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Philips Predicts Weaker Market for Health-Care Gear in 2012

Royal Philips (PHIA) Electronics NV forecast weakening demand for health-care equipment in Europe next year as deteriorating economies crimp spending on body scanners and heart monitors.

The Dutch company has imposed controls on discretionary spending and scaled back hiring plans as it seeks to “prudently manage the situation,” Steve Rusckowski, chief executive officer of Philips Healthcare, said in an interview.

“Things in Europe have gotten more uncertain,” the executive said by phone. “This will undoubtedly effect sales in the market.

Philips, which competes with General Electric Co. and Siemens AG (SIE) in health-equipment markets, is responding to a market decline that withered orders from hospitals in the second and third quarters. Chief Executive Officer Frans van Houten already announced a companywide savings plan, involving 4,500 job cuts, as Philips also battles slowing demand in consumer electronics and lighting markets.

Siemens is cutting as many as 1,600 jobs at two health-care units after falling behind competitors including Roche Holding AG.

Rusckowski said his division will benefit from the overhaul of Philips. He didn’t provide specific details. In health care, Philips still expects the global market to show growth of 4 percent to 5 percent this year, with a ”low single digit’’ expansion in the U.S., Rusckowski said. Shares of the company rose 0.3 percent to 15.48 euros as of 9:07 a.m. in the Dutch capital.

New Products

Philips this week received U.S. approval for its Heartnavigator, a tool to simplify and minimalize invasive surgery during heart-valve replacements. That market is expected to grow 50 percent, Rusckowski said.

Rusckowski is betting product development will help win market share from Siemens and General Electric. (GE) Philips is looking to become co-leader in the field of imaging equipment, a 16 billion-euro market that’s projected to grow by 3 percent to 5 percent a year.

The Amsterdam-based company set a target for its health- care unit of earnings before interest, taxes and amortization as a percentage of sales to grow to 15 percent to 17 percent by 2013 versus 13.3 percent in the second quarter of this year.

Philips shares have lost 32 percent this year, reducing its market value to 15.7 billion euros ($21 billion). Siemens has declined 21 percent and General Electric is down 5.5 percent.

To contact the reporter on this story: Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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