Consent Decree Curtails Philips' Sleep and Respiratory Growth for Several Years

Philips is a one-stop shop for imaging-related devices with an established footprint in many hospitals, which positions it to benefit from long-term healthcare trends like the transition to noninvasive or minimally invasive procedures and increased hospital demand for efficiencies. Through several divestitures and acquisitions, Philips has transformed itself from an industrial medical conglomerate into a healthcare company and primary supplier across hospitals, which facilitates the introduction of new products and the displacement of smaller suppliers with more depth in a single product line but lack of breadth. In many of its underlying markets, the company operates in an oligopoly where significant market share is controlled by a few players. Several of Philips' products require proprietary software or service; this provides stability to cash flows and helps to lock in customers. In addition, the company has carried out several divestments and acquisitions, which we believe has reinforced its positioning.