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Monday, 29 September 2014

The Netherlands is turning into the data centre capital of the world. Is it due to our fantastic locations, perfect infrastructure and moderate climate? Or do the advantages for these companies start with the letters T.A.X.?

Microsoft, Google and other American giants from the ICT-industry are currently deploying for billions of dollars in data centre capacity on our Dutch shores. 

In my humble opinion, we should forget the fantastic locations, the perfect digital and transport infrastructure and even the moderate climate in The Netherlands: the biggest advantage for these companies to build their infrastructure overhere probably starts with the letters T... A... X...

Good news! Good news!

In the evolvement of The Netherlands from a country specialized in physical transport and distribution into a digital transport and distribution frontrunner, we have reached a few new milestones in less than one year.

Last year, the Dutch community already heard the fantastic news that Microsoft would develop a €2 billion data centre in Middenmeer: a rural town lying in the ‘cabbage, flowerbulbs and potato-belt’ in Noord-Holland, The Netherlands.

Between the greenhouse complexes in the ‘Kop van Noord-Holland’, a gargantuous data centre for Microsoft will start to emerge at the beginning of next year. A computer shed full of servers, instead of greenhouses full of tomatoes and other vegetables. Nobody should be surprised, when this would not be the last of its kind in this region.

Top-secret negotations took place upon ‘Project Blue’, as it is called. Various regions were in the race to haul in the computer giant. And not in vain. 

Reputedly, Microsoft will invest €2 billion in the project, which will supply work for a number of years for construction workers and installation companies. After being taken into operation, the centre will supply at least 150 to 200 steady jobs.

And last week, the news was spread that Microsoft’s "archenemy" Google will soon be deploying a €600 million data centre, located at the Eemshaven in Groningen (the Dutch province).

Google is going to deploy an enormous data centre in the Eemshaven in Groningen. The American internet giant will invest approximately €1 billion in the data centre, according to insiders. The Ministry of Economic Affairs mentions an amount of €600 million.

The centre will offer 150 structural jobs, and on top of that, also substantial amounts of indirect jobs. The construction phase itself will offer about 1000 jobs, according to Economic Affairs.

Reputedly, the company has been looking for a suitable place for its data centre since 2012. Google is already present in Eemshaven with a smaller data centre, which has a capacity of 20 Megawatts. The new facility will consume a six-fold of this energy usage: 120 Megawatts.

These data centres offer work for a host of specialized construction and electronic infrastructure companies. After being taken into operation, centres of such magnitude need about 150 - 200 people in fixed personnel for service, maintenance and surveillance and probably a variable number of indirect jobs, through subcontractors.

This is of course very good news for both regions. Especially Groningen is a lagging province, when it comes to employment and chances, as it is relatively far away from both the Dutch Randstad and the German Ruhr-area. 

This means that high-tech and high-profile jobs are quite hard to find in this region. In other words: the new data centre is more than welcome.

Also cities like Amsterdam and Almere – where I live  are increasingly becoming host cities for large data centres, on behalf of various domestic and foreign ICT companies. And it definitely makes sense for the large companies to establish their data centres in The Netherlands.

First, the country has generally a very moderate climate, with often relatively cool summers and soft winters. This makes the energy consumption of cooling installations much more predictable than in many other countries, with larger temperature fluctuations. The Dutch climate will not often present you with surprises, in the long run.

Besides that, the country offers a fantastic digital infrastructure, with:
  • A few globally important internet backbones being positioned in Amsterdam;
  • 11 important data cables on Dutch shores, which connect The Netherlands with a.o. the United States;
  • Broadband internet with mindboggling speeds, being available almost everywhere in the country. 

On top of that, there is a well-educated, multilingual population, favourable energy prices and a very good transport infrastructure, by road, as well as by air. 

The dense population of the country and short travelling distances top it off.

And wait…, hang on…, there is something more. 

There are also the very favourable corporate tax regulations for large companies, the ample availability of subsidies for employment and education and the (secret) tax rulings, which can be made with the local and central governments in The Netherlands. When jobs and (more important) prestige are at stake, the sky-is-the-limit in The Netherlands, with respect to the possibilities for favourable tax rulings.

The following snippets come from the Netherlands Foreign Investment Agency, a subsidiary of the Dutch Ministry of Economic Affairs, in an article from 2012.

The Netherlands is very popular among foreign suppliers of data center services. A good example is Terremark, an American company that chose Amsterdam over London, Frankfurt, and Paris for the construction of its first ‘Network Access Point’ in Europe.  Softlayer too recently opened its first European data center in Amsterdam. In addition, the British company TelecityGroup already has five operational data centers in Amsterdam. What exactly is making the Netherlands so attractive as a ‘data center country’?

The appeal of the Netherlands for foreign investors is certainly also playing a role in this matter. According to the NFIA, the appeal to foreign investors can be explained by the good telecommunications infrastructure, the reliable energy supply, the strategic location, and the innovative character of the Netherlands as a ‘data center country’, among other factors (see also the section ’10 factors for success’).

Connectivity
The Netherlands is one of the most connected countries in the world. Of the fifteen submarine cables, eleven are directly connected to the Netherlands. As a result, our country has an excellent broadband connection to the rest of the world. In addition, the largest internet junction in the world is located in the Netherlands. The Amsterdam Internet Exchange (AMS-IX) offers a fast, cheap, and redundant connection via the more than seventy carriers present at the AMS-IX sites to approximately 475 internet-related companies.

Additionally, the Netherlands is also appealing as far as the costs of constructing and maintaining data centers are concerned. The  Financial Times' ‘fDi Benchmark’ data for 2012 reveal that the costs of staff support are more favorable in Amsterdam than in Brussels, Frankfurt, and Paris. London is approximately at the same level. In Dublin, you generally pay somewhat less for positions such as an industrial engineer or a systems analyst. The real estate prices in the Netherlands have been declining steadily in recent years.

In addition, the Netherlands scores high as far as level of training and language skills are concerned. However, the favorable economic climate might be the most important reason why foreign parties opt for the Netherlands.

The Netherlands has one of the lowest corporate tax rates in Europe, and as a consequence, a very competitive tax climate. In addition, innovative entrepreneurs can qualify for additional tax cuts. Data centers using energy-saving or sustainable techniques can, for example,  claim the Energy Investment Allowance (Energie Investeringsaftrek, EIA).  Furthermore, the laws in the Netherlands are often experienced as less stringent than in other European countries. “Most importantly, the Netherlands has a relatively favorable economic climate,” added Eric Lisica of Terremark.

At the moment, 33 percent of the European data centers are located in Amsterdam. The presence of large data centers, such as those of Google in Eemshaven, Groningen, and Terremark’s NAP at Schiphol, will only further strengthen the appeal of the Netherlands to foreign suppliers of data center services, and create a snowball effect.

This whole article was a 3 page advertorial for the perfect conditions in The Netherlands for the establishment of tech-companies and especially data centres. But it is the red and bold text, which counts: come to us and we will give you all tax breaks and every special, secret(!) tax rulings that you want.

To emphasize that the Dutch goverment practices what it preaches, there is the confirmation that Google did receive a tax-break in Groningen (start looking from 12:00 minutes and further of this Dutch-spoken video), according to Professor Maarten Duijvendak of Economic History and the managing director of the Dutch Development Corporation (i.e. NOM), Siem Jansen:

Maarten Duijvendak (professor Economic History): There must have been some wheeling and dealing in the preliminary phase, when the terms of this contract were set. This mixture of advantages that Groningen offers to Google can also be found elsewhere in Europe: it's nothing special.

Siem Jansen of the NOM: No subsidies. We don't hand out subsidies on these kinds of large investments. What does happen, however, is that plans can be made with the Dutch government, regarding tax rulings on behalf of such companies. Also known as tax benefits. These companies do pay taxes, but not more taxes than in comparison with other places in Europe.

I bet that these companies pay much less taxes in The Netherlands, than in other European countries. Professor Duijvendak is undoubtedly right in this situation. To hand out some circumstancial evidence, there is the following article in the Dutch online magazine Webwereld:

It is a public secret that Apple, Google and Amazon benefit from two popular tax-constructions in Europe, in which a central role is played by Ireland and The Netherlands

The so-called “Double Irish" and the Amsterdam-based variant “Double Irish with a Dutch Sandwich" keeps the foreign profits of American tech companies out of the grabbing hands of the US taxes department. These companies make use of the ‘special arrangements’ in The Netherlands  and Ireland. Often, these taxes are evaded even further, by transfering the money to letterbox-companies in the Caribbeans or Bermuda.

Some companies receive billions of dollars in tax-breaks for a.o. the construction of a new plant. Penssylvania even created a totally new tax reduction plan for Shell, in order to haul in a production platform. Shell is pondering about this plan. Amazon uses its power to create jobs to repeatedly put pressure on local governments, in order to postpone tax payments. This yielded at least $348 million for the company.

Microsoft saved $312 million, with a.o. a program in the state Washington, which absolves the VAT (i.e. value added tax), which is calculated on sales. There were also favourable tax programs, in order to create employment, but Microsoft mainly establishes datacentres, which do not bring many new jobs.

There is the chance of a snowball in hell that these companies did not profit of the favourable taxes and the possibility for even more favourable tax rulings in The Netherlands. Not profiting is simply not in their nature.

So Google probably received a substantial tax-break in Groningen and you can safely bet all your money on it, that the same happened with Microsoft, when they signed their contract with Middenmeer and the province of Noord-Holland.

So forget the infrastructure… it are probably the Dutch tax-breaks, which signed the final deal. To say it in a proverbial way: “When all the guys are hunting for the same lady, then she never ever has to pay for her drinks”.

Of course, these companies have the right to profit from the ‘financial pork’, that they get handed out by the Dutch central and local government. And it almost seems a leading article in the “American Corporate Constitution” that corporate taxes ought to be paid as little as possible, by these companies.

Still, the same familiar questions always remain in such situations:
  • How many real, steady jobs for Dutch people are created, as a consequence of the tax breaks that such large companies get handed out?!
  • What will be the costs and benefits per job for such jobs, when the tax breaks are counted as government expenses?!
  • When this money would have been invested in research and development at small and large innovative companies, would these companies not have yielded much more employment than these data centres do?! 
You and I could do the math, when we only would know how high these tax-breaks to the likes of Google, Amazon and Microsoft have been!

Sunday, 28 September 2014

Is striking turning into a French weapon of “mass self-destruction” or will the French finally learn to adapt to the new reality?!

I have always been very much in favour of striking as a ‘means-of-last-resort’.

It is the ultimate measure to let an unwilling employer know that its personnel means business: for better wages, for better/safer labour circumstances or for another important goal. The right to strike has helped numerous formerly ‘powerless’ workers to gain more respect and appreciation from their bosses and to get better, safer and more rewarding jobs for themselves (both in money and in job satisfaction).

This is the reason that the right to strike should be an inalienable right for every worker in every country all over the world.

Countries where normal workers don’t have the right to strike or where this particular right is treated with much disapproval and disdain by the people in charge, are almost always the countries, where workers are treated very poorly and with blatant disrespect.

There is one country, however, which gained infamy for its aggressive and sometimes very violent strikes, as well as for the large number of strikes that it went through in the past: France. One should not underestimate the enormous (self-)destructive powers that such strikes have generated against certain companies, industries and even the whole country.  The French workers have sometimes struck until the bitter end and sometimes for causes that raised ‘a few eyebrows here-and-there’  in other European countries.

In many other countries strikes have indeed been means-of-last-resort, which were only deployed when the distress was at a peak level and workers did not see another way out to claim justice and / or better conditions for themselves.

In France, however, striking always runs the risk of becoming a weapon of ‘mass self destruction’.

The French economy is the 5th strongest economy in the world with a GDP of $2.7 trillion dollars. With this GDP, the country leaves many other countries behind, which are much, much bigger than France.  Many French products, irrespective whether they are agricultural produce, handmade luxury products or state-of-the-art pieces of technology, are second to none in quality. Often these products famous for their French twist, which makes them out of the ordinary and thus much more attractive.

Nevertheless, the French economy as a whole seems to be clutching at straws currently. The country has shown little more than anaemic growth for almost two decades now and there is a general unwillingness among the population to accept the hard, but very necessary changes, scared as they are by the outlook of losing certain privileges.

The last few presidents – irrespective whether they were from the left of the right wing – have traditionally scared away from making the really tough decisions upon their population. They were just too afraid that their country would be victimized by massive strikes, ubiquitous unrest, chaos and violence on the streets and too weak a person to get the population behind their bold, but necessary moves.

Nicholas Sarkozy, for instance, has proven to be more a yapper than a biter. And François Hollande has shown himself as a hopelessly weak president, who is seemingly more busy with driving on his scooter to his girlfriends  and mistresses, than with running the country towards better economic times. The fact that Hollande offers the impopular Sarkozy a chance for a second stint as president, proves how incredibly weak he has been.

When things don’t change soon in France, then the extremely right-wing Front National might even become the largest party in France and perhaps Marine Le Pen – the slightly friendlier face of the FN, after barking ‘pitbull’ Jean-Marie Le Pen –could become the winner of the next presidential elections. You know that, in such a case, the blame-game will be played to the fullest in France…  And that the blame will probably land at the French Algerians, central Africans and other minorities in the large cities, as they are the easiest groups to blame for the misery of the other French.

And in the end, France will only become weaker and less united from it, as the ‘divide and conquer’ strategy, which is used by Front National, is one of the most destructive political forces that any country could have.

When nothing dramatically changes in France, the whole country runs a substantial risk of losing the connection with the more progressive and vigorous countries in Europe, which already have eaten the sometimes bitter fruits of change. Thus France could become a second-rate economy in Europe: still important for the reason of its sheer size, but nevertheless hopelessly obsolete and scorned for that.

To be honest: although I praise the EU over and over again for the many good things that it did in Europe, the protection of workers has not always been one of them. To start with something positive: it is an undeniable fact that the safety situation for workers in the EU has improved dramatically under the EU labour regulations of the last fourty years.

However, this has not been the case for the security of labour and wages in particular. Both have moved in the direction of much looser, “liberal” regulation, which left much more leeway for large companies and smart entrepreneurs to wheel and deal with the wages and interests of their personnel. As a matter of fact: I disapprove of many new regulations and changes in the European (and Dutch) labour market and in the European economy, but consider them nevertheless to be a fact of life. 
  • Mini-Jobs in Germany and perhaps Belgium, which are creating a lower-class of workers, virtually without any rights and job security? I disapprove of it, but I can’t make it go away myself; 
  • Truck-drivers from Bulgaria, Romania and Lithuania, who have been hired through opaque labour contracts and straw firms in the low-wage countries? People, who are driving their trucks for long, long hours, at a fraction of the wages that a western European truck driver demands and without having their rights and privileges,?! If you can’t change it, you have to live with it;
  • Low-budget air carriers, which are demanding blind obedience from their personnel and which are sometimes flying at kerosene fumes, because the management is too stingy to buy sufficient fuel for their planes?! If you can’t catch them in-the-act for breaking the aviation laws, then you have to change your own earnings model as an airliner, if you don’t want to perish;
  • Large ICT principals in Europe, which are pushing their freelance professionals and fixed contract employees to lower their tariffs and hourly fees to the bare minimum, otherwise threatening to replace them with thousands of eager ICT-experts from Eastern Europe and the Far East. Whether you like it or not, it happens anyway!
  • Many youngsters for whom it is impossible to get a steady job, as they get one temporary contract after another? It is the way it is, at the moment. It is unfair, but no employer seemingly gives a rat’s behind about that.
This new paradigm in the European labour market is here and it is here to stay, probably for as long as the crisis and the time of moderate (i.e. poor) economic growth and poor consumption in the EU lasts. And both might last for a helluva time!

When the French remain being unable to adapt to this new paradigm, the country will definitely start to seriously lag behind to the other European countries, which already did adapt to it. 

Yet, the French population has shown at many occasions that it rather strikes and demonstrates against this new reality, than that it adapts to it. And so the French striking can indeed turn into a weapon of mass self-destruction.

To take the pilots of Air France as an example of this French self-destructive stubbornness: as off today they have been striking for more than ten days in a row, against the positioning of Air France-KLM subsidiary Transavia as a pan-European pricefighter. The bill for this strike has exceeded €150 million euro’s in damages already and we are still counting.

The French pilots are afraid that they might be forced to work for Transavia, which will probably offer worse labour conditions than Air France currently does. And presumably they are right about that. Transavia, on the other hand, would run the gauntlet against the leading pricefighters Ryanair and Easyjet, with still competitive prices, but slightly more comfort and a friendlier face than its British competitors.

The fact that the pan-European deployment of Transavia has now been postponed (until eternity(?)) under pressure of the French strikers, does not mean that Ryanair and Easyjet do not exist anymore. And it doesn’t mean at all that this will stop the other large European airliners from adapting to the new reality of ‘flying-more-for-less-money’.

On top of that, it does also not mean that Air France will suddenly start to make mindboggling profits. To the contrary…

It could very well be that the French pilots will be punished soon for their inability to adapt to the new reality, by losing their job and/or even losing their employer through a massive bankruptcy. And perhaps the French pilots will even become an involuntary stereotype for a whole nation’s inability to adapt to this new reality. As a giant panda, sticking to his menu of bamboo shoots, in a world where there is less and less room for bamboo and consequently, pandas. 

If I were the French, I would fight for fair labour legislation and fair treatment for everybody within the EU (in which they are still among the undisputed leaders), but still open my eyes towards the new reality, instead of being surprised by it eventually…

Thursday, 25 September 2014

Royal Philips NV pulled another rabbit out of the hat: the company is being split into two “baby Phil’s”, to become more profitable.

Yesterday, there was breaking news from the Dutch multinational giant in healthcare products, lighting and consumer electronics, Koninklijke (i.e. Royal) Philips NV ($PHG).

The company had a genuine bombshell for its investors, which made a large number of them very happy: Philips will be split up into two “baby Phil’s”:
  • Philips Healthcare + Consumer Electronics, using the label Philips HealthTech;
  • Philips Lighting.

In order to give you some valuable background information about this Dutch giant with approximately 115,000 employees worldwide, I refer to an older article: Does a new CEO in his rookie year always generate losses and dropping stockprices for Philips?

Philips (PHG) is a multinational company in lighting, healthcare and consumer electronics from The Netherlands, that you can best compare with a phoenix: every time you think the company is finished, it reinvents itself and returns from its ashes to grow bigger and stronger again.

The bad news is that the company is an investor’s worst nightmare. Cor Boonstra, CEO of the company from 1996-2001 called the organization structure in 1996: “a plate of spaghetti”. And that was after Operation Centurion, the worldwide reorganization of Philips, started by previous CEO Jan Timmer, had ‘finished’.  And also after the discharge of tens of thousands of ‘redundant’ employees and some drastic changes in the organization structure.

The problem was that the company was so big, versatile and sluggish, operated in so many countries and had an organization that was so complex, that it could be compared with a super tanker where the captain is frantically turning the steering rudder: nothing happens… Trying to change the company seems like pulling on a dead horse. If you look over the last 40 years, the numbers of reorganizations, strategic reorientations and buy-outs of company parts is truly countless. And for a few exceptions, nothing seems to have the desired effect.

But just when you think there is no strategy left, the product lines are hopeless, there is no subsidiary left to sell and the company has finally sung its swansong, other parts of the company become successful again and grow enormously, thus saving the company from bankruptcy.

Again this legend proved to be true for Philips. After a shaky start for Frans van Houten in 2011 and in spite of a series of scandals, regarding bribery, corruption and offending EU competition rules, the company saw its stock value rise again to values north of $37 dollar at the beginning of 2014.

5 year stock rate overview of Koninklijke Philips NV ($PHG)
Chart courtesy of Bloomberg
Click to enlarge
With this improved performance during the last three years, Philips proved once more the following statement that I made in the same aforementioned article from June, 2011.

In the last full working year of a Philips CEO, the company almost always shows good profits and a high stock price. In the first year of the new CEO the company often reports (record) losses and the stock price drops .

Of course there is no guarantee that this is a winning strategy. Especially after the crash of the dotcom bubble and in 2008, the stock got hammered. But it seems more than a coindicental pattern, that the last full year of the old CEO of Philips is always successful if you look at the stock price, while the next year is a year with reported losses and falling stock prices.

Of course CEO Frans van Houten is probably only in the middle of his stint as CEO of Philips and so he has still a few years left to work on his legacy for the company. 

Nevertheless, after the stock rates of Philips plummeted to $30 in August, 2014 from their $37 peak in January and the voices demanding a corporate split up of Philips became louder and louder, Van Houten decided to choose for the nuclear option indeed and split up the company.

The following snippets come from Het Financieele Dagblad:

Philips comes with a major intervention in the organisation. The company, with yet three divisions, will split itself up in two separate companies. The company will merge the Consumer Lifestyle division, which produces a.o. razors and coffeemachines, into the Healthcare division, operating under the label Philips HealthTech.

The Lighting division will be put into a new legal entity. This is the first step for a split up, after which other shareholders could enter into this division. Philips keeps several options open, concerning the future of this newly formed subsidiary. Still, it is the most intrusive step of Van Houten, Philips CEO since 2011, who already sold other subsidiaries of the company.

Both divisions will remain active under the Philips brand. However, putting the lighting division in a separate legal entity could mean that the stock-rated company wants to separate these company parts from the core organization. Philips already used this strategy a number of times before to outsource numerous other activities. The most famous split-offs are ASML (manufacturer of state-of-the-art lithography machines for the microprocessor industry) and NXP (microprocessor production).

Van Houten reckons that these interventions will make the company more “lean and mean”, enabling it to battle the competition. By merging Consumer Electronics into Healthcare, he thinks that Philips can become a front-runner in the development and sales of medical products all over the world. And by separating Lighting, this division is better able to expand its strong market position in the world, according to CEO Van Houten.

This morning, the FD came with a further analysis with respect to this corporate split up of Royal Philips NV:

Is it a briljant move or will it prove to be the end of Philips as independent company?! It is impossible to answer this question yet, but CEO Van Houten made a bold move, by announcing the split up of Philips.

A split up was high on the wishlists, which circulated among investors and analysts who follow Philips. Yet, the announcement came unexpected. 

Analysts initially reckoned that Van Houten would first solve the various problems at the Healthcare and Lighting divisions. This is yet possible. The timebox for the transformation is 12 to 18 months, enabling Philips to guide this process thoroughly. It is a major operation, which will undoubtedly be very intrusive for the 115,000 employees of the corporation.

The corporation also takes a risky step. Such transformations offer opportunities to competitors, as well as financials, to perform an ‘air assault’ on these new companies, as the value of the new companies is only €15 billion (HealtTech) and €7 billion (Lighting) respectively.

Van Houten acknowledged yesterday that Philips has been put “under possible jeopardy” with this action: Both companies are leaders in their respective markets. We think that when we act rapidly and create proper value, we don’t have to worry about forms of activism (among shareholders) and takeovers”.

Suffice it to say that CEO Frans van Houten of Philips had his hand firmly on the “chicken switch”, when he made this announcement to split up the company:
  • This split up had been high on the wishlist of the shareholders (first red and bold text);
  • Probably the activist investors (TCI and its likes) had been banging on the door of Philips for some time now, and Van Houten decided to make a flight forward under their pressure (second red and bold text).

Perhaps the split up might be a sensible step after all for Philips, in order to avoid either a hostile take-over by a stronger competitor or a revolt under the (activist) shareholders, as a consequence of Philips’ poor performance in 2014.

Still, I don’t see it as a particularly brave step: it could be the end for the Lighting division as an inseparable part of the Philips legacy, which started in 1891 with this very division. 

In The Netherlands, Philips has been famous for ages under the moniker “the light bulb factory in the south of the country”. Lighting was just as an inseparable part of Philips, as the city of its establishment Eindhoven was. 

That this Lighting division will now be put on its own two feet is something that will sadden many (former) workers of Philips and will send shockwaves among numerous inhabitants of Eindhoven.

On top of that, I have serious doubts whether this step will make Philips-as-a-whole more successful!

In the past, Philips was as close to the famous A.C.M.E. company (i.e. American Company Manufacturing Everything) from the Looney Tunes cartoons, as could be: 

They. Made. Litterally. Everything...

However, that was 25 years ago. Since then, the company went through dozens and dozens of outsourcings, shut-downs, overhauls and moves of whole factories to the low wage countries.

The Philips company, infamous from the ‘Plate of Spaghetti’ methaphor and established in the hundred years before Cor Boonstra, has changed to an ever leaner and meaner company, focusing at only three successful divisions (even if they had their ups and downs in the recent past). In these years, world-famous institutions like Philips NatLab (i.e. Physical Lab) and the Philips television department have been abandoned or sold.

There comes, however, a time when famous large companies stop being viable, after too many divisions or company parts have been sold or outsourced. 

In the second FD article (see the aforementioned further analysis link), Frans van Houten refered to Nokia, as a company which waited too long with changing their main strategy and product lines.

The sad truth is in fact, that Nokia (once a part of ITT) was the Finnish cousin of Philips, specializing in all kinds of consumer electronics. That was before it started to focus on mobile phones exclusively. 

From a healthy, quite successful, company with a broad product range and sufficient cash cows, Nokia changed into a one-trick pony, which burned up like a flare. The company finally 'perished' (or would you call the take-over by Microsoft differently?!) when their telephones fell from grace with the consumers, under pressure from the competition.

Of course it is impossible to say whether Nokia would have survived as a broad producer of consumer electronics, or that it would have disappeared just like the German companies ‘Grundig’ and ‘Telefunken’ did earlier. We will never know…

Still, I have fears that this latest overhaul will turn Philips from a healthy, innovative company with (unfortunately) cyclical stock rates and a 'revolving CEO problem', into two “one-trick-pony’s”, which will become very vulnerable for the risk of falling from grace at their customers. 

However, the investors obviously didn’t share these fears of mine, as the stock rate of Philips skyrocketed after Van Houten made his announcement yesterday.

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