Philips expects further growth and acquisitions in Medical systems

21 June, 2005

Amsterdam, The Netherlands. At a meeting with investors and financial analysts on 15 June, Royal Philips Electronics (NYSE: PHG, AEX: PHI) discussed the company's ongoing progress in building a steadily growing Medical Systems division. Senior management from Philips Medical Systems also highlighted emerging technology trends that continue to reshape the global healthcare market, and how Philips can position itself to expand in this changing market.

Ongoing improvements in Medical Systems

"After completing a series of acquisitions, Philips Medical Systems now has a three-year record of improving financial returns. While we've completed integrating these acquisitions, I still see many opportunities to create more value for our shareholders and customers. We expect operational efficiency, innovation and customer support will provide us with additional margin points in a few years," said Jouko Karvinen, president and CEO of Philips Medical Systems. "As we explore areas for further expansion — either through acquisitions or alliances — we'll be looking for market, technology and clinical synergies with our existing activities to build an even stronger healthcare business," Mr. Karvinen added.

Senior management from Philips Medical Systems reviewed progress being made in areas of medical imaging like ultrasound, magnetic resonance and X-ray, while highlighting the company's activities in healthcare IT, global services and in the high-growth Asia Pacific market. Discussions also addressed how market drivers and emerging technologies will change the practice of medicine, and how Philips can help drive these trends. Minimally invasive techniques and the field of molecular medicine, for example, have the potential to extend the capabilities of medical technology beyond diagnosing conditions like heart disease and cancer, to treating and preventing such conditions.

Lighter demand expected in consumer markets in the second quarter

The meeting ended with concluding remarks by Gerard Kleisterlee, president and CEO of Royal Philips Electronics, who provided an update on current market conditions.

"Economic indicators around the world point to reduced growth rates. Europe in particular is suffering from a weakened consumer retail environment in the second quarter, hampering our growth ambitions in the short term. Against this background, we're maintaining our commitment to the brand campaign, investing around EUR 75 million in the second quarter," Mr. Kleisterlee explained.

"In our Other Activities segment, we also expect a deteriorating business performance. Philips will continue to pursue measures to boost the efficiency of its core operations, while continuing to dispose of non-core activities to achieve its medium term goals," Mr. Kleisterlee added.

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