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The Hague - Philips said on Tuesday it would split the 120-year-old Dutch giant in two, separating its healthcare-lifestyle division from the historic lighting business in a dramatic streamlining move.
"We're preparing Philips for the next century," CEO Frans van Houten told a telephone press conference.
"Giving independence to our lighting solutions business will better enable it to expand its global leadership position and venture into adjacent market opportunities," Van Houten said.
"I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step for Philips."
Shares in Philips, the inventor of the compact disc, were up 3.26% to €24.27 immediately following the announcement, which analysts said could herald the selling off of the lighting business.
Both companies will continue to use the Philips name, the company said in a statement, noting that its HealthTech business had sales of €15bn ($19bn) in 2013 and its lighting business sales of €7bn.
Job losses
Details on how its lighting business will be split off into a separate legal structure are to be announced in 2015.
"Both companies will be able to make the appropriate investments to boost growth and drive profitability, ultimately generating significantly more value for our customers, employees and shareholders," Philips said.
The companies will be based in the Netherlands, Van Houten said, adding that it was too early to say how many job losses might be involved.
The global HealthTech is worth more than €100bn and the lighting business worth more than €60bn, Philips said.
The new structure should result in savings of €100m in 2015 and another €200m in 2016.
The move will also incur annual restructuring costs of around €50m up to 2016, the company said.
Analyst Jos Versteeg from Theodoor Gilissen private bank said: "It was a big announcement and quite a surprise."
The move could herald the sale of Philips lighting - the business started by Philips in the southern Dutch city of Eindhoven in 1891.
"Yes, it is the end of Philips as we know it," said Versteeg.
"Both companies will keep the brand name Philips, but it's only a question of time... It's quite clear that it will be completely split and in the end have two different owners."
"The end result will be the sell-off of Philips lighting," he said, adding Tuesday's announcement was a "logical step".
Competition
Philips announced in June that it was creating a separate company for some of its lighting activities, notably in the auto and mobile phone sectors, and it said this activity was benefiting from demand for energy efficiency.
The split comes after German engineering and technology giant Siemens in July last year separated the activities of its lighting company Osram, the world's second largest.
Osram, with about 40 000 staff worldwide, restructured after suffering a net loss of €378m in 2012.
Philips, Osram and fellow light bulb market leader General Electrics are facing stiff competition from players such as Samsung and LG as the market has shifted toward low-energy bulbs and light-emitting diodes.
Philips, a household name around the world for home appliances, has already in recent years stripped down its business to focus more on advanced lighting technology and on medical technology where margins are strong and less vulnerable to competition from emerging markets.
In 2013, Philips announced the sale of its lifestyle entertainment branch, which makes stereos and DVD players, after selling its troubled TV-making arm in 2012.
Founded in 1891, the company employs around 112 000 people worldwide.
