Philips W e l c o m e t o F i n a n c i a l A n a l y s t s M e e t i n g September 15, 2000
Financial Analysts Meeting A g e n d a 09.30-10.00 Registration/Coffee 10.00-10.30 Introduction Cor Boonstra President and Chairman of the Board of Management Royal Philips Electronics 10.30-11.20 Remaking Gerard Kleisterlee Executive Vice-President and COO Royal Philips Electronics CEO Philips 11:20-11:35 B r e a k 11:35-12:15 Display Philippe Combes Executive Vice-President Philips CEO Business Group Display 12:15-13:00 Optical Storage Hein van der Zeeuw Executive Vice-President Philips CEO Business Group Optical Storage
Financial Analysts Meeting 13:00 14:15 Lunch 14:15 15:30 Flat Display Systems Matt Medeiros Executive Vice-President Philips CEO Business Group Flat Display Systems 15:30 15:45 B r e a k A g e n d a 15:45 16:25 Final Q&A Management Team David Chang Chairman of the Board LG.Philips Senior Vice-President Business Group Flat Display Systems Peter Hopper Managing Director Mobile Display Systems Senior Vice-President Business Group Flat Display Systems 16:25 16:30 Closing Remarks J a n Hommen Executive Vice-President, CFO and Member of the Board of Management
S a f e H a r b o r S t a t e m e n t u n d e r t h e P r i v a t e S e c u r i t i e s L i t i g a t i o n R e f o r m A c t o f O c t o b e r 1 9 9 5 T h e s e p r e s e n t a t i o n s a n d d i s c u s s i o n s / d o c u m e n t c o n t a i n c e r t a i n f o r w a r d - l o o k i n g s t a t e m e n t s w i t h r e s p e c t t o t h e f i n a n c i a l c o n d i t i o n, r e s u l t s o f o p e r a t i o n s a n d b u s i n e s s o f P h i l i p s a n d c e r t a i n o f t h e p l a n s a n d o b j e c t i v e s o f P h i l i p s w i t h r e s p e c t t o t h e s e i t e m s. B y t h e i r n a t u r e, f o r w a r d - l o o k i n g s t a t e m e n t s i n v o l v e r i s k a n d u n c e r t a i n t y b e c a u s e t h e y r e l a t e t o e v e n t s a n d d e p e n d o n c i r c u m s t a n c e s t h a t w i l l o c c u r i n t h e f u t u r e. T h e r e a r e a n u m b e r o f f a c t o r s t h a t c o u l d c a u s e a c t u a l r e s u l t s a n d d e v e l o p m e n t s t o d i f f e r m a t e r i a l l y f r o m t h o s e e x p r e s s e d o r i m p l i e d b y t h e s e f o r w a r d - l o o k i n g s t a t e m e n t s. T h e s e f a c t o r s i n c l u d e, b u t a r e n o t l i m i t e d t o, l e v e l s o f c o n s u m e r a n d b u s i n e s s s p e n d i n g i n m a j o r e c o n o m i e s, c h a n g e s i n c o n s u m e r t a s t e s a n d p r e f e r e n c e s, t h e l e v e l s o f m a r k e t i n g a n d p r o m o t i o n a l e x p e n d i t u r e s b y P h i l i p s a n d i t s c o m p e t i t o r s, r a w m a t e r i a l s a n d e m p l o y e e c o s t s, c h a n g e s i n f u t u r e e x c h a n g e a n d i n t e r e s t r a t e s, c h a n g e s i n t a x r a t e s a n d f u t u r e b u s i n e s s c o m b i n a t i o n s, a c q u i s i t i o n s o r d i s p o s i t i o n s a n d t h e r a t e o f t e c h n i c a l c h a n g e s. M a r k e t s h a r e e s t i m a t e s c o n t a i n e d i n t h i s r e p o r t a r e b a s e d o n o u t s i d e s o u r c e s s u c h a s s p e c i a l i z e d r e s e a r c h i n s t i t u t e s, i n d u s t r y a n d d e a l e r p a n e l s, e t c. i n c o m b i n a t i o n w i t h m a n a g e m e n t e s t i m a t e s.
Philips Gerard Kleisterlee Executive Vice-President and COO Royal Philips Electronics CEO Philips
Remaking Philips at a Glance Evaluation - Need to change Our Vision Transformation - Focus on Value Where We Are
Philips at a Glance Key enabler for Philips high-volume electronics strategy Consumer D A P S e m i c o n d u c t o r s Technology Consumer Electronics B r a n d i n g Lighting Medical Systems
Philips at a Glance 5. 3 b R e v e n u e s i n 1 9 9 9 4 Business groups Marketing & Sales in 3 9 countries Manufacturing in 1 8 countries Approximately 40,000 40,000 employees
Philips at a Glance O u r c u s t o m e r s a r e g l o b a l m a r k e t l e a d e r s
Remaking Philips at a Glance Evaluation - Need to change Our Vision Transformation - Focus on Value Where We Are
Evaluation - need for change P h i l i p s C o m p o n e n t s - t h e p i c t u r e i n e a r l y 1 9 9 9 6 0 0 0 5 0 0 0 4 0 0 0 3 0 0 0 2 0 0 0 1 0 0 0 3 5 0 3 0 0 2 5 0 2 0 0 1 5 0 1 0 0 5 0 R e v e n u e s IFO 0 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 0
Evaluation - need to change P h i l i p s C o m p o n e n t s - t h e p i c t u r e i n 1 9 9 8 Stagnating revenues Rapidly declining profits Destroying value as a result of Too many businesses, with different business models in different markets Over exposure in low-growth commodity businesses Operational performance problems in some businesses Grey image - low tech, slow moving, old Product focused rather than market oriented N e e d t o F o c u s o n V a l u e
Remaking Philips at a Glance Evaluation - Need to change Our Vision Transformation - Focus on Value Where We Are
Our Vision V i s i o n In our digital, internet-driven, 24x7 world, consumers demand the functionality of different applications - interactively, anywhere, anytime Networked products for home and away will be made possible by the emergence of new enabling technologies OEM customers will increasingly focus on product definition, branding, and channel management, demanding plug&play functionality from their technology suppliers Successful suppliers will be expert in applications integrating technologies and functions
Our Vision M i s s i o n We will be a recognised leader in high growth, high value-added digital electronic solutions We provide customer-driven integrated solutions for the Digital CE, Mobile Telecom, PC-related, and Automotive Infotainment segments We partner with customers who are global market and innovation leaders in their industry We leverage our strengths in Display, Storage, Wireless Connectivity, and Power Management across applications and segments
Our Vision S t r a t e g i c D i r e c t i o n System Requirements Functional Integrations Technology Potential V a l u e c h a i n B a s e M a t e r i a l s K e y Functional Modules Functional Sub systems
Remaking Philips at a Glance Evaluation - Need to change Our Vision Transformation - Focus on Value Where We Are
Transformation - Focus on Value Rebuild the organisation with new talent and a co-operative structure Manage operations to world-class standards Apply Value Based Management approach to transform the portfolio away from commodity businesses Invest in digital-age technologies to fuel growth
Transformation - Focus on Value A n e w t e a m w i t h d i v e r s e e x p e r i e n c e P rr ee ss i di ee n t t & C E O G ee rra ar rd K l el ei si st et er rl el ee Finance Finance Frans Frans Spaargaren Spaargaren T e c h n o ll o g y M a r ii n o C a r a s s o S t r a t e g y R o b v a n G e e r t r u ii jj H u m a n R e s o u r c e M a n a g e m e n t H a y k o K r o e s e Global Global Commercial Commercial Organisation Organisation Harrie Harrie Brunklaus Brunklaus Display Display Philippe Philippe Combes Combes Flat Flat Display Display Systems Systems Matt Matt Medeiros Medeiros Optical Optical Storage Storage H H e e i n i n v v d d Z Z e e e u u w Emerging Electronic Solutions R o b v a n G e e r t r u ii jj New since 1998
Transformation - Focus on Value I n t e g r a t e d M a r k e t A p p r o a c h Established a Global Commercial Organisation, focusing on Key Account Management Partnership with market- and innovation-leading customers Focused customer teams Sales processes and systems Consistent world-wide interface World-wide management information and control L o w e r o p e r a t i o n a l c o s t s, f l e x i b i l i t y f o r c h a n g e s Simplified Back-Office Infrastructure Concentration of sales back-offices Single point of invoicing and accounting
Transformation - Focus on Value E - B u s i n e s s ek@m - Electronic Key Account Management Facilitates collaborative approach increases transparency of the supply chain speeds-up logistics improves technology road-mapping Currently being rolled-out to all major accounts Nokia selected Philips as one of only 3 e- Suppliers
Transformation - Focus on Value I m p r o v e O p e r a t i o n a l P e r f o r m a n c e Speeded-up migration to low-cost manufacturing centers Closure of non-performing operational units Focus in product portfolio and industrial improvements Turn-around Optical Storage
Transformation - Focus on Value S a l e s a n d I F O p e r Q u a r t e r / i n M 2 0 0 0 Revenues 1 2 0 I F O 1 7 5 0 1 5 0 0 1 2 5 0 1 0 0 8 0 1 0 0 0 7 5 0 5 0 0 2 5 0 6 0 4 0 2 0 0 1st Qtr 2 n d Q t r 1 9 9 9 2 0 0 0 0-2 0-4 0 1 s t Q t r 2 n d Q t r
Transformation - Focus on Value P o r t f o l i o D e c i s i o n s Display Flat Display S y s t e m s O p t i c a l S t o r a g e A d v a n c e d Ceramics & Modules G e n e r a l System Color Television Tubes Color Monitor Tubes Large Flat Displays Active Matrix LCDs LCD Cells & Modules Poly-LEDs Reflective LCDs Audio/Video R O M R e a d / R e W r i t a b l e O P U Discrete Ceramics Y o k e R i n g s Soft Ferrites Integration Automotive Playback Modules (APM) Inpact (WWC) Electronic Power Modules (EPM) Micro Electronic M o d u l e s ( M i M o ) Key Software & Electronics Imaging & Optical Modules ( I O M )
Transformation - Focus on Value A n n u a l i s e d I m p a c t o f P o r t f o l i o D i v e s t m e n t s Sales I F O % of sales 1 9 9 7-9 8 1 9 9 9-0 0 623 30 5% 578 90 15% 1997-1998 Hard Ferrites Conventional Passives Rare earth Flat Shadow Masks a.o. # of employees 7,033 4,023 # of factories 25 16 1999-2000 Discrete Ceramics Ferrite Ceramics Imaging Optical Modules a. o.
Transformation - Focus on Value I n v e s t m e n t s i n G r o w t h Invested $1.6 b in LG.Philips LCD Created leadership position in active matrix LCD Provided basis for leading position in LCD monitors and LCD television Started business in Wireless Connectivity Leveraged position in RF tuners Have doubled capital expenditures in 2000 to over 500 m to capture market opportunities CRT Large/Jumbo Optical Storage R/RW Mobile displays
Transformation - Focus on Value P o r t f o l i o D e c i s i o n s Display Flat Display S y s t e m s O p t i c a l S t o r a g e A d v a n c e d Ceramics & Modules G e n e r a l System Color Television Tubes Color Monitor Tubes Large Flat Displays Active Matrix LCDs LCD Cells & Modules Poly-LEDs Reflective LCDs Audio/Video R O M R e a d / R e W r i t a b l e O P U Discrete Ceramics Y o k e R i n g s Soft Ferrites Integration Automotive Playback Modules (APM) Inpact (WWC) Electronic Power Modules (EPM) Micro Electronic M o d u l e s ( M i M o ) Key Software & Electronics Imaging & Optical Modules ( I O M )
Transformation - Focus on Value P o r t f o l i o D e c i s i o n s Display Flat Display S y s t e m s O p t i c a l S t o r a g e A d v a n c e d Ceramics & Modules G e n e r a l System Color Television Tubes Color Monitor Tubes Large Flat Displays Active Matrix LCDs LCD Cells & Modules Poly-LEDs Reflective LCDs Audio/Video R O M R e a d / R e W r i t a b l e O P U Discrete Ceramics Y o k e R i n g s Soft F e r r i t e s Integration Automotive Playback Modules (APM) Inpact (WWC) Electronic Power Modules (EPM) Micro Electronic M o d u l e s ( M i M o ) Key Software & Electronics Imaging & Optical Modules ( I O M )
Transformation - Focus on Value P o r t f o l i o D e c i s i o n s Display Flat Display S y s t e m s O p t i c a l S t o r a g e A d v a n c e d Ceramics & Modules G e n e r a l System Color Television Tubes Color Monitor Tubes Large Flat Displays Key Y o k e R i n g s Active Matrix LCDs LCD Cells & Modules Poly-LEDs Reflective LCDs Software & Electronics Audio/Video R O M R e a d / R e W r i t a b l e O P U Automotive Playback Modules (APM) Discrete Ceramics Y o k e R i n g s Soft F e r r i t e s Integration Automotive Playback Modules (APM) Inpact (WWC) Electronic Power Power Modules Management (EPM) Micro Electronic M o d u l e s ( M i M o ) Imaging & Optical Modules ( I O M )
Transformation - Focus on Value P o r t f o l i o D e c i s i o n s Display Flat Display S y s t e m s O p t i c a l S t o r a g e A d v a n c e d Ceramics & Modules E2S G - e Emerging n e r a l Electronic System Solutions Color Television Tubes Color Monitor Tubes Large Flat Displays Key Active Matrix LCDs LCD Cells & Modules Poly-LEDs Reflective LCDs Software & Electronics Audio/Video R O M R e a d / R e W r i t a b l e O P U Automotive Playback Modules (APM) Discrete Ceramics Y o k e R i n g s Soft F e r r i t e s Integration Y o k e R i n g s L G. P h i l i p s L C D Automotive Playback Modules (APM) Inpact (WWC) Electronic Power Power Modules Management (EPM) Micro Electronic M o d u l e s ( M i M o ) Imaging & Optical Modules ( I O M )
Transformation - Focus on Value t o a m o r e f o c u s e d p o r t f o l i o o f f u n c t i o n a l s o l u t i o n s D i s p l a y C o m p o n e n t s F l a t D i s p l a y S y s t e m s O p t i c a l S t o r a g e E m e r g i n g E l e c t r o n i c s S o l u t i o n s Color Television Tubes Mobile Display Systems Audio/Video Power Solutions Color Monitor Tubes Large Display ReWritable Power Key Plasma Displays Enablers for D i f f e r e n t i a t i o n Automotive O p t i c a l P i c k - u p U n i t Tuners Wireless Connectivity Key Account Management L G. P h i l i p s L C D
Transformation - Focus on Value I n v e s t m e n t s i n d i g i t a l - a g e t e c h n o l o g i e s Display S t o r a g e P o w e r Connectivity
Investments in digital-age technologies D i s p l a y - The Human Interface Surface of the Future
Investments in digital-age technologies C o n n e c t i v i t y - Effortless connection of appliances, enabling free communication in a mobile environment Personal, home or office network
Investments in digital-age technologies S t o r a g e - media for interchange, portability and archiving of digital content S a v e i t Keep it S h a r e i t M o v e i t
Investments in digital-age technologies P o w e r s o l u t i o n s - a continuum between stationary and mobile applications S t a t i o n a r y Semi-Stationary M o b i l e Modules to transmit Data Over Mains Power Solutions which enable flat, efficient and green HVE products Active surfaces for energy transfer Standard universal mechanical interface Uninterruptable power buffer unit Turbo Charging Power Systems Integrated Charger Alternative power generation systems
Investments in digital-age technologies c o n v e r g e n c e a n d i n t e g r a t i o n d r i v e f u t u r e o p p o r t u n i t i e s Digital Consumer Electronics PC Related C o n v e r g e n c e C o n v e& r g e n c e I n t e g r a t i o n Mobile Communications
Transformation - Focus on Value B l u e t o o t h p r o d u c t d e v e l o p m e n t Commercial N o w Single chip Widcomm soft ware Size: 30 COMPACT F L A S H J u n e 2 0 0 0 Samples E X T E N D E D COMPACT Philips baseband F L A S H Philips RF module Widcomm soft ware Size: 55 Prototype A p r i l 2 0 0 0 VLSI baseband VLSI reference design PC Card Size: 100 H P s e l e c t s P h i l i p s a s s u p p l i e r o f c o n n e c t i v i t y m o d u l e s f o r p r i n t e r d i v i s i o n
Remaking Philips at a Glance Evaluation - Need to change Our Vision Transformation - Focus on Value Where We Are
Where We Are K e y T r e n d s 1996 1997 1998 1999 2000 H1 S a l e s t o T h i r d s 2870 3671 3841 3754 2330 I n t e r n a l S a l e s 1479 1428 1420 1571 8 1 0 Total Sales 4349 5099 5261 5325 3140 IFO 3 1 6 2 6 7 44 2 8 9 2 2 7 % 7. 2 % 5. 2 % 0. 8 % 5. 4 % 7. 2 % Headcount 41,995 46,131 42,613 41,709 42,370
Where We Are S t r a t e g i c D i r e c t i o n - f o c u s o n h i g h - g r o w t h m a r k e t s R e v e n u e p e r S e g m e n t 1 9 9 9 C A G R 2 0 0 0-2 0 0 4 C o n s u m e r E l e c t r o n i c s 3 6 % M o b i l e T e l e c o m 1 9 % A u t o m o t i v e I n f o t a i n m e n t 7 % 10% 1 2 % 2 5 % 3 0 % P C - R e l a t e d 3 8 % Consumer Electronics Mobile Telecom Automotive Infotainment PC-Related 0% 10% 2 0 % 3 0 % 40%
Philips S u m m a r y World leader in display technology #1 in large LCD displays - with LG.Philips 23% market share # 1 i n c o l o u r T V t u b e s - 1 8 % m a r k e t s h a r e #1 in Mobile Displays - 35% market share Leading innovator in CD and DVD formats for the information technology and consumer electronics markets Will ship 10 million CD-R/RW units in 2000 and 20 million in 2001! DVD+RW - the only fully-compatible DVD format Building a position in wireless connectivity modules Supported by world number three position in RF tuners
Philips A m b i t i o n We will be an industry shaper in display optical storage wireless connectivity power management We aim, with out current market outlook, to maintain >25% growth rate through both organic growth and alliances and acquisitions We will deliver significant shareholder value
Philips Introduction Cor Boonstra Remaking Gerard Kleisterlee Display Philippe Combes Optical Storage Hein van der Zeeuw Flat Display Systems Matt Medeiros Final Q&A Management Team Closing Remarks Jan Hommen
Philips Introduction Cor Boonstra Remaking Gerard Kleisterlee Display Philippe Combes Optical Storage Hein van der Zeeuw Flat Display Systems Matt Medeiros Final Q&A Management Team Closing Remarks Jan Hommen
Philips Introduction Cor Boonstra Remaking Gerard Kleisterlee Display Philippe Combes Optical Storage Hein van der Zeeuw Flat Display Systems Matt Medeiros Final Q&A Management Team Closing Remarks Jan Hommen
Philips Introduction Cor Boonstra Remaking Gerard Kleisterlee Display Philippe Combes Optical Storage Hein van der Zeeuw Flat Display Systems Matt Medeiros Final Q&A Management Team Closing Remarks Jan Hommen
Philips Introduction Cor Boonstra Remaking Gerard Kleisterlee Display Philippe Combes Optical Storage Hein van der Zeeuw Flat Display Systems Matt Medeiros Final Q&A Management Team Closing Remarks Jan Hommen
Philips Gerard Kleisterlee Executive Vice-President and COO Royal Philips Electronics CEO Philips