Breakingviews

Philips sleep fail gives investors recall insomnia

3 minute read

Philips CEO Frans van Houten is pictured in Amsterdam, Netherlands, January 29, 2019. REUTERS/Eva Plevier

LONDON, July 26 (Reuters Breakingviews) - Koninklijke Philips’ (PHG.AS) Chief Executive Frans van Houten is trying to soothe anxious investors. On Monday the Dutch medical technology group read more announced a plan to spend a pacifying 1.5 billion euros buying back its own shares – equivalent to some 4% of outstanding stock. The 37 billion euro group’s splurge was partly justified by a post-pandemic boom in elective surgeries, which led to strong demand for diagnostic imaging equipment in the second quarter. But its decision to take a 250 million euro provision for recalling awry breathing-aid devices for troubled sleepers is keeping shareholders awake.

Philips has now set aside 500 million euros for the machines, but the threat of litigation in the United States is giving investors nightmares. The company’s market value has fallen by roughly 10 billion euros since Philips disclosed the issue in late April. That’s more than 10 times the unit’s entire annual sales of 600 million euros to 700 million euros. Even so, a further 2% drop in Philips shares on Monday morning suggests van Houten faces more restless nights. (By Christopher Thompson)

On Twitter http://twitter.com/breakingviews

Capital Calls - More concise insights on global finance:

GM’s self-driving skills take a wrong turn read more

Bankers get red faces in German landlord M&A fail read more

Hard seltzer boom goes flat read more

Hitting tech on Covid lies is a healthy compromise read more

Commerzbank outsourcing flop is warning for rivals read more

Editing by Peter Thal Larsen and Oliver Taslic

Breakingviews
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

More from Reuters