The Hindu Business Line : Philips Healthcare targets mid-price segment through more acquisitions

Mumbai, March 4 With five acquisitions in the emerging markets in less than two years, Philips Healthcare is hungry for more inorganic growth in the region, as the company morphs from a traditional consumer-electronics major to a health-and-wellness company.

The Dutch major is scouting for acquisition targets that fit its strategy of focussing on the mid-price product segment, as more Governments across the world look to make healthcare accessible in an affordable manner, Philips Healthcare’s Senior Vice-President and Chief Executive for emerging markets, Mr Ronald de Jong, told Business Line.

“In the not too distant future, we would be able to start exporting from India into other markets,” he said, adding that initially it would be to emerging markets but could extend to mature markets.

Traditionally, Philips is in the premium end of the market and is looking to have products in the value-for-money segment, he added.

Growth with X-ray

The recent acquisitions of Philips include X-ray system makers Meditronics and Alpha X-Ray Technologies in India during the last quarter, Chinese Shenzhen Goldway Industrial and Dixtal Biomédica e Tecnologia and VMI Sistemas Medicos in Brazil.

Explaining why Philips pursued opportunities in the X-ray segment, he said: “Around one-fifth of the healthcare equipment business is the X-ray. So if you want to grow in the healthcare equipment business, you need to be a player in the X-ray (segment).”

Recession paradox

As companies draw up strategies to ride out the recession, he observed, healthcare was “recession-proof”, as it is a basic need and in some countries, a basic right. Governments were coming out with stimulus packages to beat recession and this was benefiting investment in infrastructure, said the Chief Executive.

“This is a paradox in the emerging markets, where the recession lead to stimulus packages, lead to more investment in infrastructure and healthcare infrastructure,” said the Philips executive, who was in China before visiting Mumbai.

The Chinese Government had issued a $120-billion stimulus package targeting healthcare to be invested in three years from 2009, he said. By tapping into this, the company and the Government are able to achieve their objectives, he said.

Looking for buys

The economic crisis may also throw up a couple of good deals and Philips is fortunate enough to have a strong balance sheet, he said, adding that they were scouting for targets across India, China, Latin America and Russia.

For Philips, globally, healthcare is set to become its biggest business, he said, adding that they had invested over the last few years in acquiring companies in healthcare so the relative base of the healthcare business grew in the company.

Referring to recent global job cuts announced by the company, Mr de Jong said, some kind of restructuring was constantly on in the company. “But in emerging markets and India, Philips will continue investing in inorganic and organic growth. We have plans to strengthen the Indian organisation,” he said, without getting into details.