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Demuynck Keeps Philips On Course

1/06/2001 02:00:00 AM Eastern

LAS VEGAS -Despite a changing of the guard for the mainstream A/V products group of Philips Consumer Electronics North America, the strategy and philosophy first instituted under departing president Robert Minkhorst will continue.

That's the promise of Guy Demuynck, CEO of Philips worldwide mainstream consumer electronics business group, who will directly run the North American mainstream consumer electronics operations on an interim basis until a permanent successor is found.

"We want to continue building Philips into a top U.S. consumer electronics brand by developing a balanced digital products portfolio with a TV-display-centric emphasis," Demuynck told TWICE. "This will include LCD monitors, which is a big future growth area, optical recording products, and a number of Web-enabled devices. All of this will be in line with our vision for the total Philips organization as a high-growth technology company."

Demuynck said he "will not rush into a decision" to find a new president for the North American company but "hopes to finalize a decision before the middle of March." The search for "the right man or woman" will be made both inside and outside the Philips organization, he said.

Philips will "not be satisfied with average market share positions" in these categories, Demuynck said, but it is intent on taking "higher than average market share positions in these segments."

"Our strategy does not include surrendering profitability to build up volume," he said, adding that in addition to supporting mass distribution outlets, Philips continues to expand its base of service-oriented retailers to support the new digital products.

Reflecting on the company's accomplishments to date, Demuynck said, "We never will be satisfied. It always has to be better." He singled out building Philips into a stronger U.S. brand name as the company steps away from Magnavox and re-establishing a leadership position in the audio business as key achievements.

"Where we have to work harder is moving away more quickly from a mass-oriented Magnavox-brand distribution policy to a more Philips-branded premium positioning," he said. "We also must work on the basic fundamentals of the business. This involves keeping an extremely good relationship with the trade, involving them early in the business creation process, making continued improvements in our product and time to market of our product, and continuing our efforts in our advertising and commercial support for our distribution."

Advertising spending this year will "continue along the levels of the last few years. We are fully confident we have been making progress in accordance with our plans to justify the investments we have made in this area," he said.

Demuynck offered this road map for the Philips' other brands: "Philco will no longer be used. Marantz will continue to be positioned as a top-end hi-fi audio-centric brand with extensive and expanding home-cinema applications. Magnavox will become a more tactical brand, which will be used for commodity mass-oriented products. All mainstream products are now under the Philips brand, where they will stay."

Continuously producing cutting-edge TV displays is viewed as a key for accelerating the Philips brand image in the United States and the rest of the world, he said.

The brand position has been significantly enhanced by Philips introduction of flat-panel plasma displays. This effort will continue with the introduction of next-generation plasma monitors, and an expansion of LCD-based TV products and PC monitors, coming from Philips' recent partnership with LG Electronics in an LCD manufacturing plant in Korea.

"LCD monitors have tremendous growth potential," he said. "As TFT panels continue to become more affordable we see that monitors as such could become almost as big as the total television market."

Rear-projection television, direct-view television and digital television products factor prominently in Philips' growth strategy.

In digital television, Demuynck lamented that the market "has not really taken off yet, but we are committed to maintaining our role in the development of digital-ready TVs and set-top box decoders." Philips, he said, has been instrumental in starting the consumer education process by publishing a variety of informational books on the technology and staging product demonstrations around the country-which is playing a significant role in escalating the image of the Philips brand as a technology leader.

Starting in the second quarter, Philips will ship its first DVD+RW optical disc recorder at a retail price of around $3,000. A large-scale commercial launch is slated for the 2001 CEDIA Expo, and a European launch will begin at IFA in Berlin. "As with CD-recording, we see DVD-recording as a natural evolution of the technology," Demuynck said. "We will continue to emphasize the compatibility benefit of DVD+RW with the installed base of DVD-Video players, because we expect there will be close to 170 million DVD-ROM and DVD-Video products on the market by the time we launch" the first DVD+RW recorder.

Pricing will limit market size at first but prices will come down, he said, adding, "It's too early to tell what the magic price point will be for mass acceptance of the product."

Demuynck disagreed with those who see DVD recordable products as "an interim" solution until DVR-blue laser technology arrives. "We are co-developing DVR Blue Laser technology with Sony," he said. "The storage capacity this offers is intended mainly for high-definition television recording. For the short or midterm period, we don't see any mass application of blue laser product."

In audio, the company will look to continue mining its patents in the CD functionality market, which accounts for over 850 million pieces in both the data and consumer environments.

Demuynck said the market that Philips pioneered for CD-recording decks "has seen a slowdown in the retail market [during] Christmas, but this the result in part of the slowdown of the economy in the United States. It's still the fastest-growing audio product category in the market. We are very confident that its pace will pick up again in the market as the technology moves into shelf systems and minisystems."

Elsewhere, Philips will bring CD technology to a new level with the introduction at CES of the first multichannel Super Audio CD/DVD player (SACD1000). It will carry a $2,000 suggested retail price and will be followed by another player in the second half of the year. The company will also include SACD in minisystems.

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