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Philips - Lighting the World with LED

April 15, 2014 | About:



One name that comes to mind when thinking about lighting solutions is Philips (PHG). The company, with a broad range of services under its belt, is also a leader in providing lighting solutions. With the paradigm shift in lighting solutions over the years and users embracing LED lights for it innumerable benefits, Phillips is exploring LED lighting solutions as it was an established brand that provided turnkey light solutions for home and industrial segments, not forgetting its solutions for outdoor lighting.

Financial analysts believe that the LED penetration rate will reach 70% by 2020, but looking at the exponential growth and demand for LED lights, this can grow much faster. Various research estimates foresee the growth of LED chips to be at a rate of 1.9% and possibly reaching $12.74 billion year-end 2014, and the Global LED lighting market size reaching $25.82 billion in 2014 with a market penetration of 23.4%. This market size is certainly benefiting a market leader like Phillips which has been a pioneer in providing lighting solutions globally.

The company posted strong earnings in its recently declared fourth quarter 2013 results. It recorded revenue of $9.3 billion, up by 7% year over year. The net income reported was $580 million (€412 million) as against the loss of €420 million in the same quarter last year. The phenomenal increase in the income was largely due to lower restructuring and acquisition-related charges.

The company has segmental revenue streams that are comprised of consumer lifestyles, health care and lighting divisions. LED lighting that is part of the lighting division of the company witnessed a growth of 48% year over year and now LED represents 34% of the total lighting sales.

Philips has been giving tough competition to its nearest competitor like Cree as it lays a focused expansion strategies to acquire a bigger market share in LED lighting. The company, which was more focused in the high-power LED market, is now eyeing the mid-power LED to attain a wider market share in 2014. The company launched “LUXEON 3020” last month to tap the mid-power LED lighting market.

The LUXEON 3020 emits over 1000 lumens per dollar and it aims a wider adoption of LED enabled lighting as it is most affordable. This was a much awaited launch by Philips LED fixtures that included lamps and troffers, this sets an impetus for Philips in the commercial lighting for the mass market.

Synergy That Will Further Boost Philips’ Growth

A synergistic tie-up between two European giants Philip and ABB will enable Philips to use its LED expertise and ABB’s automation knowledge. This fusion evolved to the new generation of LED lighting solutions mainly for commercial LED lighting solutions. It will provide seamless solutions by integrating connected lighting systems with device control for commercial light solutions in buildings and also industrial LED lighting solutions.

The connected lighting system provided by Philips with a software interface provided by ABB provides all ability to control commercial lighting seamlessly. This integrated solution will find an extended market for Philips in commercial LED lightings like shopping complexes, hotels, office buildings, etc.


The company, with its global reach and footprint, has been recording growth in most competitive international markets like China, Africa and the Middle East, where the future prospects are very bright.

The company is focused on its cost-saving programs, with a target cost saving of around €1.1 billion. This further adds on to influence the company’s operating margins and bottom line. The cost saving programs are anticipated to achieve its laid out targets by end of 2014. Major cost cutting has also been accomplished, as the company reduced 74% of the targeted employees; this resulted in a gross margin of $851 million (€641 million).

The net debt of the company also seems to be falling as it reduced $811.2 million (€596 million) as against $828 million (€608 million).

These conclusions make Philips a buy for long for an investor who prefers to sit on the stock and not count their chickens before they are hatched.

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