Philips Names Van Houten as Chief Executive Officer

Philips to name Van Houten as chief executive officer
Philips plans to name new CEO as Frans van Houten. Photographer: Natalie Behring/Bloomberg

Royal Philips Electronics NV, the world’s biggest maker of patient-monitoring system, named company veteran Frans van Houten as chief executive officer to succeed Gerard Kleisterlee.

Van Houten, 50, was a Philips management board member until 2006 and led the spinoff of Philips’s semiconductor business into NXP Semiconductors NV, the Amsterdam-based company said in a statement today. Retiring CEO Kleisterlee spent nine years reforming the business and making acquisitions to create a company focused on the three businesses of health-care, lighting and consumer goods.

“There is some cost-cutting left to do, but not a lot,” said Marcel Achterberg, an Amsterdam-based analyst at Petercam. Van Houten “will really need to make the switch to growth, with a clear focus on certain core activities and regions. He’ll need to come up with a fitting health-care product range for Asia for example and to shape up the supply chain in lighting.”

Before becoming CEO next April, Van Houten, who has advised on restructuring at ING Groep NV and ASM International NV, will rejoin Philips in October and will become chief operating officer on Jan. 1.

“I am glad it is an internal succession and that they haven’t dragged someone from abroad,” said Mark Reinalda, a Nieuwegein, Netherlands-based fund manager at Allianz Nederland Asset Management which has about 2 billion euros under management. “I say Go, go, go Philips, because management is doing well. I hope the succession will be as noiseless as possible, like it was with Kleisterlee.”

Health-Care Acquisitions

Philips rose 0.2 percent to 24.74 euros in Amsterdam trading. The shares have climbed 20 percent this year while the Amsterdam Exchanges Index fell 3.8 percent.

Kleisterlee, 63, worked at Philips for more than 30 years. Since taking the helm in 2001, he spent more than $10 billion buying health-care assets, including the 3.6 billion-euro ($4.6 billion) takeover of Respironics Inc. in 2007. Philips’ lighting unit expanded with acquisitions including Lumileds in 2005 and lighting-fixtures manufacturer Genlyte Group Inc. in 2008.

Philips, which still makes products ranging from coffee machines to lightbulbs, shed or reduced stakes in companies including LG Diplay Co., monitor-maker TPV Technology Ltd. and Pace Plc, a digital television set-top box supplier.

“The big changes in the portfolio have been made. It is now about driving margins,” Kleisterlee said at a conference in Florida in May.

Earnings Forecast

Philips said in April it was “increasingly confident” of reaching adjusted earnings before interest, taxes and amortization as a percentage of sales of 10 percent as early as

2010. At this year’s annual shareholders’ meeting, Kleisterlee said Philips will present its strategy for the next five years in September, including a target for earnings per share.

Philips’s health-care and lighting units compete with General Electric Co. and Siemens AG. In December 2008, Philips dropped a goal of doubling operating earnings per share by 2010 because the weakening economy was hurting demand for consumer and automotive products.

Philips unveiled plans in January 2009 to slash 6,000 jobs to bolster profitability and has said its fixed-cost base will be more than 700 million euros lower in 2010 than in 2008.

Strategy Changes

“Kleisterlee took the right actions, especially on the consumer electronics side,” said Christian Vondenbusch, a Rotterdam-based fund manager at Robeco Asset Management, which oversees about 135 billion euros including Philips shares. “It was a good decision to leave the high capital invested manufacturing model for a marketing model, thereby increasing returns.

Vondenbusch said he doesn’t “expect massive strategy changes will be announced in September, firstly because Kleisterlee will be giving it and secondly because his successor is another Philips veteran.”

Van Houten joined Philips in 1986. After holding several positions in the company, he became co-head of the consumer electronics division in 2002 before being appointed CEO of semiconductors in 2004.

“Frans van Houten has built an excellent track record with Philips,” Victor Bareno, an Amsterdam-based analyst at SNS Securities, wrote in a report today. “He made an important contribution to the restructuring and repositioning of consumer electronics” in his time at the unit.

After leaving NXP, Van Houten became a temporary adviser to the management board of ASMI, Europe’s second-largest maker of semiconductor equipment.

‘Determined Leadership’

Van Houten is an independent board adviser and interim manager at ING, where he has headed the operational separation of the company’s banking and insurance businesses, scheduled to be completed by the end of the year. He’ll be succeeded by Eric Robles as of Aug. 1, Frans Middendorff, a spokesman for the Amsterdam-based financial-services company, said today.

“The opportunity that has arisen for Mr. Van Houten at Philips is a great professional challenge,” ING Chief Executive Officer Jan Hommen said in an e-mailed statement. “I thank Frans for his inspirational and determined leadership.”

Philips will propose Van Houten’s appointment at the annual shareholders meeting on March 24.

“I am happy to see Frans return to our company,” said Kleisterlee. “Under his leadership, Philips’s future will be in very good hands.”

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