Philips Electronics, the world’s largest lighting company, plans to cut an additional 2,200 jobs by 2014 in an effort to save money in a worsening economy. These cuts are in addition to the 4,500 positions Phillips had already planned to eliminate.
The majority of the cuts will come this year.
The cuts are designed to help Phillips reach its cost-cutting target of $1.4 billion by 2014. This year, the company hopes to save $64 million and aims to reach a target for earnings, reaching 10%-12% of sale on revenue growth of 4%-6%.
Chief Executive Officer Frans van Houten called the job cuts regrettable, saying: “I already flagged in July that the economy is in worse shape than before. This will make us more agile and competitive.”
Philips has been affected by a drop in demand and increased competition. At the end of 2011, Phillips employed 121,900 workers.
Cuts in Healthcare, Lighting Divisions
The bulk of the job cuts will come in the healthcare and lighting divisions, with roles in information technology and marketing being targeted first.
Phillips also plans to source cost savings for raw materials and will streamline its management team. Sales and R&D will not see any jobs cut.
By the end of the year, Phillips will have spent $270 million on restructuring, some $110 million more than the company forecasted.
Competitor Siemens AG is expected to announce cost cutting plans in October.
Phillips, inventor of the compact disk, will review its audio and video consumer electronics business model unit as demand for MP3 music players and DVD players is on the decline. The unit is worth $2 billion.
Key Statistics - World Consumer Electronics Industry (source: MarketLine)
- In 2011, the consumer electronics market generated revenue totaling $284 billion globally. For the timeframe 2007-2011, this represents a compound annual growth rate (CAGR) of 4.3%.
- In 2011, the most lucrative segment of the consumer electronics market worldwide was sales of electrical equipment and sales generated through electronics retailers. Revenue totaled $207 billion, which is equivalent to nearly 73% of the overall market value.
- For the five-year period 2011-2016, market performance is predicted to decelerate, with a CAGR of 4% anticipated. By the end of 2016, the market is forecast to be valued at $343 billion.