Philips is still worth 11 billion euros on the stock exchange, a fraction compared to the 190 billion of former subsidiary ASML. A takeover bid of 15 billion euros seems to be sufficient to persuade shareholders to sell their shares and to take the fund off the stock exchange. More than 95 percent of shares are owned by foreign opportunists looking for quick profits.
All that remains is the Philips brand name. This will continue to exist for some time on coffee machines, vacuum cleaners and televisions made by Chinese.
The luck for management is that competitors scratch their heads before bidding. Even vultures don’t immediately dive for this injured prey. Philips is a poisonous snack. No one knows how high the claims will be due to the errors with the sleep apnea and breathing equipment. Anyone who buys up the entire company also automatically receives the damage claims. Bayer’s experience with the acquisition of Monsanto, producer of the harmful pesticide Roundup, has been instructive.
Commercially, it’s probably smarter just to wait for bankruptcy. Then the healthy debris can be picked from a house of death and the claims end with the trustee.
The new CEO Roy Jakobs is trying to avert the doomsday scenario with a remediation. In the survival plan, 4,000 people are put on the street, 800 of whom are in the Netherlands. That should result in cost savings of 300 million euros next year.
Compared to Jan Timmer’s operation Centurion, which cost 50 thousand Philips people their jobs between 1990 and 1996, it is small beer. But the group is also much smaller. Hurricane Gilbert has weakened into a storm, but Philips is also much more shaky than in the early 1990s. There’s nothing left to sell.
The fact that Philips is about to collapse is due to the risky choice that Jakobs’ predecessor Van Houten made with a full concentration on medical technology. He had his reasons for that. It was a growth market in the aging world. And the equipment was so complex that Asian competitors were not so quick to match cheap alternatives, such as with televisions.
But the strategy backfired. Mistakes, even mistakes, can be fatal in the production of medical technology. Too little attention has been paid to this. If something goes wrong with a television, a technician comes and renews the cables. If necessary, the equipment will be taken back. It ruins the viewing pleasure, but the viewer experiences no lasting consequences. But if something goes wrong with a medical product, it can lead to permanent health damage. With the taking back and repair of the equipment, the suffering is not over.
Philips now has to reserve billions for damage claims. Or it must prepare for years of litigation, not only from people who claim to have suffered health damage, but also from investors who have seen the stock implode. Both groups accuse the Philips leadership of acting culpably.
If they are right, 11 billion euros is still quite a lot.