTV
Video
Audio
Eu US China India Bras
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
Key Business Drivers for creating Shareholder Value
+
+
+ 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
Key Business Drivers for creating Shareholder Value
Operations
HRM
People & competences
+ +
+
+
Globalbrand
strengthPrice
+
+Global
portfolioleadership
++
+
+
+ NOC
Cost
Revenue
IFO
EPR*
* EPR = EVA
+
+ -
-
Cost mgt & asset
productivity
Customer Pull Generation
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
• Philips Consumer Electronics:Position and Strategy
• Key Business Drivers
• 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
• Philips Consumer Electronics:Position and Strategy
• Key Business Drivers
• 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!”