Philips cuts 13 percent of jobs in a safety and profitability drive

In order to restore its profitability and improve the safety of its products, the Dutch health technology company Philips will cut another 6,000 jobs globally. This is following a recall of respiratory devices that knocked off 70% of its market value. According to the company, half of the job cuts will be achieved this year and the other half by 2025.

According to Reuters, the ongoing reorganization brings the company’s total number of job cuts to 10,000. This is around 13% of its workforce, which was announced by newly appointed CEO Roy Jakobs in recent months. As the economy turns tougher, companies such as Alphabet’s Google, Microsoft, Amazon and German software maker SAP are making layoffs to cut costs.

As of 0855 GMT, Philips shares were up 5.5%, helped by better-than-expected earnings for the fourth quarter. “There is a significant beat on Q4 and the operational improvement measures are significant,” ING analyst Marc Hesselink wrote.

As Philips grappled with the fallout from the recall of millions of sleep apnoea ventilators over fears that foam used in the machines might become contaminated, Jakobs took over the company last October. “I think what we present today is a very strong plan to secure Philips’ future. We are addressing the challenges we have head on,” Jakobs said. The reorganized entity will place patient safety at the center, according to Jakobs.

Jakobs stated that innovations will be targeted at “fewer, better resourced, and more impactful projects” in order to increase profitability while also improving safety. Combined, these factors should lead to a low-teens profit margin, as measured by adjusted earnings before interest, taxes, and amortization (EBITA), by 2025, and a margin in the mid-to-high teens thereafter, as measured by comparable sales growth in the mid-single digits.