Royal Philips
Royal Philips Chief Executive Officer Frans van Houten

Philips to Start Selling Smart Software for Doctors to Rival GE

Nov. 28, 2016
Philips' decision challenges General Electric Co. and Siemens AG for a bigger share of the lucrative health-care software solutions market.

Royal Philips NV (IW 1000/146) plans to roll out software designed to help doctors improve the diagnoses of diseases such as cancer as it challenges General Electric Co. and Siemens AG for a bigger share of the lucrative health-care solutions market.

The apps will improve interpretation of data such as a sequence of scans, with different colors showing up minor differences easily missed with the naked eye, Chief Executive Officer Frans van Houten said in a media briefing. It’s a market that could potentially grow twice as fast as Philips’ traditional business supplying scanners and other big-ticket medical gear. Software currently accounts for about 3 billion euros (US$3.1 billion) of the 17 billion euros in sales generated by Philips.

“The world does not need much more capacity in scanners, but is especially in need of better interpretation of data,” Van Houten said, adding that currently about half of diagnoses given to patients are incorrect. “This is the holy grail that we all are after.”

Van Houten earlier this month told investors at a capital markets day in London that they should increasingly consider Philips a provider of software, as opposed to the iconic lightbulbs, TVs and CD players that have been core products during the company’s 125-year history. Philips has exited traditional businesses to focus on health care, and is streamlining its factory network and increasing spending on research to close the gap on its rivals.

The Dutch company’s 12-month trailing 8.9& operating margin in healthcare sales lags behind GE Healthcare’s 16.9% and Siemens’ 15.7%, according to Bloomberg Intelligence.

GE is bundling software apps on its health-care cloud platform capable of linking imaging machines and patient devices. Siemens also made the first steps in the area of ​​computer-assisted detection with software that analyzes pictures for typical patterns and irregularities and support radiologists in their analysis, including in mammography and lung screening.

For Philips, the diagnosis software is just one product to come out of a 300 million-euro pool of cash that’s ring-fenced for developing breakthrough products. In total, Philips spends about 1.7 billion euros on R&D annually, as Van Houten aims to expand its product base internally rather than by buying companies to become bigger in the informatics business.

By Ellen Proper

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Licensed content from Bloomberg, copyright 2016.

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