Philips Consumer Electronics - Backgrounder

Headquarters: Amsterdam, The Netherlands
President & CEO: Rudy Provoost
Number of employees: approx. 14,500
Sales in 2006: EUR 10.6 billion
Manufacturing, product development and assembly operations: France, Belgium, Hungary, India, China, Mexico, Argentina and Brazil

Philips Consumer Electronics (PCE) is a business within Royal Philips Electronics, (NYSE: PHG, AEX: PHI), a global leader in healthcare, lifestyle and technology, delivering products, services and solutions through the brand promise of “sense and simplicity”.

Headquartered in Amsterdam, PCE employs approximately 14,500 people around the world. It is one of the world’s leading vendors of digital entertainment and productivity solutions for the modern consumer lifestyle and enjoyed revenues of Euro 10.6 Bln in 2006.

PCE enjoys global leadership positions in LCD FlatTVs, home entertainment systems and DVD recording, and is growing a broad portfolio of attractive peripherals and accessories for portable entertainment, telephony, computing and PC gaming.

With its Global Sales & Service organisation regionally embracing North America, Latin America, Asia Pacific, Europe, the Middle East and Africa, PCE has sales activities in 50 countries across the world.

Product creation within PCE is organised across six functional business units, each strategically headquartered in locations closest to key sources of competence, innovation and component supply. The businesses units and lines of business are:

• Connected Displays (HQ Eindhoven, The Netherlands)
  -LoBs: Upmarket Displays, Mainstream Displays, and IT Displays
• Audio & Multimedia Applications (Hong Kong)
  -LoBs: Personal Audio & Multimedia, Mainstream Audio & Multimedia, and Digital Audio
• Video & Multimedia Applications (Singapore)
  -LoBs: Recording Applications, Home Theater-in-a-Box & Playback Solutions, BLU, and PC.
• Peripherals and Accessories (Eindhoven)
  -LoBs: Audio Video, PC, Mobility, Home Control, Speech Processing, and Personal Displays
• Home Networks (Suresnes, France)
  -LoBs: Set-Top boxes & Home Communications and Connectivity Solutions
• Professional and Business Solutions (Eindhoven)
  -LoBs: Hospitality, Healthcare, and Public Signage

Underpinning PCE’s sales and product creation operations are networks of core functions such as Strategy, Marketing, Design, Quality, F&A and Human Resources Management, each with representation through PCE business organisations.

Over the past three years, PCE’s strategic focus has been on de-risking and streamlining the business to cope with the dynamics of a high price-competitive, fast-evolving industry.

PCE has optimized its asset-light strategy, maximizing returns from a value chain it controls but largely no longer owns. In 2006, the outsourcing level was around 70%. Together with a de-verticalized supply base, this gave PCE much greater flexibility in responding to market demands. With this context, PCE runs or licenses manufacturing, product development and assembly operations in France, Belgium, Hungary, India, China, Mexico, Argentina and Brazil.

PCE places the consumer at the very heart of its activities and strategy, helping to create a world where consumers enjoy great lifestyle entertainment experiences and services whenever and wherever they want.

Based on our brand promise of “sense and simplicity” we commit to delivering products and solutions that are:

1. Designed around you
2. Easy to experience
3. Advanced

Bringing meaningful, easy to use and relevant innovation to consumers’ lives, Philips builds on its heritage in consumer electronics breakthroughs like the Compact Disc and widescreen TV driving the commercial introduction of high definition television and Blu-ray Disc, the new format for ultra-high capacity data storage.

PCE is proactively addressing concerns about the environmental impact of electrical consumer appliances by driving Philips’ EcoVision strategy throughout the division’s product creation process.

Flagship Green Products within each range represent best-in-class breakthroughs in specific aspects of environmental performance. Green Products have been defined, through independent testing, as having better-than-average environmental ratings and lifecycle assessment in six specific categories.

Consumers can identify PCE’s most environmentally-friendly products in store by their Green Logo. These products have been certified as being at least 10% more efficient than other products on the market within a given product category.