2003 - 6
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
-------
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the period commencing August 26, 2003 through October 14, 2003
-------
KONINKLIJKE PHILIPS ELECTRONICS N.V.
-------------------------
(Name of registrant)
Breitner Center, Amstelplein 2, 1096 BC Amsterdam, The Netherlands
----------------------------------------------
(Address of principal executive offices)
Name and address of person authorized to receive notices
and communications from the Securities and Exchange Commission:
A. Westerlaken
Koninklijke Philips Electronics N.V.
Amstelplein 2
1096 BC Amsterdam - The Netherlands
This report comprises a copy of the Quarterly Report of the Philips Group for
the three months ended September 30, 2003, dated October 14, 2003 as well as a
copy of the press releases entitled:
- "Philips Files First Electronic PCT Application at World Intellectual
Property Organization", dated August 26, 2003;
- "Philips Adds BT, Belgacom, T-Com and Telecom Italia to its European
Broadband Partners", dated August 27, 2003;
- "Philips Consumer Electronics Unveils 'Connected Planet' Strategy",
dated August 28, 2003;
- "Philips Electronics Announces Cooperation with Deutsche Telekom's
T-Com Division to Develop the German Broadband Connected Home Market",
dated August 28, 2003;
- "Philips CEO announces changes in business models", dated August 29,
2003;
- "Philips CEO Discusses Technology Solutions for Bridging the 'Digital
Divide'", dated September 4, 2003;
- "Philips Reports Progress In Semiconductor Division", dated September
12, 2003;
- "Dow Jones Names Philips Market Leader in Sustainability", dated
September 22, 2003;
- "Philips CEO Visits China And Strengthens Cooperation With China",
dated September 24, 2003;
- "Philips Partners with The Wisconsin Heart Hospital to Launch New
State-Of-The-Art Hospital Offering Singular Focus on Cardiovascular
Care", dated September 25, 2003;
- "Philips to Invest Eur 20 million in production site for new television
technology", dated September 26, 2003;
- "Philips Announces Possible Offering of TSMC Shares", dated October 8,
2003.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf, by the
undersigned, thereunto duly authorized at Amsterdam, on the 14th day of October
2003.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
/s/ G.J. Kleisterlee
G.J. KLEISTERLEE
(President,
Chairman of the Board of Management)
/s/ J.H.M. Hommen
J.H.M. HOMMEN
(Vice-Chairman of the Board of Management
and Chief Financial Officer)
Report on the performance of the Philips Group
QUARTERLY REPORT
Q3
OCTOBER 14, 2003
'Safe Harbor' Statement under the Private Securities Litigation Reform Act of
1995 This document contains certain forward-looking statements with respect to
the financial condition, results of operations and business of Philips and
certain of the plans and objectives of Philips with respect to these items
(including, but not limited to, cost savings).
By their nature, forward-looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, levels of consumer
and business spending in major economies, changes in consumer tastes and
preferences, changes in law, the performance of the financial markets, pension
costs, the levels of marketing and promotional expenditures by Philips and its
competitors, raw materials and employee costs, changes in future exchange and
interest rates (in particular, changes in the euro and the US dollar can
materially affect results), changes in tax rates and future business
combinations, acquisitions or dispositions and the rate of technological
changes.
- all amounts in millions of euros unless otherwise stated
- the data included in this report are unaudited
- financial reporting according to US GAAP
Philips reports net profit of EUR 124 million in third quarter
- Nominal sales decline by 4% mainly due to weaker currencies -
comparable sales up 6%
- A loss of EUR 126 million for income from operations - this includes
EUR 152 million for restructuring and other charges in Semiconductors
- Medical Systems income from operations of EUR 138 million
- Unconsolidated companies contributed EUR 239 million to net income -
this includes EUR 68 million for a dilution gain related to Atos Origin
The third quarter 2003
In the third quarter of 2003, Philips recorded a net profit of EUR 124
million (a profit of EUR 0.10 per share) versus a loss of EUR 330
million (a loss of EUR 0.25 per share) in the same period last year.
Nominal sales decreased by 4% over the same period last year, being
impacted by the weakening of the US dollar and related currencies (7%)
and the downward effect from various divestments in 2002 (3%).
Comparable sales increased by 6%, reversing the downward trend. Income
from operations was a loss of EUR 126 million versus a profit of EUR
135 million last year. Income from operations included EUR 197 million
for restructuring and other charges, of which EUR 152 million was at
Semiconductors, EUR 28 million at Consumer Electronics and EUR 12
million charges at Miscellaneous. Pension costs were EUR 84 million
higher compared to Q3 2002. Income from operations of last year
included EUR 120 million for gains on the sale of businesses. The
overhead cost reduction program delivered EUR 379 million to-date.
Integration savings at Medical Systems are in line with the EUR 350
million targeted savings by year-end 2003. The cost reduction programs
are on-track to achieving the targeted EUR 1 billion in savings by
2004.
Cash flow from operating activities was an inflow of EUR 376 million.
At 13.4%, inventories as a percentage of sales came to another record
low for a third quarter, compared to 14.1% last year. During the
quarter the net debt position decreased by EUR 201 million to EUR 5.2
billion.
1
Gerard Kleisterlee,
Philips' President and CEO:
"We see that our change programs are having a positive impact on our
performance. Sales on a comparable basis were up 6%, with the strongest showing
from Semiconductors and Medical Systems. We're also on-track to achieving EUR 1
billion in cost savings. DAP and Lighting continued their solid performance,
while Medical Systems made the greatest contribution to income from operations,
thanks to improving margins and lower costs. The planned restructuring charges
in Semiconductors are now complete and we expect this business to be profitable
in the fourth quarter, supported by strengthening sales of Nexperia platform
chips. Fundamental changes in the industry structure in consumer electronics are
leading us to review our business models and to target an additional EUR 400
million in annual costs savings by the end of 2005.
We continue to focus on the factors we control: developing new products,
lowering our debt, optimizing our supply chain management, improving our working
capital, and - last but not least - serving our customers well."
2
Philips Group
Net income
------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------
Sales 7,313 6,989
Income (loss) from operations 135 (126)
in % of sales 1.8 (1.8)
Financial income and expenses (449) (24)
Income taxes (5) 54
Results unconsolidated companies (4) 239
Minority interests (7) (3)
Cumulative effect of change in
accounting principle - (16)
----------------
Net income (loss) (330) 124
Per common share - basic (0.25) 0.10
- diluted (0.25) 0.10
-----------------------------------------------------------
Highlights in the quarter
Net income
- Net income in Q3 of 2003 was a profit of EUR 124 million, mainly the
result of a strong contribution from unconsolidated companies of EUR
239 million.
- Income from operations in Q3 was a loss of EUR 126 million,
predominantly due to restructuring and other charges of EUR 152 million
at Semiconductors. Pension costs were EUR 84 million higher than last
year. Income from operations for Q3 2002 included EUR 120 million for
gains on the sale of businesses.
- Income taxes were calculated using an estimated effective tax rate of
25% on pre-tax income, excluding non-taxable gains.
- A charge of EUR 16 million, representing the cumulative effect of a
change in accounting principle, was related to SFAS 143 Accounting for
Asset Retirement Obligations.
Special items affecting net income
--------------------------------------------------------
in millions of euros
Q3 Q3
2002 2003
----------------
Affecting income from operations: 60 (197)
Affecting financial income and exp.: (339) 68
Income taxes related to special items: (9) 49
Affecting results uncons. companies: (15) 54
---------------
Special items affecting net income (303) (26)
-------------------------------------------------------
Special items affecting net income
(For a definition of special items, see Annual Report 2002 Management
Report page 35)
- Special charges affecting income from operations were primarily related
to restructurings and other charges in Semiconductors, Consumer
Electronics and Miscellaneous.
- Financial income and expenses included gains resulting from selling
securities of EUR 68 million.
- Results from unconsolidated companies included a dilution gain of EUR
68 million related to Atos Origin and a dilution loss of EUR 15 million
at TSMC.
Sales by sector
---------------------------------------------------------
in millions of euros unless otherwise stated
% change
-----------------
Q3 Q3 compa-
2002 2003 nominal rable
-----------------------------------
Lighting 1,130 1,088 (4) 2
Cons. Electronics 2,232 2,208 (1) 6
DAP 519 466 (10) (3)
Semiconductors 1,186 1,252 6 14
Medical Systems 1,540 1,413 (8) 9
Miscellaneous 706 562 (20) (6)
--------------
Philips group 7,313 6,989 (4) 6
--------------------------------------------------------
Group sales
- Sales in Q3 2003 were 4% lower than in Q3 of the previous year. Weaker
currencies had a downward effect of 7%, while an additional 3% downward
effect came from various divestments in 2002.
- On a comparable basis, sales increased 6% versus a decrease of 1% in
Q2. The strongest increases were realized at Semiconductors (14%
including Mobile Display Systems), Medical Systems (9%) and CE (6%).
- Sales on a comparable basis posted the strongest growth in Asia
Pacific, increasing 20% over last year.
3
Income (loss) from operations by sector
-----------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
----------------
Lighting 141 124
Consumer Electronics 8 (32)
DAP 79 82
Semiconductors (53) (191)
Medical Systems (11) 138
Miscellaneous 38 (107)
Unallocated (67) (140)
---------------
Income (loss) from operations 135 (126)
in % of sales 1.8 (1.8)
----------------------------------------------------------
IFO
- Medical Systems showed strong growth in profitability driven by higher
comparable sales, better margins and lower costs.
- Despite 2% comparable sales growth, last year's income from operations
of Lighting could not be repeated in 2003 mostly due to unfavorable
currency effects and lower gross margins.
- The profitability of Domestic Appliances and Personal Care (DAP)
increased due to strong margin management as well as delayed
advertising and promotion costs.
- Lower income from operations at Semiconductors and Consumer Electronics
was mainly due to restructuring and other charges.
- Income from operations in Q3 2002 for Miscellaneous included EUR 120
million for gains on the sale of businesses.
Financial income and expenses
--------------------------------------------------------
in millions of euros
Q3 Q3
2002 2003
----------------
Financial income and expenses (449) (24)
Impairment charges included in
Financial income and expenses (339) -
Gain on sale of securities
included in Financial income
and expenses - 68
-------------------------------------------------------
Financial income and expenses
- Financial income and expenses in 2003 included gains on the sale of
ASML shares and JDS Uniphase shares of EUR 68 million, while last year
they included a EUR 339 million impairment charge for Vivendi
Universal.
Results unconsolidated companies
--------------------------------------------------------
in millions of euros
Q3 Q3
2002 2003
----------------
SSMC (13) 3
LG.Philips LCD 28 131
LG.Philips Displays (3) (16)
Dilution gains (losses) - 53
Others (16) 68
---------------
Total (4) 239
-------------------------------------------------------
Results relating to unconsolidated companies
- Results from LG.Philips LCD almost doubled compared to Q2 2003, driven
by increased sales and scale efficiencies.
- LG.Philips Displays was impacted by poor market conditions and
continued to be loss making. The business is working on programs to
achieve faster than planned cost leadership in this declining market.
These plans may lead to both asset and goodwill impairments in Q4 2003.
Philips and its partner have each guaranteed USD 200 million of
indebtedness for a limited period of time.
- The value of Philip's equity in Atos Origin increased due to the
mandatory conversion in stock of Atos Origin's convertible bonds.
Consequently there was a non-cash dilution gain of EUR 68 million.
- A dilution loss of EUR 15 million at TSMC was included.
4
Cash balance
--------------------------------------------------------------
in millions of euros
Q3 Q3
2002 2003
---------------
Beginning balance 683 1,493
Net cash from operating activities 344 376
Gross capital expenditures (337) (264)
Acquisitions/divestments 176 (76)
Other cash from investing activities 82 174
Dividend paid - -
Changes in debt/other (126) (820)
---------------
Ending balance 822 883
-------------------------------------------------------------
Cash balance
- Cash outflow in Q3 2003 for acquisitions included an investment for
Semiconductors in Crolles 2 of EUR 36 million and an investment of EUR
47 million for an increased shareholding in a participation in China.
- Sale of securities contributed to a cash inflow of EUR 197 million.
- Changes in debt were primarily due to a one-year early redemption of a
EUR 1 billion floating rate note.
[CASH FLOWS FROM OPERATING ACTIVITIES BAR CHART]
Cash flows from operating activities
------------------------------------
in millions of euros
Q3 02 344
Q2 03 148
Q3 03 376
Cash flows from operating activities
- Net cash from operating activities was generated by a reduction in
working capital, in particular at Semiconductors and Consumer
Electronics.
[GROSS CAPITAL EXPENDITURES BAR CHART]
Gross capital expenditures
------------------------------------
in millions of euros
Q3 02 337
Q2 03 220
Q3 03 264
Gross capital expenditures
- Gross capital expenditures in Q3 2003 were EUR 73 million below last
year, primarily due to lower investments within Semiconductors.
- Gross capital expenditures were EUR 92 million for Semiconductors, EUR
36 million for Lighting and EUR 33 million for DAP.
- In Q3 2003, EUR 17 million was spent on the High Tech Campus in
Eindhoven.
- In addition to gross capital expenditures, investments in software and
systems amounted to EUR 17 million, being EUR 11 million lower than in
Q3 of last year.
5
[INVENTORIES AS A % OF SALES BAR CHART]
Inventories as a % of sales
---------------------------
Q3 02 14.1
Q2 03 12.8
Q3 03 13.4
Inventories
- Inventories as a percentage of sales was 13.4%, which is another record
low for a third quarter.
- Compared to Q3 2002 improvements were recorded in particular in
Consumer Electronics.
- Undiminished focus on supply chain and working capital management.
[NET DEBT AND GROUP EQUITY BAR CHART]
Net debt and group equity
-----------------------------------
in billions of euros
group equity net debt
Q3 02 16.1 6.9
Q2 03 13.1 5.4
Q3 03 13.3 5.2
NET DEBT : GROUP EQUITY RATIO
30:70 29:71 28:72
Net debt and group equity
- In Q3, net debt was reduced by EUR 201 million to EUR 5.2 billion due
to a positive cash flow before financing.
- Group equity increased EUR 191 million in Q3, to EUR 13.3 billion at
quarter's end mainly due to positive net income and translation
effects.
- Net debt : group equity ended at 28:72.
[NUMBER OF EMPLOYEES(FTES) BAR CHART]
Number of employees(FTEs)
-------------------------
Q3 02 183,447
Q2 03 163,928
Q3 03 166,464
Employment
- During Q3 the total number of employees increased by 2,536. An increase
in temporary employees was partly offset by a reduction in permanent
employees.
6
Lighting
Lighting: key data
----------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
---------------------
Sales 1,130 1,088
Sales growth
% (decrease), nominal (3) (4)
% increase, comparable 1 2
Income from operations 141 124
in % of sales 12.5 11.4
Special items included in IFO (2) (1)
in % of sales (0.2) (0.1)
Net operating capital (NOC) 1,869 1,750
Number of employees (FTEs) 47,776 44,081
-------------------------------------------------------------------
Business highlights
- Establishment of Asia Pacific Lighting Electronics business center for
ballasts in Xiamen, China.
- Launch of 2-in-1 Nightlight: a dual LED technology, using 98% less
energy than a 40W incandescent lamp and giving just the right amount of
light to see by at night. As a soft white light, it is 75% more energy
efficient.
[LIGHTING SALES BAR CHART]
Lighting
sales
-------------------------------------
in millions of euros
Q1 '02 1,228
Q2 '02 1,192
Q3 '02 1,130
Q4 '02 1,295
Q1 '03 1,154
Q2 '03 1,037
Q3 '03 1,088
Financial performance
- Market share gained in a flat market.
- Comparable sales increased by 2%. Automotive & Special Lighting as well
as Lighting Electronics increased, while Luminaires faced a 2%
decrease. Sales of Lamps were solid, in spite of industry pressure.
- Profitability decreased from 12.5% last year to 11.4%, and was
virtually on the same level as in Q2 (11.5%). The decrease compared to
last year was mainly due to currency effects and lower gross margins.
[LIGHTING INCOME FROM OPERATIONS (IFO) BAR CHART]
Lighting
income from operations (IFO)
-----------------------------------------
IFO in millions of euros
Q1 '02 152
Q2 '02 126
Q3 '02 141
Q4 '02 183
Q1 '03 173
Q2 '03 119
Q3 '03 124
Looking ahead
- Ongoing softness in the markets.
- Continuing strict cost control, enhancing purchase savings and gaining
efficiencies in the utilization of assets.
- Expanding capacity for innovative products (UHP, Xenon).
7
Consumer electronics
Consumer Electronics: key data
--------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
--------------------
Sales 2,232 2,208
Sales growth
% (decrease), nominal (10) (1)
% (decrease) increase, comparable (6) 6
Income (loss) from operations 8 (32)
in % of sales 0.4 (1.4)
Special items included in IFO 2 (28)
in % of sales 0.1 (1.3)
Net operating capital (NOC) 600 150
Number of employees (FTEs) 27,250 19,893
-----------------------------------------------------------------
Business highlights
- CE launched its Connected Planet vision at IFA, outlining its view and
go to market strategy of a range of broadband connected products, which
was enthusiastically received by both consumers and press.
- The 30-inch LCD and the 42-inch plasma TVs were distinguished with EISA
awards - the 30-inch LCD TV was also designated a Green Flagship
product, outperforming its key competitors.
- Emotive Micro-Range wins product design award at Materialica 2003.
[CONSUMER ELECTRONICS SALES BAR CHART]
Consumer Electronics
sales
---------------------------------------
in millions of euros
Q1 '02 2,262
Q2 '02 2,408
Q3 '02 2,232
Q4 '02 2,953
Q1 '03 1,943
Q2 '03 1,980
Q3 '03 2,208
Financial performance
- CE sales (excluding Licenses) amounted to EUR 2,147 million. Comparable
growth of 6% compared to Q3 2002 was particularly driven by a 28%
growth of sales in Asia Pacific. Lower sales in Audio Video
Entertainment were more than compensated by increased sales of
Television, GSM, Set-top Boxes and Monitors.
- Income from operations was impacted by a charge of EUR 28 million for
restructuring at a TV factory in France.
- A loss of EUR 23 million in North America (including EUR 15 million for
sales and brand support) compared to a loss of EUR 35 million in Q2
2003.
- Sales of Licenses amounted to EUR 61 million, resulting in an income
from operations of EUR 43 million, or approximately the same as last
year.
[CONSUMER ELECTRONICS INCOME (LOSS) FROM OPERATIONS (IFO) BAR CHART]
Consumer Electronics
income (loss) from operations (IFO)
-------------------------------------------
IFO in millions of euros
Q1 '02 51
Q2 '02 27
Q3 '02 8
Q4 '02 122
Q1 '03 73
Q2 '03 (42)
Q3 '03 (32)
Looking ahead
- CE embarked on a Business Renewal program with the objective to realign
its businesses, simplify the organization and streamline global
processes. The program aims to reduce annual operating costs by EUR 400
million by the end of 2005, securing CE's competitive position and
future profitability.
- North America expected to be close to break-even in Q4.
- Additional income of approximately EUR 35 million expected for past use
licenses in Q4.
- Restructuring charges of approximately EUR 15 million expected in Q4.
8
Domestic Appliances and Personal Care
DAP: key data
-----------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------
Sales 519 466
Sales growth
% increase (decrease), nominal 6 (10)
% increase (decrease), comparable 12 (3)
Income from operations 79 82
in % of sales 15.2 17.6
Special items included in IFO - -
in % of sales - -
Net operating capital (NOC) 682 627
Number of employees (FTEs) 9,652 8,735
--------------------------------------------------------------
Business highlights
- Success of the new sonic toothbrush `Elite' contributed to a strong
performance in the Oral Healthcare business (Sonicare) with a
comparable sales growth of 31% over Q3 2002.
- Successful `Break Away and Excite Day' where some 9,000 DAP employees
interacted with over 9,000 consumers about their views for the
development of exciting new products, allowing DAP to gain better
consumer insights.
[DAP SALES BAR CHART]
DAP
sales
---------------------------------------
in millions of euros
Q1 '02 454
Q2 '02 524
Q3 '02 519
Q4 '02 776
Q1 '03 458
Q2 '03 456
Q3 '03 466
Financial performance
- Lower nominal sales compared to last year, mainly due to weaker
currencies. On a comparable basis, increase in sales of Oral Healthcare
could not compensate weak demand in other businesses, primarily in
Western Europe.
- Despite lower sales, record income from operations for Q3.
Profitability margin up to 17.6% due to strong margin management and
delayed advertising and promotion costs.
- Ongoing cost control and purchasing efficiencies contributed to strong
financial performance.
[DAP INCOME FROM OPERATIONS (IFO) BAR CHART]
DAP
income from operations (IFO)
-----------------------------------------
IFO in millions of euros
Q1 '02 65
Q2 '02 74
Q3 '02 79
Q4 '02 183
Q1 '03 81
Q2 '03 75
Q3 '03 82
Looking ahead
- Weakness in markets across all regions except China, where there is a
noticeable post-SARS recovery.
- Higher than normal marketing investments have been planned for Q4 to
further enhance brand visibility during the Christmas season.
- Ongoing focus on innovation, purchasing efficiencies, cost savings and
efficient utilization of capital.
9
Semiconductors
Semiconductors: key data
--------------------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------------
Sales 1,186 1,252
Segment revenues 1,306 1,293
Segment revenues growth
% increase (decrease), nominal 14 (1)
% increase, comparable 22 7
Income (loss) from operations (53) (191)
In % of segment revenues (4.1) (14.8)
in % of sales (4.5) (15.3)
Special items included in IFO 7 (152)
In % of segment revenues 0.5 (11.8)
in % of sales 0.6 (12.1)
Net operating capital (NOC) 4,279 2,899
Number of employees (FTEs) 35,128 33,843
--------------------------------------------------------------------------------
Business highlights
- Fully integrated System-on-Chip solution unveiled for hybrid LCD and
digital TVs.
- Philips and Pixelworks to deliver low-cost reference design for rapidly
growing LCD television market.
- RFID Chip Technology provided to the Vienna Technical Museum in Austria
to create an interactive digital adventure.
- High-performance 802.11a/g and 802.11g chipsets announced to serve the
market for WiFi applications.
[SEMICONDUCTORS SALES BAR CHART]
Semiconductors
sales
-------------------------------------
in millions of euros
Q1 '02 1,190
Q2 '02 1,311
Q3 '02 1,186
Q4 '02 1,345
Q1 '03 1,126
Q2 '03 1,114
Q3 '03 1,252
Financial performance
- Sequential revenues (excluding MDS) increased by 9% in USD terms,
predominantly driven by increases in Communications (13%) and Consumer
(19%) businesses. Sequential revenue growth of MDS was 18% in USD
terms.
- Book-to-bill ratio at quarter's end of 1.16 (excluding MDS) versus 1.06
at Q2 2003.
- Special items included restructuring and other charges of EUR 115
million for Albuquerque and San Antonio, and EUR 42 million for
factories in Europe.
- Income was negatively impacted by EUR 6 million due to the power
failure in North America and by EUR 11 million for obsolescence costs.
- Utilization rate continued to rise to 69% in Q3 versus 66% in Q2 2003.
[SEMICONDUCTORS INCOME (LOSS) FROM OPERATIONS (IFO) BAR CHART]
Semiconductors
income (LOSS) from operations (IFO)
--------------------------------------
IFO in millions of euros
Q1 '02 (108)
Q2 '02 (59)
Q3 '02 (53)
Q4 '02 (304)
Q1 '03 (178)
Q2 '03 (139)
Q3 '03 (191)
Looking ahead
- Expectation to be profitable in Q4 reconfirmed.
- In Q4 sequential revenue growth (in USD terms, excluding MDS)
approximately at the same level as Q3.
- R&D cost reductions continue according to plan through a sharpened
focus on spending.
- Continued design wins for Nexperia particularly in the area of DVD+RW;
28% of DVD recorders sold in 2003 will be based on Nexperia.
10
Medical Systems
Medical Systems: key data
--------------------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------------
Sales 1,540 1,413
Sales growth
% increase (decrease), nominal 34 (8)
% increase, comparable 2 9
Income (loss) from operations (11) 138
in % of sales (0.7) 9.8
Special items included in IFO (91) (4)
in % of sales (5.9) (0.3)
Net operating capital (NOC) 5,105 4,607
Number of employees (FTEs) 32,036 30,826
--------------------------------------------------------------------------------
Business highlights
- A 6-year, multimillion dollar partnership with Wisconsin Heart Hospital
will provide highly-integrated, customized solutions for cardiovascular
care.
- Strategic initiatives in Molecular Imaging including Washington
University, University of Bordeaux, University of California in San
Francisco, and participation in CellPoint.
- University of Nottingham research agreement to develop an ultra
high-field 7.0T whole body Magnetic Resonance system for degenerative
neurological diseases.
- Number one position in 23 of 25 categories in IMV's annual medical
technology survey for patient monitoring products and services.
[MEDICAL SYSTEMS SALES BAR CHART]
Medical Systems
sales
------------------------------------
in millions of euros
Q1 '02 1,664
Q2 '02 1,757
Q3 '02 1,540
Q4 '02 1,883
Q1 '03 1,329
Q2 '03 1,446
Q3 '03 1,413
Financial performance
- Comparable sales grew 9%, mainly driven by strong performance in
Cardiac and Monitoring Systems (Patient Monitoring), Medical IT and
Customer Services.
- Income from operations exceeded Q3 2002 due to a better product mix and
lower costs of organization.
[MEDICAL SYSTEMS INCOME (LOSS) FROM OPERATIONS(IFO) BAR CHART]
Medical Systems
income (loss) from operations(IFO)
--------------------------------------
IFO in millions of euros
Q1 '02 27
Q2 '02 54
Q3 '02 (11)
Q4 '02 239
Q1 '03 70
Q2 '03 153
Q3 '03 138
Looking ahead
- Continued cautious outlook due to macroeconomic weakness and lower
public spending - in particular in some European countries.
- Increasing competition and more price pressure in Medical industry.
- Strong continued focus on innovation, productivity and cost control.
- Integration program to achieve EUR 350 million savings at the end of
2003 on-track.
11
Miscellaneous
Miscellaneous: key data
--------------------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------------
Sales 706 562
Sales growth
% (decrease), nominal (17) (20)
% increase (decrease), comparable 2 (6)
IFO Corporate Technology (78) (79)
IFO Corp. Investments and others 116 (28)
-----------------------
Income (loss) from operations 38 (107)
in % of sales 5.4 (19.0)
Special items included in IFO 144 (12)
in % of sales 20.4 (2.1)
Net operating capital (NOC) 112 4
Number of employees (FTEs) 27,108 26,490
--------------------------------------------------------------------------------
Business highlights
- Philips to invest EUR 20 million in production site in Boblingen
(Germany) for new Television technology (Liquid Crystal on Silicon).
[MISCELLANEOUS SALES BAR CHART]
Miscellaneous
sales
------------------------------------
in millions of euros
Q1 '02 800
Q2 '02 794
Q3 '02 706
Q4 '02 671
Q1 '03 489
Q2 '03 499
Q3 '03 562
Financial performance
- Nominal sales decrease was primarily due to the divestment of
Communication, Security and Imaging and lower sales at Enabling
Technologies Group and Assembleon.
- Although recent industry announcements indicated a recovery in the
semiconductors industry, order intake and sales for Assembleon and
Enabling Technologies Group have not picked up yet. The lower sales
levels resulted in income from operations of a loss of EUR 35 million
for Corporate Investment activities. This result included restructuring
and other charges of EUR 12 million.
- General Research and various development projects on new technologies
impacted income from operations negatively by EUR 79 million.
- Performance of Optical Storage continued to improve.
- Sequentially, income from operations was EUR 46 million lower. Q3
included restructuring and other charges of EUR 12 million against
gains in Q2 of EUR 15 million from the disposal of some real estate.
[MISCELLANEOUS INCOME (LOSS) FROM OPERATIONS (IFO) BAR CHART]
Miscellaneous
income (loss) from operations (IFO)
----------------------------------------
IFO in millions of euros
Q1 '02 (31)
Q2 '02 28
Q3 '02 38
Q4 '02 (281)
Q1 '03 (56)
Q2 '03 (61)
Q3 '03 (107)
Looking ahead
- Additional activities in the Corporate Investment portfolio to be
divested given suitable market conditions.
12
Unallocated
Unallocated: key data
--------------------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------------
Corporate and regional overheads (69) (78)
Pensions 2 (62)
-----------------------
Income (loss) from operations (67) (140)
Number of employees (FTEs) 4,497 2,596
--------------------------------------------------------------------------------
Business highlights
- Philips Annual Report 2002 placed eighth in the E.com ranking of global
top 200 annual reports.
- Dow Jones named Philips market leader for sustainability in the
cyclical goods and services market.
- Philips India won the MIS Asia Innovation Award 2003.
[UNALLOCATED: CORPORATE AND REGIONAL OVERHEADS INCOME (LOSS) FROM OPERATIONS
(IFO) BAR CHART]
Unallocated: Corporate and Regional Overheads
income (loss) from operations (IFO)
---------------------------------------------
in millions of euros
Q1 '02 (76)
Q2 '02 (86)
Q3 '02 (69)
Q4 '02 (101)
Q1 '03 (66)
Q2 '03 (65)
Q3 '03 (78)
Financial performance
- Compared to Q3 2002, corporate and regional overheads were EUR 4
million lower. This trend in Q3 was more than offset by incidental
results.
- Unallocated pension costs compared to previous year increased by EUR 64
million.
[UNALLOCATED: PENSIONS INCOME (LOSS) FROM OPERATIONS (IFO) BAR CHART]
Unallocated: Pensions
income (loss) from operations (IFO)
--------------------------------------
in millions of euros
Q1 '02 (7)
Q2 '02 1
Q3 '02 2
Q4 '02 6
Q1 '03 (65)
Q2 '03 (66)
Q3 '03 (62)
Looking ahead
- Ongoing focus on cost control.
13
Joint ventures LG.Philips LCD and LG.Philips Displays
LG.Philips LCD joint venture (100%)
--------------------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------------
Sales 693 1,270
Sales growth
% increase, nominal 29 83
Income from operations 86 295
in % of sales 12.4 23.2
Net income (100%) 56 262
Net income
(Philips share = 50%) 28 131
Net operating capital (NOC) 2,791 3,020
Number of employees (FTEs) 5,727 7,010
--------------------------------------------------------------------------------
LG.Philips LCD joint venture (100%)
- LG.Philips LCD sustained its number one position with over 22% market
share and achieved an industry record of shipping two million
large-size panels in September.
- Market for LCD panels has been increasing throughout the quarter.
Despite industry wide capacity increases, demand outpaces supply.
- Sequential sales were up 33% largely driven by increased shipments and
higher prices. Average panel prices improved 15% (from USD 225 to USD
260) during the quarter.
- Net income almost doubled compared to previous quarter, mainly driven
by higher sales and scale efficiencies.
LG.Philips Displays joint venture (100%)
--------------------------------------------------------------------------------
in millions of euros unless otherwise stated
Q3 Q3
2002 2003
-----------------------
Sales 1,073 861
Sales growth
% increase (decrease), nominal 12 (20)
Income from operations 29 9
in % of sales 2.7 1.0
Net income (loss) (100%) 46 (32)
Net income (loss)
(Philips share = 50%) 23 (16)
Net operating capital (NOC) 3,267 2,356
Number of employees (FTEs) 32,097 27,636
--------------------------------------------------------------------------------
LG.Philips Displays joint venture (100%)
- Overall CRT market continued to be hampered by declining global demand
and overcapacity in the industry.
- Sales deteriorated by 10% in USD terms, and were strongly impacted by
adverse market conditions, especially in Europe and the Americas.
- Despite lower sales, income from operations margin was just above
break-even, largely driven by cost savings and efficiency measures.
- Restructuring charges for scaling down of activities and head count
reduction at a number of sites amounted to EUR 15 million.
- Substantial reductions in inventories and working capital have been
achieved compared to last year.
14
Highlights in the 1st nine months
Net income
----------------------------------------------------------------------
in millions of euros unless otherwise stated
January- JANUARY-
Sept. SEPT.
2002 2003
------------------
Sales 22,897 20,020
Income (loss) from operations 373 (120)
in % of sales 1.6 (0.6)
Financial income and expenses (2,074) (186)
Income taxes 1 113
Results related to unconsolidated companies 45 323
Minority interests (21) (17)
Cumulative effect of change in accounting
principle - (16)
-----------------
Net income (loss) (1,676) 97
Per common share - basic (1.31) 0.08
- diluted (1.31) 0.08
---------------------------------------------------------------------
Group net income
Net income
- Nominal sales were 13% lower than in same period last year. Weaker
currencies and various divestments carried out in 2002 had a downward
effect of 15%. On a comparable basis, sales were 2% up versus last
year.
- Despite strongly improved results at Medical Systems, income from
operations was lower, mainly due to restructuring and other charges at
Semiconductors and at Consumer Electronics and an increase of EUR 247
million in pension costs. In 2002, income from operations also included
higher gains from the sale of businesses.
- Net income was EUR 97 million. The net loss in 2002 was primarily due
to impairment charges.
Special items affecting net income
---------------------------------------------------------------------------
in millions of euros
January- JANUARY-
Sept. SEPT.
2002 2003
-----------------------
Affecting income from operations: 214 (312)
Affecting financial income and exp.: (1,808) 146
Income taxes related to special items: (21) 78
Affecting results uncons. companies: (211) 33
----------------------
Special items affecting net income (1,826) (55)
--------------------------------------------------------------------------
Special items affecting net income
- Special items affecting income from operations were mainly related to
restructuring and other charges at Semiconductors (EUR 302 million) and
at CE (EUR 23 million).
- Financial income and expenses included EUR 146 million for gains on the
sale of securities.
15
Other information and outlook
Other information
On September 22, 2003, Atos Origin announced that it agreed to buy Schlumberger
Sema in Q1 2004 through cash and new shares. Consequently, Philips' stake would
decrease from 44.7% to 32% and a dilution gain of approximately EUR 120 million
is expected to be reported in Q1 2004.
On October 8, 2003, Philips announced the possible offering of TSMC shares.
Subject to all necessary regulatory approvals, Philips is considering an
offering of up to 500 million common shares, which when converted equate to 100
million American depositary shares. Philips plans to use the proceeds to reduce
the level of net debt on the company's balance sheet and for general corporate
purposes.
In Q3, Philips issued a letter of credit following the earlier announced verdict
with respect to a claim of Volumetrics Inc. This verdict is in the amount of EUR
319 million plus interest and has been appealed by Philips.
Outlook
We expect Semiconductors to be profitable in the fourth quarter, with improving
book-to-bill ratios. Here we continue to focus our R&D spending and to build on
Nexperia design wins. In DAP and Lighting, we are responding to softness in the
markets by capitalizing on innovations and boosting the efficiencies of our
operations. Our outlook for Medical Systems is cautious due to economic
uncertainties and lower public spending - above all in Europe. Here, we continue
to target innovation, productivity and cost control. Price erosion and ongoing
competition from existing brands and new market entrants continue to shape the
CE market. Our recently announced business renewal program will help strengthen
our competitive position. In CE, we expect to be close to breakeven in North
America in the fourth quarter.
The company will continue with its cost reduction initiatives and ongoing asset
management programs, while strengthening its balance sheet. Innovation and
making Philips a market driven company will continue to be among our top
priorities as the key drivers for growth and profitability.
Amsterdam, October 14, 2003
Board of Management
16
Consolidated statements of income
all amounts in millions of euros unless otherwise stated
3rd quarter January to September
2002 2003 2002 2003
------- ----------- ---------- ----------
Sales 7,313 6,989 22,897 20,020
Cost of sales (5,163) (4,894) (15,812) (13,746)
------ ---------- --------- ---------
GROSS MARGIN 2,150 2,095 7,085 6,274
Selling expenses (970) (1,068) (3,559) (3,174)
General and administrative expenses (347) (348) (1,068) (1,092)
Research and development expenses (756) (609) (2,297) (1,892)
Write-off of acquired in-process R&D - - (4) -
Impairment of goodwill (21) - (21) (9)
Restructuring and impairment charges (9) (208) (59) (391)
------ ---------- --------- ---------
(2,103) (2,233) (7,008) (6,558)
------ ---------- --------- ---------
Other business income (expenses) - net 88 12 296 164
------ ---------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 135 (126) 373 (120)
Financial income and expenses:
- interest (90) (90) (299) (267)
- impairment charges (339) - (1,875) -
- other (20) 66 100 81
------ ---------- --------- ---------
(449) (24) (2,074) (186)
------ ---------- --------- ---------
Income before taxes (314) (150) (1,701) (306)
Income taxes (5) 54 1 113
------ ---------- --------- ---------
Income after taxes (319) (96) (1,700) (193)
Results relating to unconsolidated companies:
- impairment charges (8) (7) (45) (16)
- other 4 246 90 339
Minority interests (7) (3) (21) (17)
------ ---------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (330) 140 (1,676) 113
Cumulative effect of change in accounting
principle - (16) - (16)
------ ---------- --------- ---------
NET INCOME (LOSS) (330) 124 (1,676) 97
INCOME FROM OPERATIONS
as a % of sales 1.8 (1.8) 1.6 (0.6)
as a % of net operating capital (RONA) 3.8 (1.6)
Weighted average number of common shares outstanding during
the period (in thousands):
(after deduction of treasury stock)
- basic 1,274,861 1,276,791
- diluted 1,280,106 1,281,088
BASIC EARNINGS PER COMMON SHARE IN EUROS:
Income (loss) before cumulative effect of
change in accounting principle (0.25) 0.11 (1.31) 0.09
Net income (loss) (0.25) 0.10 (1.31) 0.08
DILUTED EARNINGS PER COMMON SHARE IN EUROS:
Income (loss) before cumulative effect of
change in accounting principle (0.25) 0.11 (1.31) 0.09
Net income (loss) (0.25) 0.10 (1.31) 0.08
The Group financial statements have been prepared on a basis consistent with US
GAAP, which differs in certain respects from accounting principles as required
by Dutch law (Dutch GAAP). Net income determined in accordance with Dutch GAAP
amounted to a loss of EUR 446 million in the first nine months of 2003, compared
to a loss of EUR 2,208 million in the corresponding period last year. These
aggregate amounts result in basic earnings per common share of a loss of EUR
0.35 in January-September 2003 compared to a loss of EUR 1.73 last year. The
difference between Dutch GAAP and US GAAP is caused by the fact that goodwill is
no longer amortized under US GAAP but instead tested for impairment.
17
Consolidated balance sheets and additional ratios
all amounts in millions of euros unless otherwise stated
Consolidated balance sheet
Sept. 30, December Sept. 30,
2002 31, 2002 2003
--------- --------- ---------
Current assets:
Cash and cash equivalents 822 1,858 883
Receivables 5,601 5,068 5,072
Inventories 4,535 3,522 3,870
Other current assets 783 603 678
--------- --------- ---------
TOTAL CURRENT ASSETS 11,741 11,051 10,503
Unconsolidated companies 7,683 6,089 6,222
Other non-current financial assets 1,162 1,306 1,074
Non-current receivables 138 219 258
Other non-current assets 2,913 2,553 2,639
Property, plant and equipment 6,645 6,137 5,198
Intangible assets excl. goodwill 1,670 1,742 1,463
Goodwill 3,351 3,192 3,047
--------- --------- ---------
TOTAL ASSETS 35,303 32,289 30,404
Current liabilities:
Accounts and notes payable 3,400 3,228 3,150
Accrued liabilities 3,608 3,314 3,495
Short-term provisions 876 1,276 939
Other current liabilities 732 691 687
Short-term debt 1,163 617 1,709
--------- --------- ---------
TOTAL CURRENT LIABILITIES 9,779 9,126 9,980
Long-term debt 6,567 6,492 4,414
Long-term provisions 2,656 1,970 2,089
Other non-current liabilities 192 603 598
--------- --------- ---------
TOTAL LIABILITIES 19,194 18,191 17,081
Minority interests 192 179 167
Stockholders' equity 15,917 13,919 13,156
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 35,303 32,289 30,404
NUMBER OF COMMON SHARES
OUTSTANDING AT THE END OF PERIOD
- shares in thousands 1,274,976 1,275,978 1,277,970
RATIOS
Stockholders' equity, 15,917 13,919 13,156
per common share in euros 12.48 10.91 10.29
Inventories as a % of sales 14.1 11.1 13.4
Net debt: group equity ratio 30:70 27:73 28:72
Stockholders' equity determined in accordance with Dutch GAAP amounted to EUR
12,128 million as of September 30, 2003 compared to EUR 13,156 million under US
GAAP.
The deviation is caused by the fact that goodwill under Dutch GAAP has to be
amortized and charged to income, whereas under US GAAP it is no longer
amortized, but instead tested for impairment.
18
Consolidated statements of cash flows *
all amounts in millions of euros
3rd quarter January to September
2002 2003 2002 2003
----- ----------- ------ ------
Cash flows from operating activities:
Net income (loss) (330) 124 (1,676) 97
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 497 488 1,520 1,443
Impairment of equity investments 347 8 1,920 17
Net gain on sale of assets (142) (95) (471) (255)
Loss (income) from unconsolidated companies
(net of dividends received) 2 (236) (82) (319)
Minority interests (net of dividends paid) 7 (4) 21 10
Decrease (increase) in working capital/other
current assets 63 408 (350) (391)
(Increase) decrease in non-current
receivables/other assets (86) (285) 26 (227)
Decrease in provisions (21) (41) (117) (138)
Other items 7 9 (5) 82
---- ----------- ------ -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 344 376 786 319
Cash flows from investing activities:
Purchase of intangible assets (software) (28) (17) (108) (68)
Capital expenditures on property, plant and
equipment (337) (264) (782) (661)
Proceeds from disposals of property, plant
and equipment 47 23 310 114
Proceeds from sale (purchase) of other
non-current financial assets and
derivatives 63 168 395 660
Proceeds from sale of businesses (purchase of
businesses) 176 (76) (206) 75
---- ----------- ------ -----
NET CASH (USED FOR) PROVIDED BY INVESTING
ACTIVITIES (79) (166) (391) 120
CASH FLOWS BEFORE FINANCING ACTIVITIES 265 210 395 439
* For a number of reasons, principally the effects of translation
differences and consolidation changes, certain items in the statements
of cash flows do not correspond to the differences between the balance
sheet amounts for the respective items.
19
Consolidated statements of cash flows (continued) *
all amounts in millions of euros
3rd quarter January to September
2002 2003 2002 2003
---- ---- ---- ----
CASH FLOWS BEFORE FINANCING
ACTIVITIES 265 210 395 439
Cash flows from financing
activities:
(Decrease) increase in debt (125) (823) 96 (879)
Treasury stock transactions 11 12 (30) 28
Dividends paid - - (459) (460)
---- ----- ---- ------
NET CASH USED FOR FINANCING
ACTIVITIES (114) (811) (393) (1,311)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 151 (601) 2 (872)
Effect of changes in exchange
rates on cash positions (12) (9) (70) (103)
Cash and cash equivalents at
beginning of the period 683 1,493 890 1,858
---- ----- ---- ------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD 822 883 822 883
* For a number of reasons, principally the effects of translation differences
and consolidation changes, certain items in the statements of cash flows do
not correspond to the differences between the balance sheet amounts for the
respective items.
20
Consolidated statement of changes in stockholders' equity
all amounts in millions of euros
January to September 2003
---------------------------------------------------------------------------
Accumulated other comprehensive income (loss)
---------------------------------------------
Capital in Available Minimum
Common excess of Retained Translation for sale pension Cash flow
stock par value earnings differences securities liability hedges
----- --------- -------- ----------- ---------- --------- ------
Balance as of January 1, 2003 263 14 16,738 (1,712) 265 (353) 11
Net income (loss) 97
Net current period change (487) 161 25 (4)
Reclassifications into income (147) 5
------ ------ ---- ---- --
TOTAL COMPREHENSIVE INCOME (LOSS), NET OF TAX 97 (487) 14 25 1
Dividends (462)
Purchase of treasury stock
Re-issuance of treasury stock 10
Stock options accrual 19
--- -- ------ ------ --- ---- --
Balance as of September 30, 2003 263 43 16,373 (2,199) 279 (328) 12
=== == ====== ====== === ==== ==
January to September 2003
-------------------------
Treasury Total stock-
shares at holders'
cost equity
---- ------
Balance as of January 1, 2003 (1,307) 13,919
Net income (loss) 97
Net current period change (305)
Reclassifications into income (142)
------
TOTAL COMPREHENSIVE INCOME (LOSS), NET OF TAX (350)
Dividends (462)
Purchase of treasury stock (1) (1)
Re-issuance of treasury stock 21 31
Stock options accrual 19
------ ------
Balance as of September 30, 2003 (1,287) 13,156
====== ======
21
Product sectors
all amounts in millions of euros unless otherwise stated
Segment revenues and income from operations
3rd quarter
--------------------------------------------------------------------------------
2002 2003
------------------------------------- -----------------------------------
segment Income (loss) from segment Income (loss) from
revenues operations revenues operations
-------------------- -------------------
amount as % of amount as % of
segment segment
revenues revenues
Lighting 1,136 141 12.4 1,094 124 11.3
Consumer Electronics 2,248 8 0.4 2,228 (32) (1.4)
DAP 524 79 15.1 471 82 17.4
Semiconductors 1,306 (53) (4.1) 1,293 (191) (14.8)
Medical Systems 1,542 (11) (0.7) 1,416 138 9.7
Miscellaneous 868 38 4.4 765 (107) (14.0)
Unallocated (67) (140)
-------- ------ ------- -----
Total 7,624 135 7,267 (126)
Intersegment revenues (311) (278)
-------- -------
SALES 7,313 6,989
INCOME FROM OPERATIONS
AS A % OF SALES 1.8 (1.8)
22
Product sectors (continued)
all amounts in millions of euros unless otherwise stated
Segment revenues and income from operations
January to September
--------------------------------------------------------------------------------
2002 2003
------------------------------------- -----------------------------------
segment Income (loss) from segment Income (loss) from
revenues operations revenues operations
-------------------- -------------------
amount as % of amount as % of
segment segment
revenues revenues
Lighting 3,571 419 11.7 3,296 416 12.6
Consumer Electronics 6,955 86 1.2 6,189 (1) -
DAP 1,512 218 14.4 1,393 238 17.1
Semiconductors 4,047 (220) (5.4) 3,621 (508) (14.0)
Medical Systems 4,965 70 1.4 4,198 361 8.6
Miscellaneous 2,758 35 1.3 2,152 (224) (10.4)
Unallocated (235) (402)
-------- ------ ------- -----
Total 23,808 373 20,849 (120)
Intersegment revenues (911) (829)
-------- -------
SALES 22,897 20,020
INCOME FROM OPERATIONS
AS A % OF SALES 1.6 (0.6)
23
Product sectors and main countries
all amounts in millions of euros
Sales and total assets
Sales (to third parties) Total assets
------------------------ ---------------------
January to September Sept. 30, Sept. 30,
2002 2003 2002 2003
-------- -------- --------- ---------
Lighting 3,550 3,279 2,804 2,605
Consumer Electronics 6,902 6,131 3,257 2,775
DAP 1,497 1,380 1,124 1,037
Semiconductors 3,687 3,492 8,028 6,341
Medical Systems 4,961 4,188 7,301 6,360
Miscellaneous 2,300 1,550 6,829 5,673
Unallocated 5,960 5,613
-------- -------- -------- --------
TOTAL 22,897 20,020 35,303 30,404
Sales and long-lived assets
Sales (to third parties) Long-lived assets *
------------------------ ---------------------
January to September Sept. 30, Sept. 30,
2002 2003 2002 2003
-------- -------- --------- ---------
Netherlands 1,095 811 1,682 1,616
United States 6,957 5,403 5,969 4,755
Germany 1,652 1,523 687 630
France 1,297 1,293 387 220
United Kingdom 1,037 819 197 267
China 1,789 1,913 435 365
Other countries 9,070 8,258 2,309 1,855
-------- -------- -------- --------
TOTAL 22,897 20,020 11,666 9,708
* Includes property, plant and equipment and intangible assets-net.
24
Philips quarterly statistics
all amounts in millions of euros unless otherwise stated; percentage increases
always in relation to the corresponding period of previous year
2002
-------------------------------------------------------------
1st quarter 2nd quarter 3rd quarter 4th quarter
------------- ------------- ------------- -------------
Sales 7,598 7,986 7,313 8,923
% increase (7) 4 2 (4)
Income (loss) from operations 73 165 135 47
as % of sales 1.0 2.1 1.8 0.5
% increase (77) - - -
Net income (loss) 9 (1,355) (330) (1,530)
% increase (90) - - -
per common share in euros 0.01 (1.07) (0.25) (1.20)
2003
-------------------------------------------------------------
1st quarter 2nd quarter 3rd quarter 4th quarter
------------- ------------- ------------- -------------
Sales 6,499 6,532 6,989
% increase (14) (18) (4)
Income (loss) from operations 32 (26) (126)
as % of sales 0.5 (0.4) (1.8)
% increase (56) - -
Net income (loss) (69) 42 124
% increase - - -
per common share in euros (0.05) 0.03 0.10
January- January- January- January- January- January- January- January-
March June September December March June September December
-------- -------- --------- -------- -------- -------- --------- --------
Sales 7,598 15,584 22,897 31,820 6,499 13,031 20,020
% increase (7) (2) (1) (2) (14) (16) (13)
Income (loss) from operations 73 238 373 420 32 6 (120)
as % of sales 1.0 1.5 1.6 1.3 0.5 0.0 (0.6)
% increase (77) - - - (56) - -
as a % of net operating
capital (RONA) 2.0 3.4 3.8 3.2 1.2 0.1 (1.6)
Net income (loss) 9 (1,346) (1,676) (3,206) (69) (27) 97
% increase (90) - - - - - -
as a % of stockholders'
equity (ROE) 0.2 (14.7) (13.3) (19.2) (2.1) (0.3) 1.0
per common share in euros 0.01 (1.06) (1.31) (2.51) (0.05) (0.02) 0.08
period ending 2002 period ending 2003
------------------------------------------ ------------------------------
Inventories as % of sales 14.0 13.4 14.1 11.1 12.1 12.8 13.4
Net debt : group equity ratio 28:72 30:70 30:70 27:73 30:70 29:71 28:72
Total employees (in thousands) 186 184 183 170 166 164 166
Information also available on Internet, address: www.investor.philips.com
Printed in the Netherlands
25
August 26, 2003
Philips Files First Electronic PCT Application at World Intellectual Property
Organization
Philips became the first this week to file a fully electronic international
application under the World Intellectual Property Organization (WIPO) Patent
Cooperation Treaty (PCT). The full-scale launch of this new global service
called PCT-SAFE makes it possible to electronically file PCT applications on
line. Philips was the first to file a PCT-SAFE application, after a joint pilot
project of 9 months. WIPO has worked in close cooperation with Philips as a
partner in the pilot because of the Philips' longstanding and extensive use of
the PCT. In 2002 Philips was, for the second year in row, the largest filer of
PCT applications with 1922 applications published.
The new on line electronic filing service of WIPO is much quicker, safer and
causes a large reduction in paper and postal expenses. Having a long and
productive relationship with WIPO as a PCT user, Philips welcomes the PCT-SAFE
application. 'Filing patents on line at WIPO means a huge step forward for our
patent creation process', says Ruud Peters, CEO of Philips Intellectual Property
& Standards. 'As we are constantly looking for ways to improve our business
process and be cost-effective, this new service fits perfectly in our strategy'.
Mr. Francis Gurry, WIPO Assistant Director General who oversees the PCT,
welcomed the first fully electronic filing by Philips. "We are delighted that
the largest user of the PCT, Philips, has recognized the efficiency gains that
will result from electronic filing. We are always in search of new means of
making the PCT more efficient and effective. Electronic filing is one such
means, " he said.
Philips currently holds about 95,000 patent rights, 22,000 trademark
registrations, 6000 design registrations and some 2000 domain name
registrations. All these Philips intellectual property rights are created and
managed by Philips Intellectual Property & Standards, which has some 300
Intellectual Property professionals located in 23 offices around the world.
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News from Philips is located at
www.philips.com/newscenter
For further information:
Caroline Kamerbeek
Philips Intellectual Property & Standards
Tel.:+31 40 2735485
August 27, 2003
Philips Adds BT, Belgacom, T-Com and Telecom Italia to its European Broadband
Partners
Companies Will Seek Joint Commercialization of Home-Networked Entertainment
Devices and Broadband Service
AMSTERDAM, AUGUST 27, 2003 - Royal Philips Electronics (AEX:PHI; NYSE:PHG) today
announces that it has signed Memoranda of Understanding (MoUs) with BT,
Belgacom, T-Com and Telecom Italia to jointly develop the use of broadband and
complementary enabled technologies in the UK, Belgian, German and Italian
markets. This follows earlier announcements from Philips about its alliances
with KPN and Telefonica and is one of a series of alliance announcements that
Philips will be making with broadband operators around Europe. The alliances
will ensure that Philips' connected entertainment products will work effectively
with the key European telcos broadband and value-added services.
As part of the MoUs, the companies have agreed to share strategy on multimedia,
entertainment and consumer electronics technologies, especially on new business
based on broadband.
Gottfried Dutine, CEO Philips Consumer Electronics and member of the Board of
Management said:
"Widespread adoption of broadband will only occur as consumers are presented
with real ongoing value propositions beyond the limits of the PC. We realize
that in the Connected Home environment, consumers want easy to install, easy to
use, and easy to upgrade products and services that allow them to enjoy their
favorite entertainment content. To accomplish this, it is essential that we work
closely in step with broadband providers such as BT, Belgacom, T-Com and Telecom
Italia. Together with our existing alliances with KPN and Telefonica, these
agreements are a big step in our broadband strategy to cover Europe. We believe
that such alliances are the beginning of a new service and product dynamic for
the home environment that will spur the development of next generation
applications such as home automation and interactive video communications."
BT Retail Director of Home Communications, David Sales said: "This alliance is
about the power of broadband and what it can do for the customer in the home.
Together, BT and Philips will offer consumers in the UK more compelling and
easier to use solutions that will really enable them to tap in to the great
benefits of broadband."
Building Blocks for the Connected Home
The products Philips plans to offer UK, Belgian, German and Italian customers
are built on Philips' core strengths in display, storage, connectivity and video
processing, as well as standard WiFi technology and open protocols. Under the
Streamium brand of connected audio and visual devices, Philips will be aiming to
offer customers products that enable them to enjoy their favorite entertainment
and content whenever, wherever and however they choose.
The Philips-BT Alliance will focus on a full range of broadband-enabled
multimedia and entertainment products and services for the UK market. In order
to create consumer awareness of the possibilities of broadband beyond the PC,
the two companies plan to create joint product demonstrations and entertainment
displays in key retail partner outlets. These demos will showcase a complete
portfolio of Philips' connected devices enabled by the BT Broadband service in
order to educate consumers on the profound impact broadband will have on home
entertainment, personal expression and productivity applications.
Additionally, the companies will cooperate on product research and development,
driving the adoption and wider use of digital home applications using broadband.
Philips and BT have agreed to share product and service roadmaps, as well as
actively collaborate on product/service planning. New products will be showcased
through the alliance as and when they reach the market. The first announcement
is expected in October.
About BT
BT Group plc is the listed holding company for an integrated group of businesses
providing voice, data and video services in the UK and elsewhere in Europe.
British Telecommunications plc, a wholly-owned subsidiary of BT Group, holds
virtually all businesses and assets of the BT group.
BT is one of Europe's leading providers of telecommunications services. Its
principal activities include local, national and international
telecommunications services, higher-value broadband and internet products and
services, and IT solutions. In the UK, BT serves over 20 million business and
residential customers with more than 29 million exchange lines, as well as
providing network services to other licensed operators.
BT consists principally of three lines of business:
- BT Retail, serving businesses and residential customers and including BT
Openworld, one of the UK's leading ISPs.
- BT Wholesale, providing network services and solutions within the UK,
including ADSL, conveyance, transit, bulk delivery of private circuits, frame
relay and ISDN connections.
- BT Global Services, BT's managed services and solutions provider, serving
multi-site organisations worldwide. Its core target market is the top 10,000
global multi-site organisations with European operations.
There are a number of other businesses within the BT group, including BT Exact,
an internationally renowned centre of excellence in IT and networking
technologies. It is also BT's technology and research and development business.
In the year ended 31 March 2003, BT's turnover was L18,727m. with profit before
taxation of L1,829m.
For more information, visit www.bt.com
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging
and patient monitoring, and one-chip TV products. Its 164,000 employees in more
than 60 countries are active in the areas of lighting, consumer electronics,
domestic appliances, semiconductors, and medical systems. Philips is quoted on
the NYSE (symbol: PHG), London, Frankfurt, Amsterdam and other stock exchanges.
News from Philips is located at www.philips.com/newscenter
For further information:
Sajin Varghese
Philips Corporate Communications
Tel.:+31 20 5977425
Email:sajin.varghese@philips.com
Damian Peachey
BT
Tel.:+44 20 7492 4774
Email:damian.p.peachey@bt.com
August 28, 2003
Philips Consumer Electronics Unveils `Connected Planet' Strategy
Innovative New Products, Partnerships Anchor Strategy to Enable Consumer Access
to Digital Content Anywhere and Anytime
Berlin, Germany, 28 August, 2003 - Philips Consumer Electronics, a division of
Royal Philips Electronics (AEX: PHI, NYSE: PHG) today unveiled the Connected
Planet(TM), the strategic vision behind a vanguard portfolio of consumer
products and technologies enabling people to access and enjoy digital content
anywhere and anytime in the home and beyond.
In a move that builds off of its success and legacy in the home, Philips is
combining a unique series of partnerships with the telecommunications industry,
with a slate of new products designed to accelerate consumers' access to the
rich content and services promised by today's broadband and wireless
technologies. Under the umbrella of `Connected Planet', Philips will further
broaden its application of wireless, broadband and mobile enabling technologies
to provide seamless accessibility to entertainment, information and services.
Based on open technical standards such as WiFi(TM) and UPnP, the Philips
Streamium family of products that form the basis of this Connected Planet
strategy, enable the wireless transmission of digital media content throughout
PC and A/V environments.
"Connected Planet is really about freeing people from the existing constraints
of technology that until recently they have had to accept. As we've seen
broadband, wireless and digital media technologies grow in availability and
functionality, we now have an opportunity to give consumers intuitive,
spontaneous access to content," said Gottfried Dutine, CEO, Philips Consumer
Electronics. "As a lifestyle and technology company, this is a strategic sweet
spot for us. With our vision, product line and partnerships, Philips can lead
consumers and the market into the new connected age."
Another key element of the strategy involves a series of partnerships with the
world's leading telecommunications providers, including Deutsche Telekom
(T-Com), British Telecom, Belgacom and Telecom Italia announced this week, as
well as previously existing partnerships with KPN and Telefonica. These
partnerships, combined with Philips' core competency strengths in display,
storage, connectivity and digital media processing, give the company a leading
position in the race to own the 24/7 consumer lifestyle that is rapidly evolving
around the world.
Guiding Philosophy for Product Creation
As both a guiding philosophy for product creation and a tool to help introduce
consumers to technologies such as the WiFi wireless standards, Connected Planet
will embrace a wide range of Philips products being launched in the years ahead.
Philips will be applying its Connected Planet strategy across the broad canon of
the company's total consumer electronics activities. End products like Streamium
entertainment systems, the Nexperia(TM) multimedia processing platform and
components based on Bluetooth(R) and Philips' own Near-Field Communications
wireless connectivity solution will all be embraced by the Connected Planet
direction.
Philips will commence its rollout of Connected Planet products with a broad
range of products on sale by the start of 2004, including Streamium wireless
Internet audio-video entertainment systems, the iPronto advanced remote control,
a family of wireless connectivity accessories, followed by a range of wireless
multimedia link devices, based on the new 802.11g (WiFi) standard, which enables
content stored on a PC to be streamed wirelessly to audio or TV equipment.
Making their worldwide debuts at IFA are two members of the Philips Streamium
family: the MC-6000i home entertainment system and the SL400i Wireless
Multimedia Receiver. Both devices allow consumers to wirelessly stream video,
audio and multimedia content directly from the Internet, or from their PC, to
enjoy in the living room or wherever in the house they choose.
For more information on Connected Planet, please click here
Wi-Fi and the Wi-Fi logo are the registered trademarks of the Wi-Fi Alliance.
*Other names and brands may be claimed as the property of others.
Bluetooth is a trademark owned by Bluetooth SIG, Inc. and is used by Philips
under license
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News from Philips is located at
www.philips.com/newscenter
For further information:
Jeannet Harpe
Philips Consumer Electronics
Tel.:+31 40 2735677
Email:jeannet.harpe@philips.com
Sajin Varghese
Philips Corporate Communications
Tel.:+31 20 5977425
Email:sajin.varghese@philips.com
August 28, 2003
Philips Electronics Announces Cooperation with Deutsche Telekom's T-Com Division
to Develop the German Broadband Connected Home Market
Continuing Philips' Integrated Strategy to Offer Consumers Broadband Powered
Entertainment Devices
BERLIN, AUGUST 28, 2003 - Royal Philips Electronics (AEX:PHI; NYSE:PHG) and
T-Com, Deutsche Telekom AG's fixed network division, today announced a
cooperation to jointly develop the market for broadband, wireless home networks,
connected devices, and value-added broadband-connected entertainment and
communication services in Germany. The aim is to offer consumers the combination
of Philips products such as home networks and connected entertainment and
communication technologies along with T-Com's broadband service and
installation.
Philips and T-Com will market their combined offerings via selected sales
channels. The companies have also agreed to share future product and service
roadmaps in order to collaborate on new service, product and content offerings
to consumers.
Gottfried Dutine, CEO Philips Consumer Electronics and member of the Board of
Management said: "Our cooperation announced today at IFA with T-Com is the last
in the present group of announcements to align Philips' broadband ready
connectivity and entertainment devices with the services and market channel
expertise of broadband providers. With the combination of our six European telco
partners, Telefonica, KPN and recent additions British Telecom, Belgacom,
Telecom Italia and T-Com, we will be able to target a growing base of over seven
million consumers in some of the largest European markets with a compelling out
of the box broadband entertainment experience."
Achim Berg, Member of the Board of Management T-Com, Deutsche Telekom AG,
Marketing and Sales said: "We are happy to co-operate with Philips in further
developing the broadband connected home market in Germany."
Marketing and Product Development Collaboration Between T-Com and Philips
The Philips-T-Com Co-operation will focus on commercializing a full range of
broadband, multimedia and entertainment products and services for the German
market. In order to create consumer awareness of the possibilities of broadband
beyond the PC, the two companies plan to create high visibility connected
solutions displays in selected sales channels. These demos will showcase over
time a complete portfolio of Philips' connected solutions enabled by T-Com's
broadband service in order to educate consumers on the profound impact broadband
will have on home entertainment, personal expression and productivity throughout
the home.
Additionally, the companies will cooperate to jointly research new trends and
technologies in the connected home space, driving the adoption and wider use of
digital home applications using broadband. The companies will also align future
offerings and create user friendly, personalized entertainment and communication
services throughout the broadband-connected home.
Bundled Service and Product Launch
At the end of this year, in conjunction with T-Com and its other broadband
partners, Philips plans to offer to consumers in six markets in Europe a
complete broadband powered wireless audio system. This "Connected Music" offer
is planned for the 2003 Christmas season. The joint offering will include
broadband service, a wireless home network and the Philips Streamium Internet
Audio System. The goal of the pilot launches is to encourage existing and new
broadband subscribers to upgrade their home environments with a wireless home
network while at the same time offering them an entertainment device and music
services that fully leverage the benefits of broadband and wireless
technologies.
About T-Com
With more than 40 million customers, T-Com is one of the largest fixed network
providers in Europe. In Germany, T-Com's residential and small business
customers account for over 49 million lines (including ISDN channels). T-Com is
a full-service provider and offers integrated information technology and
telecommunications solutions to around 440,000 small and medium-sized
businesses. Thanks to stakes in Matav (Hungary), Hrvatski Telekom (Croatia) and
Slovenske Telekomunikacie (Slovakia), T-Com is also participating in the growth
markets of Eastern Europe.
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News from Philips is located at
www.philips.com/newscenter.
For further information:
Sajin Varghese
Philips Corporate Communications
Tel.:+31 20 5977425
Email:sajin.varghese@philips.com
August 29, 2003
Philips CEO announces changes in business models
BERLIN, AUGUST 29, 2003 - Gerard Kleisterlee, CEO of Royal Philips Electronics
(AEX:PHI; NYSE:PHG), today outlined a path towards sustained growth for the
Consumer Electronics industry. In a key note speech delivered at IFA,
Kleisterlee addressed a number of the top issues currently facing the CE
industry and suggested the way forward. His prescription comprises a
three-pronged approach that:
- Increases the pace of innovation in the face of stepped up competition
by commodity players
- Breaks down the current organizational structure of CE companies from
one focused on product development and manufacturing to a more
flexible model that emphasizes sales, marketing and a spirit of
cooperative competition - allowing for open standards and shared
development of new technologies.
- Relies on alliances and partnerships to expand the CE market beyond its
boundaries into new categories that address the changing lifestyle
needs of consumers
"We need fundamental change to the business model if we are to take
our industry forward into a new growth era," said Kleisterlee.
Innovation Unlocks Door to Sustained Profits
Kleisterlee noted the increasing velocity of the innovation-to-commoditization
cycle that now challenges the entire industry. "With so many `fast followers' in
the marketplace, nobody can rest on their laurels," he said. Explaining that
innovative new products like DVD enjoyed record-setting market penetration and
yet because of "me too" producers, prices and margins plummeted leaving this
technology breakthrough on the commodity floor.
Increased market penetration is great, but the remedy, according to Kleisterlee,
is for leaders like Philips to step up the pace of innovation in order to
maximize the profit potential inherent in new products, while focusing less
energy on products that are quickly becoming commodities. "Leaders have to move
much more quickly than ever before to stay one step ahead and remain leaders,"
he said.
Creating Flexible Organizations
The consumer electronics organization of the future, according to Kleisterlee,
recognizes the decreasing value in owning everything from technology development
to production. "What you're seeing is some companies moving away from being
vertically integrated manufacturing monoliths to focus on sales and marketing
based on technology leadership," he said.
Increased collaboration with competitors is key to maximizing the value of
technology investments. Kleisterlee cited Philips' partnership with Motorola and
ST
Microelectronics to build the Crolles2 Alliance semiconductor R&D and pilot line
facility near Grenoble, France as an example. "Together we are developing the
advanced manufacturing processes required to develop system-on-a-chip solutions
that will speed the introduction of 3G and 4G mobile phones. It's a perfect
example of what I call `cooperative competition'. We pool our R&D and
manufacturing resources, but still compete head-to-head in the consumer
markets."
New Markets, New Opportunities
Gone are the days when consumer electronics companies launched an individual new
product and found a wide open market. With a near total saturation of the
consumer electronics market, companies need to look beyond their boundaries and
add value to their offerings. "We need to look outside our own backyards in
order to leverage the full potential of our innovations," noted Kleisterlee.
For example, Philips announced this week a series of alliances with Europe's
leading telco providers to further open the market for broadband enabled
services. "We work with telcos and content providers, packaging their services
and entertainment with our equipment to give us a whole new marketplace in the
world of `PC-less broadband', and a different revenue model based on long-term
partnerships."
Looking further beyond its boundaries in consumer electronics, Kleisterlee sees
a world that marries consumer electronics with important growth areas such as
healthcare. "We are the world's third largest provider of medical diagnostic
equipment and the leader in patient monitoring. We are uniquely positioned to
serve this new category. The rising cost of healthcare, combined with an
increasing empowerment of patients-as-consumers, is going to fuel an explosion
in demand for personalized diagnostic and monitoring devices. What we are seeing
is a move towards technology and well-being."
Click here to read Gerard Kliesterlee's keynote speech.
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News from Philips is located at
www.philips.com/newscenter
For further information
Sajin Varghese
Philips Corporate Communications
Tel.:+31 20 59 77425
Email:Sajin.varghese@philips.com
September 04, 2003
Philips CEO Discusses Technology Solutions for Bridging the 'Digital Divide'
Mumbai, India / Amsterdam, the Netherlands - September 4, 2003 - Gerard
Kleisterlee, CEO of Royal Philips Electronics (AEX: PHI, NYSE:PHG), outlined his
vision for how the technology industry can better serve unmet needs in
developing countries in a CNBC Global Leader presentation in Mumbai, India
today. Kleisterlee views product innovations, flexible organizations and new
market categories as the keys to serving emerging markets more effectively.
"The greatest challenge we face is how to accelerate accessibility and
affordability so the benefits of technology - above all in health care and
education - are more evenly shared," Kleisterlee said. He also went on to
explain, that helping developing countries `log on' to the benefits of
technology makes business sense since they represent "the largest new growth
market."
Tools for bridging the divide: innovation, flexible organizations, new markets
In his presentation, Kleisterlee referred to a three-pronged approach, first
unveiled last week at IFA, the world's largest consumer electronics show, in
Berlin. Through illustrations taken from India and other emerging markets,
Kleisterlee showed how a Philips strategy for sustained growth in the Consumer
Electronics industry can also provide a roadmap for delivering technology
solutions to emerging markets.
One aspect of the strategy, developing innovative products, is also decisive for
emerging markets, where "made in the west" solutions do not work. Here,
Kleisterlee cited the "Health Truck" developed by Philips and now in use in
Argentina. This state-of-the-art diagnostic clinic on wheels tours impoverished
areas of the country, providing free CT scans. "This initiative brings advanced
medical diagnosis to thousands of patients who would otherwise have no access to
such benefits," Kleisterlee said.
Kleisterlee also discussed the need for flexible organizational structures: "We
need different business models for different regions, while our technology base
remains global. More and more players - Philips included - realize that
ownership of production facilities, whether located in Europe or developing
countries, is not the answer. Instead, excellence in technology and marketing
are the keys to sustained profitability." Kleisterlee discussed the Philips
Software Centre in Bangalore as an example of how technologies developed in
emerging markets can also help the developed world.
Finally, developing new product and service categories - which is crucial in the
nearly saturated consumer electronics industry - also enables companies to zero
in on the needs of customers in emerging markets more effectively. In India,
Philips set-top boxes are connecting viewers to premium TV channels. A more
affordable pay-per-use model is also being explored. Kleisterlee: "In fact, it's
probable that a `pay per use' basis for technology will become just as common as
'owning the box' and this will be the future business model for our industry."
News from Philips, including a full copy of Mr. Kleisterlee's CNBC Global Leader
presentation, is located here
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News from Philips is located at
www.philips.com/newscenter
For further information:
Jayson Otke
Philips Corporate Communications
Tel.:+31 20 5977215
Email:jayson.otke@philips.com
Radhika Choksey
Philips India Limited
Tel.:+91 2256912122
Email:radhika.choksey@philips.com
September 12, 2003
Philips Reports Progress In Semiconductor Division
Division Expected to be Profitable in Q4 2003 - Design Wins for Nexperia(TM)
Platform Leading to Higher Revenue for Second Half 2003
Amsterdam, The Netherlands, September 12, 2003 - In a meeting with investors and
financial analysts today, Royal Philips Electronics N.V. (AEX: PHI, NYSE: PHG)
will give an update on the progress in the company's recovery plan for its
Semiconductor division. Philips will also highlight the growing role of its
Nexperia(TM) platform of programmable integrated circuits as a contributor to
growth in a market that is beginning to show signs of improved strength.
"Third quarter sequential sales growth in U.S. dollars, excluding our mobile
displays business, are expected to exceed our earlier 3 per cent forecast by a
few percentage points, and we expect further sequential growth in the fourth
quarter," says Scott McGregor, CEO of Philips Semiconductors. The order book for
the fourth quarter is progressing well, with the business on track to being
profitable in the fourth quarter.
In reviewing the five-point recovery plan that was unveiled in March 2003,
Philips will show that good progress continues to be made in reducing its R&D
costs through sharpening the focus of its spending, while adapting production
capacity as part of the business' asset-light strategy. The company will also
outline its achievements in making the Semiconductor organization simpler and
more effective. Furthermore, Philips will elaborate on a third-quarter
restructuring charge in Semiconductors of EUR 150 million relating to previously
announced plant closures in Albuquerque, New Mexico and San Antonio, Texas, and
measures to focus R&D spending and simplify the organization.
Philips will also use the meeting to review design wins for the Nexperia(TM)
platform with leading players for DVD+RW and cellular handsets, which are
strengthening Philips' position in serving the home entertainment and mobile
telephony markets.
A web cast of the Semiconductor financial analyst meeting begins at 10.00CET and
can be followed by clicking here. At 16.00CET, a press briefing on the subjects
covered in the morning will also be webcast. Click here to listen in.
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News from Philips is located at
www.philips.com/newscenter
Safe Harbor Statement
This document contains certain forward-looking statements with respect to the
financial condition, results of operations and business of Philips and certain
of the plans and objectives of Philips with respect to these items. By their
nature, forward-looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, levels of consumer
and business spending in major economies, changes in consumer tastes and
preferences, the levels of marketing and promotional expenditures by Philips and
its competitors, raw materials and employee costs, changes in future exchange
and interest rates (in particular, changes in the euro and the US dollar can
materially effect results), tax rates and future business combinations,
acquisitions or dispositions and the rate of technical changes. Market share
estimates contained in this report are based on outside sources such as
specialized research institutes, industry and dealer panels, etc. in combination
with management estimates.
For further information:
Jayson Otke
Philips Corporate Communications
Tel.:+31 20 5977215
Email:jayson.otke@philips.com
September 22, 2003
Dow Jones Names Philips Market Leader in Sustainability
Commitment to Sustainability Recognized with Top Score in the Cyclical Goods and
Services Market
Amsterdam, The Netherlands, September 22, 2003 - Today Royal Philips Electronics
(NYSE: PHG, AEX: PHG) announced that the company was ranked number one by the
Dow Jones Sustainability Index (DJSI) World in corporate sustainability among
companies from the consumer electronics, leisure goods, home construction,
apparel and airline sectors. The news comes just six months after the release of
Philips' first annual corporate Sustainability Report in which the company
measures its progress against a triple bottom line of economic, environmental
and social criteria.
Dow Jones Sustainability Indexes track the financial performance of the leading
sustainability companies worldwide, providing asset managers with reliable and
objective benchmarks to manage sustainability-driven portfolios. Currently,
there are over EUR 2.2 billion in DJSI-based funds. The DJSI World covers the
largest 2,500 companies by market capitalization in the Dow Jones Global Index.
Only the top 10 per cent of these companies are selected for the DJSI World
according to economic, environmental and social criteria. Philips ranked first
in the Cyclical Goods & Services market sector and also came out on top in the
DJSI STOXXsm index ranking of approximately 600 of Europe's leading companies.
"Companies that pursue sustainable development have, on average, provided a
higher return to shareholders than other companies. By measuring a company's
economic, environmental and social dimensions we can provide a more complete
basis for evaluating shareholder value," said John Prestbo, editor of Dow Jones
Indexes. "To be identified as the leader in its sector, Philips had to
demonstrate high-caliber governance, knowledge management, environmental
performance, human rights policies and other factors. All of these criteria are
carefully assessed in selecting companies for the index, and in our view all
contribute to the long-term success of a company," he continued.
Philips was measured on 10 economic, 6 environmental and 10 social parameters.
The analyzed companies are assigned a sustainability score for each of the three
key areas and are ranked accordingly within their industry group. In it's sector
Philips was rated highest in corporate governance and measurement systems, and
received a 100 per cent rating on its environmental reporting, 92 per cent on
its environmental policy and 95 per cent on its product stewardship. Philips
also scored higher than the industry average on corporate citizenship and
philanthropy, labor practices, and human capital.
"Because we believe that sustainable business must meet the needs of present
generations without compromising the ability of future generations, we have made
it our priority to integrate economic, social and environmental principles into
our business objectives. This isn't just good talk. It's good business too."
said Arthur Van der Poel, Chairman of Philips' Sustainability Board. "Being
recognized by the
Dow Jones as a category leader, demonstrates that our values and actions as a
company have put us on the right path to achieving our goal as a sustainable
enterprise."
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News from Philips is located at
www.philips.com/newscenter
For further information:
Jayson Otke
Philips Corporate Communications
Tel.:+31 20 5977215
Email:jayson.otke@philips.com
September 24, 2003
Philips CEO Visits China And Strengthens Cooperation With China
Philips marks 18th anniversary of investment in China, Chinese Premier Wen
Jiabao met CEO Kleisterlee
(Sep 24, 2003 - Amsterdam/Beijing) - Royal Philips Electronics marked the 18th
anniversary of its investment in China on Wednesday, and to further strengthen
its economic and technology cooperation with Chinese government, Gerard
Kleisterlee, President and Chief Executive Officer of the world electronics
giant, visited China and reiterated Philips full confidence in Chinese market
and its resolution to grow together with China in the long run. Chinese Premier
Wen Jiabao met with Gerard Kleisterlee today with presences of Mr. Zhang Zhigang
Vice Minister of Commerce Department, Jan Oosterveld, CEO of Philips Asia
Pacific and David Chang, CEO of Philips China.
Wen spoke highly of the achievements Philips has made in the country, extended
appreciation for Philips efforts to increase research and development activities
in China and expressed support for the business and technology cooperation
between Chinese electronics industry and the multinational company. Wen expected
that in the near future China would become the country of largest investment for
Philips worldwide.
Briefing Wen on the development and future strategy of Philips, Kleisterlee
expressed his determination to further enhance the full-scaled cooperation with
China, and reiterated the long-term commitment to China. "We appreciate the
endeavors of Chinese government made to keep the economic stability," said
Kleisterlee, "a stable currency and economic environment are critical for
multinational companies to have long term developments."
"China still maintains rapid growth and has become a focus of world economic
development. China is one of the most important markets in our growth strategy,
we have full confidence in this market and will go into closer cooperation with
China and its electronics industry," Kleisterlee said, "Philips long-term
commitment to China is evident not only in our further investment in plants and
factories, but also in research and development, and in the substantial
resources we dedicated to the development of local managements and establishment
of regional operation centers".
In the past 18 years Philips has scored remarkable success in China. Since the
first joint venture in China was established in 1985, Philips now counts 30
wholly owned enterprises and joint ventures in the country, employing around
18,000 staff nationwide, with cumulative investment exceeding USD 2.5 billion
and total sales reached USD 6.7 billion in 2002.
Adhering to its commitment to China, Philips actively seeks to build extensive
and firm cooperation with Chinese partner, and now grows to one of the largest
investors in China electronics industry. Recently Philips China was awarded, by
China Foreign Invested Enterprises Association, as the only winner of
"Extraordinary
Contribution Award of 2002", for recognition of its contribution in the largest
turnover and exports among all FIEs in China.
Philips has established 13 research and technology development centers for
lighting, Color TV, audio, semiconductors and mobile display system. Meanwhile
the electronics giant also works with Chinese government, research institutes
and local companies to establish China Standards with aim of bringing the
product with Chinese intellectual property to the world market, and contribute
to the development of core competencies and competitiveness of Chinese
electronics industry.
David Chang, CEO of Philips China said: "We appreciate the great support given
to Philips by Chinese government at both central and local levels, and the
cooperation from local companies and partners. During the past 18 years, Philips
witnessed the huge success of China reforms and rapid growth of Chinese economy.
More importantly both sides have developed a trustworthy partnership during this
period, and we expect that this relationship will be enhanced to a new stage in
the future."
In the coming years Philips considers to further increase its investment in
China to enhance Philips China's contribution to the global revenue. Philips
will further strengthen the partnership with local companies, with complementary
to each other for win-win situation. Kleisterlee said: "Philips expects closer
cooperation with Chinese enterprises, we share the responsibility to achieve
sustainable growth for Chinese electronics industry and to strengthen the
competitiveness of Chinese economy during of process of integrating into world
economy."
To take the company forward into a new growth era, Kleisterlee updated top
management of Philips China with the evolution of business models of Philips and
suggested a three-pronged approach: to increases the pace of innovation in the
face of stepped up competitions, to transform from focusing on manufacturing to
a more flexible model that emphasizes sales, marketing and a spirit of
cooperative competition, to rely on alliances and partnerships to expand the
market beyond its boundaries.
During his visit to China, Kleisterlee reviewed the progress of China Strategy
project with China management team and clarified the expectations of the Board
of Management on the project. He also directed the preparations of the Group
Management Committee's visit in November and made sure the purpose of the visit
was understood and the target will be reached.
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About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global leader in color television sets, lighting, electric
shavers, medical diagnostic imaging and patient monitoring, and one-chip TV
products. Its 164,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances, semiconductors,
and medical systems. Philips is quoted on the NYSE (symbol: PHG), London,
Frankfurt, Amsterdam and other stock exchanges. News
from Philips is located at www.philips.com/newscenter
For further information:
Andre Manning
Senior Press Officer
Corporate Communications
Tel.:+31 20 5977199
Email:Andre.Manning@philips.com
Denise Sun
Corporate Communications
Tel.:+86-21-63541088-5636
Email:Denise.cs.sun@philips.com
September 25, 2003
Philips Partners with The Wisconsin Heart Hospital to Launch New
State-Of-The-Art Hospital Offering Singular Focus on Cardiovascular Care
Partnership keeps The Wisconsin Heart Hospital on the cutting edge of technology
Royal Philips Electronics (NYSE:PHG, AEX: PHI) today announced that its medical
systems division and The Wisconsin Heart Hospital have signed a multi-million
dollar, 6-year partnership that will provide The Wisconsin Heart Hospital with
best-in-class, highly integrated, customized solutions for cardiovascular care.
Scheduled to open in January 2004, The Wisconsin Heart Hospital will be the
leading regional cardiovascular care center in the Milwaukee area featuring a
full range of Philips advanced imaging technologies, including computed
tomography (CT), magnetic resonance (MR), ultrasound and X-ray angiography
equipment. The Wisconsin Heart Hospital is a partnership with Covenant
Healthcare, cardiovascular physicians and community investors. In addition, The
Wisconsin Heart Hospital will serve as a reference site for medical
professionals interested in viewing Philips products and services in a clinical
setting.
"Our dedication to cardiovascular care mirrors that of Philips - we want to
create a long-term, collaborative partnership that significantly advances
treatment for patients in our community," said Norma McCutcheon, CEO, The
Wisconsin Heart Hospital. "Working with Philips, we can leverage advanced
imaging technologies and services for increased cost-efficiencies and deliver
faster diagnoses and, ultimately, better care to patients."
"Philips is honored to partner with The Wisconsin Heart Hospital in their
dedication to improving patient care through access to the best technology, an
environment of excellence and clinical capabilities," said Jouko Karvinen,
president and CEO, Philips Medical Systems. "The foundation of our partnership
is the shared vision to create a healthcare model of the future for
cardiovascular care."
The World Health Organization estimates that seventeen million people die from
cardiovascular disease every year. In addition, according to the American Heart
Association, cardiovascular disease is the number one killer in America and
claims more lives than the next seven causes of death combined. In an effort to
combat this disease and provide patients with the best care possible, healthcare
leaders are creating specialty heart hospitals that group advanced imaging and
diagnostic technologies under one roof - creating centers of excellence focused
solely on cardiovascular care and research. These centers, in collaboration with
Philips Medical Systems, are working towards improved patient outcomes, helping
professionals research and identify new and better ways to treat cardiovascular
disease.
The Wisconsin Heart Hospital is a two-story, 126,000 square foot facility that
focuses on comprehensive cardiac and vascular services including surgery,
diagnostic imaging, emergency exam department (six rooms), outpatient care (21
rooms), inpatient care (40 rooms), and wellness and preventative medicine
programs. It will have a 24-hour emergency room and a charity care policy that
is consistent with Covenant Healthcare System, a faith-based not-for-profit
health care system with more than 100 years of history. The 60-bed heart
hospital will feature four cardiac/ electrophysiology catheterization (cath)
labs for immediate cardiac intervention and one peripheral vascular lab with
easy access to two operating rooms and the ability to expand to three as needed.
The Wisconsin Heart Hospital will utilize several Philips technologies including
X-ray angiography, ultrasound, cath lab systems and CT scanners. These
technologies will enable cardiologists to view detailed images of the heart, to
reduce radiation exposure for both patient and medical staff and to complete
procedures faster. Clinicians use imaging for several electrophysiology and
interventional procedures like stent implantation because it provides them
information to gain deeper perspective and understanding of the condition of the
heart and its functions.
Philips advanced imaging technologies and services will also be used in The
Wisconsin Heart Hospital operating room (OR) during cardiac surgery, pacemaker
implantation and other surgical procedures as well as outside the OR for
diagnostic cardiac imaging, interventional cardiac imaging in stent planning and
electrophysiology procedures.
Philips deep knowledge of cardiovascular care and extensive portfolio of best in
class diagnostic, imaging and interventional products and services are further
bolstered by its Cardiovascular Care Business Team. The Business Team, dedicated
to collaborating with cardiologists and leading medical research institutions to
develop advanced technologies and services, supports the cardiovascular
community in its efforts to deliver effective and efficient patient care to meet
both the quality and economic demands of today's healthcare environment. Meeting
regularly with its global Advisory Board, the Team strives not only to
understand the industry's needs but to help shape the systems of tomorrow to
enable better patient diagnosis, treatment and outcome.
On October 4th, the Business Team will sponsor a CME-credited course with Duke
University entitled, "The Revolution in Cardiac Imaging: Adapting to the
Clinical Mindset." Featuring experts from around the world, the teleconference
will provide listeners with information on the importance of cardiac imaging,
cost effective testing and integration methods for the clinical practice.
Interested parties can find more information about the program, or can register,
at http://www.cardiacimaging.tv.
About The Wisconsin Heart Hospital
The Wisconsin Heart Hospital is being created to offer the community quality,
cost-efficient cardiovascular patient care that is focused on clinical
excellence and patient service. It is a care delivery model that is current with
the changing nature of health care, providing patients with quality,
convenience, cost-effectiveness and better patient satisfaction. Given the
hospital's single focus on cardiovascular care, the physicians will perform
interventional procedures that are less invasive and are consistent with the
latest technological advances in treatment. This type of treatment will result
in a shorter recovery time for patients, reducing expenses and helping patients
return to active, productive lives as quickly as possible.
The Wisconsin Heart Hospital will provide concentrated sources of information,
care and support, rather than duplicating services, which will lead to efficient
and cost-effective care. For more information about The Wisconsin Heart
Hospital, go to: www.twhh.org.
About Royal Philips Electronics:
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of $30.1 billion (EUR
31.8 billion) in 2002. It is a global leader in color television sets, lighting,
electric shavers, medical diagnostic imaging and patient monitoring, and
one-chip TV products. Its 164,000 employees in more than 60 countries are active
in the areas of lighting, consumer electronics, domestic appliances,
semiconductors, and medical systems. Philips is quoted on the NYSE (symbol:
PHG), London, Frankfurt, Amsterdam and other stock exchanges. News from Philips
is located at www.philips.com/newscenter/usa/ ATTN Broadcasters: Philips b-roll
(via beta copy, fiber transmission and satellite feed), is available 24/7 from
PR NEWSWIRE (212-375-0021).
For further information:
Heidi Wilson
Philips Medical Systems
Tel.:+1 978 659 7302
Email:heidi.wilson@philips.com
Jayson Otke
Philips Corporate Communications
Tel.:+31 20 5977215
Email:jayson.otke@philips.com
Ellen Roeder
The Wisconsin Heart Hospital
Tel.:+1 414 778 7800
Email:eroeder@twhh.org
Steve Kelly
Tel.:+1 4254877479
Email:steve.kelly@philips.com
September 26, 2003
Philips to invest Eur 20 million in production site for new television
technology
September 26, Amsterdam, (The Netherlands), Boblingen (Germany). Royal Philips
Electronics (AEX: PHI, NYSE: PHG) today opened a new production facility for the
production of components for the new screen technology LCOS (Liquid Crystal on
Silicon) in Boblingen. The investment volume amounts to EUR 20 million. The
Boblingen site will produce the first mass-produced high-definition panels for
the next generation of televisions to be available throughout the industry.
The new facility plant was opened by Mrs. Edelgard Bulmahn, the German Federal
Minister for Research. Mrs. Bulmahn said: "it is only with innovations of this
type that we can achieve growth and create attractive high-tech jobs in the long
term." For Philips, LCOS is an important step towards a better picture quality,
emphasized Ad Huijser, Chief Technology Officer and member of the Board of
Management of Royal Philips Electronics. The technology uses the principle of
back projection and provides extremely high, flicker-free resolution. Projection
TV units with large image diagonals can be made flatter, lighter and more
affordable using LCOS. Philips expects demand for LCOS technology to increase
rapidly over the next few years.
The new production facility for LCOS panels uses the infrastructure and combined
production of the existing chip factory in Boblingen to ensure rapid
capitalisation on quality and cost benefits. "We found exactly what we needed
here: highly qualified employees, know-how from semiconductor production and
excellent contacts to external research establishments," emphasised Huijser.
Philips is anticipating a rapid increase in demand for the new projection
displays, which are characterised by their efficient light yield and high
contrast. They provide realistic, colourful images. The image resolution of 1280
x 768 represents around one million pixels and means it can be integrated into
terminals for high-definition television (HDTV). At the same time, it makes
texts considerably more legible. This is an important requirement for new
services, such as Internet TV. A digital interface also enables a high degree of
system integration.
Background information on LCOS:
LCOS consists of a silicon component, a glass plate and an interim layer of
liquid crystal. A CMOS-type silicon chip serves as an active matrix and a
light-reflecting layer at the same time. An extremely thin film of liquid
crystal is inserted between the reflection layer and the glass plate. Unlike the
previous, transparent systems used today, the advantage of the reflective LCOS
system lies in the fact that the electric control remains concealed behind the
image pixels. This means better brightness from the same pixel size, and the
pixel grid structure is almost invisible. As the production of LCOS panels is
largely based on conventional silicon technology, they can also be manufacturer
on standard production lines for chip production. Photo material on the Internet
at www.philips.de/medienservice
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global
leader in color television sets, lighting, electric shavers, medical diagnostic
imaging and patient monitoring, and one-chip TV products. Its 164,000 employees
in more than 60 countries are active in the areas of lighting, consumer
electronics, domestic appliances, semiconductors, and medical systems. Philips
is quoted on the NYSE (symbol: PHG), London, Frankfurt, Amsterdam and other
stock exchanges. News from Philips is located at www.philips.com/newscenter
For further information:
Andre Manning
Senior Press Officer
Philips Corporate Communications
Tel.:+31 20 5977199
Email:Andre.manning@philips.com
Andreas Parchmann
Press Officer
Philips Germany Corporate Communications Tel.:+ 49 40/2899-2195
Email:Andreas.Parchmann@Philips.com
October 08, 2003
Philips Announces Possible Offering of TSMC Shares
Amsterdam, The Netherlands / Hsinchu, Taiwan, October 8, 2003 - Today, at a
board meeting of Taiwan Semiconductor Manufacturing Company Ltd. (TAIEX: 2330,
NYSE: TSM) ("TSMC"), the board of directors approved TSMC sponsoring the
conversion of up to 500 million common shares to American depositary shares
("ADSs") on behalf of Royal Philips Electronics ("Philips"). Subject to all
necessary regulatory approvals, Philips is considering an offering of up to 500
million common shares, which when converted equate to 100 million ADSs. If such
an offering is made, Philips plans to use the proceeds to reduce the level of
net debt on the company's balance sheet and for general corporate purposes.
Currently, Philips holds approximately 21.5 percent of TSMC shares, which would
decline to approximately 19.1 percent if the full 500 million shares were to be
placed.
Philips and TSMC highly value their business relationship, through which the two
companies share and exchange technology in a joint development agreement in
Crolles, France. The two companies also have a manufacturing joint venture in
Singapore, known as SSMC. Through its relationship with TSMC, Philips also has
access to a strategic supply of wafers, allowing the company to pursue an
asset-light strategy in its Semiconductors business.
This consideration of an offering follows on a strategic review of Philips'
holding in TSMC that Philips conducted in close collaboration with TSMC. "While
we'll remain among the largest shareholders in TSMC for the foreseeable future,
we believe that in the long-term our shareholders would benefit most from a
gradual and orderly reduction in this holding. We don't expect this offering
will affect the strategic relation between the two companies," explained Jan
Hommen, Vice Chairman and CFO of Royal Philips Electronics. In commenting on
this offering, Ms. Lora Ho, Vice President and CFO of TSMC said: "We have seen a
steadfast partnership between Philips and TSMC along the way, and will see it go
forward in the long run."
This announcement should not be construed as an offer of any securities for
sale. Any offering of ADSs in the United States can only be made in accordance
with the requirements of the U.S. Securities Act of 1933.
About TSMC
TSMC is the world's largest dedicated semiconductor foundry, providing the
industry's leading process technology and the foundry industry's largest
portfolio of process-proven library, IP, design tools and reference flows. The
company operates one advanced 300mm wafer fab, five eight-inch fabs and one
six-inch wafer fab. TSMC also has substantial capacity commitments at its
wholly-owned subsidiary, WaferTech, and its joint venture fab, SSMC. In early
2001, TSMC became the first IC manufacturer to announce a 90-nm technology
alignment program with its customers. TSMC's corporate headquarters are in
Hsinchu, Taiwan. For more information about TSMC please see www.tsmc.com.
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of EUR 31.8 billion in
2002. It is a global
leader in color television sets, lighting, electric shavers, medical diagnostic
imaging and patient monitoring, and one-chip TV products. Its 164,000 employees
in more than 60 countries are active in the areas of lighting, consumer
electronics, domestic appliances, semiconductors, and medical systems. Philips
is quoted on the NYSE (symbol: PHG), London, Frankfurt, Amsterdam and other
stock exchanges. News from Philips is located at www.philips.com/newscenter
Safe Harbour statement
This document contains certain forward-looking statements with respect to the
financial condition, results of operations and business of Philips and TSMC and
certain of the plans and objectives of Philips and TSMC with respect to these
items. By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will occur in the
future. There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to,
levels of consumer and business spending in major economies, changes in consumer
tastes and preferences, the levels of marketing and promotional expenditures by
Philips and TSMC and its competitors, raw materials and employee costs, changes
in future exchange and interest rates (in particular, changes in the euro and
the US dollar can materially effect results), tax rates and future business
combinations, acquisitions or dispositions and the rate of technical changes.
Market share estimates contained in this report are based on outside sources
such as specialized research institutes, industry and dealer panels, etc. in
combination with management estimates.
For further information:
Jayson Otke
Philips Corporate Communications
Tel.:+31 20 5977215
Email:jayson.otke@philips.com
J.H. Tzeng
Taiwan Semiconductor Manufacturing Company Ltd.
Tel.:+886-3-6665028
Email:jhtzeng@tsmc.com