Philips has to replace the "captain". On July 8, Royal Philips of the Netherlands announced the appointment of Frans van Houten as the company's next CEO. He will be the chief operating officer (COO) and will take over as Gerard Kleisterlee in April next year. Philips has a humane tradition: in 1997, the company designed a farewell gift for the then outgoing CEO, Jan Timmer, the totem monument-shaped bookshelf. So, what is the farewell gift for Ke Cilei? At present, it seems that there may be no such thing as "Philips 2010 EBITA profit margin is more than 10%", which makes him more satisfied.
Three years ago, when the president and CEO of Philips, Ke Cilei, launched the “Vision 2010†strategy with ambition, he never expected the process to be so tortuous. What was originally written in the script is a revival of the prosperity of the family of a wealthy family. Unexpectedly, just after the opening, it evolved into a tragedy due to the arrival of the financial turmoil. Fortunately, the second half of the drama has once again undergone a dramatic turn, and finally it is a happy ending with a happy color - July 19, Philips released the second quarter of 2010 financial report, the season Achieved sales of 6.2 billion euros, EBITA (earnings before interest, taxes, depreciation and amortization, compared to net profit, EBITA indicators can more purely reflect the profit level of business operations) reached 527 million euros, "excluding the cost of 93 million euros for mergers and acquisitions The number of EBITA is 620 million euros, equal to 10% of sales."
10% is a very critical number – and to a large extent it is the primary financial indicator for measuring the success of Philips' 10-year transformation. In September 2007, Philips launched a new “Vision 2010†strategy, with “Healthy Comfort, Quality Life†as the company's new development theme, and streamlined its corporate structure into three business units: Healthcare, Lighting and Quality Life. Of course, the vision also includes a series of necessary and clear financial goals. The first one is: “By 2010, the company's EBITA profit margin reached 10-11%.†– And now, it did.
Re-height
"If you think of Philips' centuries-old history as a novel, then the topic of my chapter is - repositioning." This is the summary of Ke Cilei's career theme for his Philips CEO. In fact, since he took office in April 2001, Philips has sold traditional bulk businesses such as mobile phones, semiconductors, monitors, etc., and also spent tens of billions of euros to acquire dozens of new companies. : Concentrate resources and focus on selecting business areas.
The direct driving force behind Philips' major transformation was the poor and dangerous financial situation: in 2001 and 2002, affected by the economic crisis caused by the global high-tech bubble burst, Philips lost 2.4 billion yuan and 3.2 billion euros respectively. It fell from around $60 in 2001 to $13 in 2002. And "the transition will inevitably face difficult choices." As one of the backgrounds of Ke Cilei's words, he sold the professional audio department he had been in charge of, and the semiconductor department that his father had worked for for a long time, even if the department once It was once the second largest source of profit for Philips. "In the future, we will only produce products that will make us stand out from the crowd. When a certain value in the industrial chain is not high enough, it will be transferred." Ke Cilei said. Therefore, when Philips’ 7 business units were changed to 5 and further streamlined to 3 at the end of 2007, Ke Cilei has reshaped the framework and direction of Philips’ future development. The next step is to strive for new goals. Going forward.
When it comes to Philips' diversified business structure, it is necessary to review history. The company's first product, founded in 1891, is a carbon filament bulb, and the medical X-ray tube that was introduced in 1918 marks the beginning of its diversified development. By the end of the last century, Philips had gradually developed into a very complex business: from televisions to medical CTs, from light bulbs to semiconductors, from DVDs to women's epilators. It even created the world's largest record in 1972. The company's PolyGold, British singer Elton John, Sting and the more familiar Chinese people such as Teresa Teng, Alan Tam, Tong Ange, Leslie Cheung, Beyond, Faye Wong, etc. have all been their contracted artists - such a business structure is easily reminiscent of owning Colombia and Sony of MGM Studios.
But Ke Cilei obviously does not want to have such a ratio. "We are getting different from companies like Sony and Samsung. We have to be a company with clear goals, transparency, agility and vitality." The reason for making him "decisive" is: Philips' long product line but loose associations not only makes management coordination extremely difficult, but also some businesses that are vulnerable to cyclical economic fluctuations also drag down overall performance; more importantly, it does not have enough resources to maintain a leading position across the board.
In 2000, at the peak of the previous performance, Philips' sales revenue reached a record 37.8 billion euros, and EBITA's profit margin reached 12.1%. However, with the deterioration of the economic environment, Philips turned into a quagmire of losses in the second year. Even after the economic situation improved from 2003 to 2007, EBITA's profit margin was always between 4.3% and 7.7%. - Such a profit rate "low-altitude flight" is certainly not the result of the transformation that Ke Cilei wants. Therefore, in the beginning of 2008, when throwing away the "heavy weight" and adjusting the course, Philips aimed at the 10% profit rate target and began to "lift up" with confidence.
But in front of not far away, there is an unexpected storm waiting for the reconstructed "huge ship." In 2001, when Ke Cilei took office and in the second half of CEO's career in 2008, they encountered two different financial crises. This is just an intentional “difficulty†for Ke Cilei, but it is also the best test of the transformation effect of Philips. . In the third quarter of 2008, the demand recession brought about by the financial turmoil began to appear. Philips' sales revenue in the quarter fell by 2% year-on-year; in the fourth quarter, it suffered the first loss in five years, with a loss of 1.5 billion euros. Faced with such a tough economic situation, Philips immediately announced plans to reduce costs such as cutting 6,000 people. As for the 10% EBITA profit margin target in 2010, perhaps even Philips itself felt that it was just a “expectationâ€. It was slightly announced on December 4th of that year: “Philips is determined to continue to implement†Vision 2010's strategy. However, due to the current world economic crisis and the decline in demand in major markets, Philips will not be able to achieve the financial goals set by Vision 2010 at the end of 2010. At this point, the distance is set to achieve this goal only 15 months.
After that, Philips rarely mentioned "Vision 2010" to the outside world. Ke Cilei is obviously not reconciled. "I expect this year will be a tough year," he said to the outside world in early 2009. "But we will continue on the road of 'Vision 2010'." The financial performance showed persistent results: in the first quarter of 2009, Philips' losses were significantly reduced from €1.5 billion in the previous quarter to 59 million euros, and in the second quarter it achieved a profit of 44 million euros. Analysts had thought that Philips would lose at least 122.5 million euros in the fiscal quarter when the economy has not yet begun to recover. What makes analysts even more eye-catching is that since the quarter, Philips has also outperformed its average earnings for four consecutive quarters. EBITA's profit margins ranged from 2.3%, 6.1%, 9.1%, 8.9% until the second quarter of 2010. The adjusted 10%" shows a strong pull-up trajectory.
Therefore, the joy brought by the new financial report at the moment is self-evident. “We are particularly pleased to see that the adjusted profit margin has reached a profit level of 10% this quarter.†Ke Cilei said at the beginning of the financial report released last month, “Although the international market continues to be weak, the economic environment still has many Uncertainty, our performance has achieved continuous improvement, which fully verifies the correctness of our strategy and the strength of our business portfolio." The scent of sensitive US Bank of America Merrill Lynch was as early as June 18 of the month before the earnings announcement. On the day, it upgraded Philips' stock rating from “neutral†to “buy†and raised its target price from 27 euros to 32 euros. They said that they believe Philips can maintain double-digit EBITA margins, exceeding the previous 10%-11% target.
“Is our transformation successful? I think so.†On May 25 this year, Ke Cilei said in a speech at the Party School of the Central Committee of the Communist Party of China, “In the two global economic crises of 2000-2002 and 2008-2009 Philips's completely different financial performance fully reflects the vitality brought by the transformation." In the second quarter earnings report more than a month later, he pointed out more specifically the vitality of the business, "three major business units regardless of sales or profits The rate has achieved good results, especially in emerging markets, and sales performance is particularly good.†In the first half of 2010, Philips global sales increased by 12%, and the “mature market†with European and American as the main body achieved “high positionâ€. The number of "emerging markets" represented by the BRIC countries increased by 25%, "the overall 12% growth, driven by the growth of 25% in emerging markets, especially China and Latin America." Another major change in 2010 is that since the first quarter, China has sold more than two consecutive quarters in Germany, becoming the world's second largest market for Philips.
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