Mumbai: Koninklijke Philips Electronics NV, the world’s biggest maker of light bulbs, plans to cut 4,500 jobs globally to revive earnings that fell to a two-year low in the September quarter. Philips employs about 120,500 people globally, of which 9,000 are in India. While India will also be assessed for job cuts, it is covered by Philips’ emerging markets strategy that envisages increasing its marketing investments.
For the Amsterdam-based firm, group-wide net profit for the three months ended 30 September was €76 million (Rs 502 crore), compared with €524 million a year earlier; revenue for the quarter declined to €5.39 billion, from €5.46 billion.
Rural push: Rajeev Chopra. Photo by Hemant Mishra/Mint
Emerging markets including India, China and Brazil account for one-third of its sales. In India, the company is in the midst of building a factory in Pune for value segment products. The Pune plant and three acquisitions in last four years will help it get into new locations and cater to the small to mid segments.
“The mandate in India is to grow and we have been growing,” said Rajeev Chopra, vice- chairman and managing director, Indian subcontinent, Philips Electronics India Ltd. Edited excerpts from an interview:
Where do you see growth coming from?
We would look at new segments in value spaces and healthcare. New areas would see us foray into cure from diagnostics with our magnetic resistance, high intensity-focused ultrasound technology.
What do you mean by value space?
We are fairly strong in government, larger hospitals and larger chains. Most of our revenues come from top end. Our marketshare is better in the high end and little in the mid end. In the next one year, we will look for a sizeable presence in the small- to mid-size segment. For example, small- and mid-size in healthcare would be the nursing homes. Accessible healthcare to the masses is one of the new segments for us. This is a sizeable opportunity. New segments in audio-video would be a sub-Rs 2,000 DVD player that we launched last month.
What will your Pune plant do?
We acquired about 10 acres of space in December last year. We are building a factory there. The various smaller factories of Alpha X-Ray Technologies, a company we acquired, will get consolidated there. Also, we just inaugurated an R&D (research and development) hub there. The charter for this centre is value products. It will start with products that we would look at for India, like general and cardiovascular X-rays for nursing homes.
How is it different from the Bangalore innovation centre?
The Bangalore centre does a lot of work in healthcare in areas of embedded software. These are products for the emerging markets. In Pune, we will do work for the value spaces and new segments largely for India.
How do you plan to reach out to more customers?
We would look at new geographies...in villages with population of 5,000-10,000 people. At this point, very little of our revenues come from rural (India). We would get into these villages with our lightings first over the next two-three years. We would look at tier IV and V towns for appliance and healthcare equipment for nursing homes.
You acquired Preethi Kitchen Appliances Pvt. Ltd in January. How does it fit into your India strategy?
Preethi is now a wholly owned company of Philips in India. It makes us a leading kitchen appliances firm here. We intend to use some of what has made Preethi really strong in south India across the country, and we will use Preethi’s channels in the south for some of our other products.
You divested some businesses.
The last one we did was TV. We realized that in TV, we were not in a position to go ahead and keep investing to remain competitive. If you have to be a player in television, you need to be vertically integrated. Initially, in India we licensed it to Videocon Industries Ltd and later globally we got into a joint venture negotiation with TPV Technology Ltd. If you look at our history, we were also in plastics, hardware, semiconductors…
How does the global slowdown affect you?
We have a diverse portfolio spread across healthcare, lightings, home. As such, we are not that much at mercy to vagaries. We will see a relative slowdown in certain segments and there are others where there would be a pick-up, like energy-efficient lighting. So our growth balances out. Our intention is to grow at a higher rate than the market, penetrate new markets, and gain market share.