From smart toothbrushes to cancer, Philips bets big on software

Reuters News
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Posted: Dec 07, 2016 5:18 AM

By Ben Hirschler

LONDON (Reuters) - These days the average researcher at Philips is more likely to be a software developer than an product engineer, reflecting a transformation at the former Dutch conglomerate that its chief executive says will gather pace.

"It's a huge shift," Frans van Houten told Reuters, noting that around 60 percent of the healthcare technology company's R&D staff are now focused on software.

"It could rise further. It will not go to 100 percent, because we will still make products, but you could easily see that the value-add comes more out of software than hardware."

Philips has repositioned itself as a health business after spinning off lighting, which has freed up capacity for acquisitions such as last year's $1.2 billion purchase of blood vessel imaging firm Volcano.

"M&A will play a more active role," van Houten said during a visit to London, highlighting informatics, diagnostics, patient monitoring and homecare as areas for potential deals.

Philips is betting on a new era of connected healthcare as smart connected devices in hospitals and at home feed data to doctors, insurers and drugmakers.

It is not alone in targeting this convergence of health and technology, with traditional medtech groups like Medtronic striving to integrate disease care and newcomers, such as Google parent Alphabet, also investing heavily.

But van Houten believes Philips' existing standing with consumers can give it an edge.

"Having a consumer brand helps us a lot. We will see more ambulatory care and there will be a lot of new ways to deliver healthcare ... and that means consumerism is going to play a bigger role."

The humble toothbrush may be a start. Philips already sells connected ones designed to encourage correct brushing in children and adults. In future, its toothbrushes could include a sensor to measure disease biomarkers in saliva.

At the other end of the spectrum, the group is developing integrated solutions for cancer, such as a single workstation combining genomics, pathology and radiology that can give medics a complete picture of tumors.

Philips' full reinvention still has a little way to run.

A sale of lighting components business Lumileds to Chinese buyers was blocked earlier this year by the United States on security grounds, although van Houten said he still hoped to clinch a deal before the end of the year.

It also retains 71 percent of Philips Lighting, which van Houten said could take a few years to unwind.

(Additional reporting by Toby Sterling in Amsterdam; Editing by Alexander Smith)