PhilipsRoyal Philips Electronics (PHG) has received plenty of attention this week. Shareholders on Thursday approved the appointment of Chief Operating Officer Frans van Houten as the company's new chief, three days after the company warned that its television business would post a first-quarter loss in April.

Houten takes the reins at a time when the company's business is shifting: TV sales have languished, but its health-care business has grown. Health-care sales grew 2% year over year to $3.7 billion in the fourth quarter of last year, accounting for approximately 35% of the company's $10.5 billion in quarterly revenues.

Greg Sebasky, CEO of Philips's North America operations (pictured), has played a role in the company's shift. He heads global customer services for the company's healthcare business, and he recently spoke with DailyFinance about the growth drivers for those services, as well as some of the challenges ahead.

First, some background. Roughly a third of the company's health-care revenues come from its global customer services business, Sebasky says. These services, which support customers of Philips's medical devices, are a significant profit contributor because they often bring in higher profit margins than the devices themselves, he adds.

Healthcare Revenues on the Rise

Credit Suisse analysts expect Philips's healthcare business to generate nearly $12.7 billion in revenues this year, up 4% from last year, according to a report.

Part of the growth could come from emerging markets in China, India and other regions. The company's healthcare sales soared 8% in emerging markets, according to a Credit Suisse report. And Sebasky, who heads global customer services for Philips's health-care business, says those markets hold great potential for further growth.

"The emerging markets have less penetration for services, so this is an area we're working on," he says. "It's up to us to create meaningful service packages."

But the task of entering these markets comes with some challenges. In a number of emerging markets, for example, customers believe support should be included in the cost of buying the medical equipment.

Also, in countries like India, companies' budgets often don't differentiate between operating costs and capital costs, Sebasky says. As a result, it's difficult for these companies to distinguish the cost of buying an MRI machine from the thousands -- or potentially millions -- of dollars it will take to maintain it.

Customer Training

To address this issue, the company has started offering to train customers' employees on how to maintain the equipment. Those employees become the first line of defense in solving any problems, with Philips serving as a backup crew and, when possible, offering support remotely.

This remote support, in which Philips can take control of the equipment to fix problems from afar, could boost Philip's profit margin by reducing the cost of sending staff to customers' work sites to tackle broken machines.

"From a profit margin perspective, we have been on a multiyear effort to improve the productivity of our employees so our workers don't have to drive to customer accounts," says Sebasky, adding that the company also uses an outsourcing company to further reduce travel costs. "This past year, many of those initiatives came to fruition."

Credit Suisse analysts expect Philips's health-care business to generate operating profit margins of 15.5% this year, compared to 13.8% last year. Overall, they expect the company to post an 11.1% margin this year.

Home Growth

In addition to emerging markets, Sebasky says that Philips also expects to see major growth in services related to home healthcare -- or medical equipment that patients use at home -- and ambient design, or designs that enable patients to control the themes, lighting and sounds in their examination rooms.

For one thing, hospitals are facing lower reimbursements from insurance companies, and they're having patients take on more of their own care in their own homes as a result. As this trend continues, Philips expects sales of home monitoring equipment, as well as other health-care devices intended for use in patients' homes, to grow, Sebasky says. Those home-health-care products also will need customer support.

Philips also stands benefit from another healthcare trend: Patients flying to foreign countries to save money on costly medical procedures. As various countries compete to attract these medical-care travelers, more facilities may decide to install its ambient designs to increase patient satisfaction, particularly in countries outside of the U.S., Sebasky says.

North American Market Remains Flat

While Philips's healthcare customer-service business appears to be humming along internationally, its North American operations have largely remained flat.

According to the company's annual report, "Sales in North America were slightly higher than in 2009, attributable to low single-digit growth in Lighting and Consumer Lifestyle. Healthcare sales in North America were on par with 2009 on a comparable basis. Sales in other mature markets, however, grew by double-digits in all sectors."

Nonetheless, Sebasky says he's "pretty bullish about the opportunity in North America," although he declined to discuss how North America will fare in the first quarter.

Much of his focus -- and the company's -- will be on bumping up Philips's revenue growth rate, rather than its earnings before interest and taxes, he says.

Aside from health care, the company's North American lighting business performed well as many homeowners decided to improve their homes instead of moving into new ones, he says. Portions of Philips's consumer lifestyle division, such as its Sonicare toothbrushes, also fared well, he adds.



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Jack

The only one way to save on your health insurance is to use insurance comparison sites.If you try to search google you will find only big promises, but nothing more ...I didn't believe it, but I tried and I saved more than 30%.That is possible because once people register, they receive free quotes from many insurance companies, so they are able to compare and to save money.

The site I used is:

---CompareHealthInsurances.Info---

January 12 2012 at 5:00 AM Report abuse rate up rate down Reply
Jack

The only one way to save on your health insurance is to use insurance comparison sites.If you try to search google you will find only big promises, but nothing more ...I didn't believe it, but I tried and I saved more than 30%.That is possible because once people register, they receive free quotes from many insurance companies, so they are able to compare and to save money.

The site I used is:

---CompareHealthInsurances.Info---

January 12 2012 at 5:00 AM Report abuse rate up rate down Reply
scottee

can we please consider The Physicians for a National Health Program???? pnhp.org....as an alternative to Obamacare or doing nothing...please???

April 02 2011 at 7:59 AM Report abuse rate up rate down Reply
amybrown778

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April 02 2011 at 6:54 AM Report abuse rate up rate down Reply
darinw40@mail.com

Of course it is a great investment...they can charge you whatever they want and you would have to pay it....a great monopoly in the making....they could charge you $550k for a needed Cat scan...you have no choice but to pay it or die...healthcare should NEVER BE FOR PROFIT

April 02 2011 at 6:42 AM Report abuse rate up rate down Reply
danielisticall

WALKER RAN ON UNION BUSTING BUT HE KNOWS NOTHING ABOUT UNIONS,,,,HARRIS RAN ON KILLING HEALTH CARE,,,,,,,,,,,,,,,,,,,,,,,,,,,, THIS IS HOW LITTLE THE GOP KNOWS ABOUT HEALTH CARE IN THIS COUNTRY____________EVEN ___THEIR____OWN_____
WHERE’S MY HEALTH CARE?????
Maryland physician Andy Harris (R) just soundly defeated Frank Kratovil, one of the most endangered Democrats on Capitol Hill going into the November election. And he did it in large part by railing against 'Obamacare' and pledging to repeal Health Care Reform. But when he showed on Capitol Hill today for an orientation for incoming members of Congress and their staffs, he had a different question: Where's my government health care?
According to Glenn Thrush of Politico, Harris created a stir at the orientation meeting by demanding to know why he had to wait a month after he was sworn in in January for his government-subsidized health care to kick in. After responding in a huff, he even asked if there was some way he could buy into the government care in advance, seemingly thinking there might be a government program similar to the so-called 'public option' championed by progressive Democrats in 2009.According to an unnamed congressional staffer quoted by Thrush, Harris stood up at the meeting "and asked the two ladies who were answering questions why it had to take so long, what he would do without 28 days of health care."____________ AND THE REPUBLICANS KNOW EVEB LESS ABOUT UNIONS
TOO BAD THE REPUBLICANS KILLED THE PUBLIC OPTION, HE COULD HAVE HEALTH CARE TOO______HOW DOES IT FEEL TO BE JUST ANOTHER ONE OF THE MILLIONS OF AMERICANS WITHOUT HEALTH CARE?______

April 01 2011 at 9:47 PM Report abuse rate up rate down Reply
danielisticall

.first the republicans claimed that America has the best health care in the world until they found out we are ranked 37 according to W H O ,after that they tried scare tactics lie DEATH PANELS and the false Obama wants to kill grandma ,,then they tried to claim there are not many Americans that are uninsured,,,, when that lie was busted,,, they said that Illegal aliens would benefit from health care reform,,,, that proved false THEN THEY LIED AND SAID FEDERAL MONEY WOULD FUND ABORTIONS, also,,and there are many many more FALSE CLAIMS made by the republicans THE NEW FALSE CLAIM NOW IS MOST OF THE PEOPLE IN THIS COUNTRY DO NOT WANT HEALTH CARE REFORME,,to be simple the republicans are just THE PARTY OF NO for the middle class and nothing more,,,,

April 01 2011 at 9:47 PM Report abuse +1 rate up rate down Reply
danielisticall

WALKER RAN ON UNION BUSTING BUT HE KNOWS NOTHING ABOUT UNIONS,,,,BERKLE RAN ON KILLING HEALTH CARE,,,,,,,,,,,,,,,,,,,,,,,,,,,,
THIS IS HOW LITTLE THE GOP KNOWS ABOUT HEALTH CARE IN THIS COUNTRY____________EVEN ___THEIR____OWN_____
Buerkle, who voted to repeal the health care reform act, was twice asked about the health insurance she receives as a government employee. At first she said she couldn't understand why people were so interested in her health insurance, and that taxpayers didn't pay anything for it. She later corrected herself after being handed a note from a staffer. Like most employees, she pays for a portion of her insurance and her employer, the government, pays the rest, she said.
As Republicans point out, these are employer provided benefits, which they're all for. So it's not as simple as straight hypocrisy. But there's a fundamental tension between the GOP's naysaying on health care reform and their willingness to accept federally subsidized private insurance -- just as in the health care law. These flubs grow out of that tension. And Dems can't get enough of it. AND REPULICANS KNOW EVEN LESS ABOUT UNIONS

April 01 2011 at 9:45 PM Report abuse rate up rate down Reply
cwaged1002

For profit Health Care throughout the globe. What a wonderful world for the greedy investors.

April 01 2011 at 6:16 PM Report abuse +2 rate up rate down Reply
leeking565

Mortgage rates are historically low you can easily refinance these days your mortgage to 3%. It is the best way to save money. Search online for "123 mortgage refinance" they did 3.54% refinance and free analysis of my current mortgage

April 01 2011 at 1:20 AM Report abuse rate up rate down Reply