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Kleisterlee, Gerard J. 1946–

Gerard J. Kleisterlee
1946

Chairman of the management board and president, Royal Philips Electronics

Nationality: German.

Born: 1946, in Germany.

Education: Eindhoven Technical University, degree in electronic engineering.

Career: Royal Philips Electronics, 19741981, manufacturing management in Medical Systems; 19811986, general manager of Professional Audio Systems; 19861994, general manager of Display Components Europe; 19941996, managing director of Display Components Worldwide; 19961999, president in Taiwan; 19961999, regional manager of Components in Asia Pacific; 19992000, president and CEO of Components; 20002001, executive vice president and COO; 2001, chair of management board and president.

Address: Koninklijke Philips Electronics, Breitner Center, Amstelplein 2, Amsterdam, 1096 BC, The Netherlands; http://www.philips.com.

In early 2001 Gerard Kleisterlee became president and chairman of the board of Royal Philips Electronics as the world economy went into a downturn. His mission early on was to realign Philips according to the trajectories of emerging technologies and to remarket the company to the world. Prior to becoming president and chairman he brought the Philips Components division back to profitability. As was the case with his father, Kleisterlee worked for Philips all his life.

TURNS PHILIPS COMPONENTS DIVISION AROUND

Kleisterlee joined Philips as soon as he left Eindhoven Technical University. His work at Philips Components eventually earned him the position of president. The components division had formerly focused on the passive-components business; Kleisterlee shifted the focus to emerging technologies, and under his tenure the group realigned to make such products

as displays and chips for mobile phones, personal-computer DVD drives, and flat-panel displays. In a joint venture with LG LCD of South Korea, the company became a global power in the field of liquid-crystal displays. Thanks to another joint venture with the South Korean LG Electronics, Philips became a global supplier in the CRT-monitor arena.

While at the Philips Components division Kleisterlee envisioned unified Philips products that would meet a variety of future technology needs for such applications as wireless services, storage, and various displays. Jack Robertson wrote in Electronic Buyers' News, "Philips Components has probably gone the furthest in recasting itself in profitable mass production of new leading-edge technologieswhich is probably why Kleisterlee was picked to become the new Philips chairman" (December 18, 2000). Kleisterlee received that appointment in April 2001; he would need to bring a conservative company that had been relying on traditional business models into a new culture based on collaboration, the outsourcing of mature technologies, and aggressive branding.

FROM RECORD LOWS, BRINGING THE COMPANY BACK

Though Philips's profits for 2000 had reached record levels, after Kleisterlee took the helm business fell due to the global economic downturn. The personal-computer components and semiconductor segments were extremely sluggish, the latter of which was producing less than half of its capacity due to the downturn. The business of the mobile-phone unit that Philips had recently acquired also slowed to half its 2000 levels; Kleisterlee made plans to either sell or close the division. In January 2002 he announced a restructuring plan that entailed the cutting of 12,000 jobs in less than a year and a reduction in the number of company factories from 269 to 160. The following month Philips released its financial figures for the year 2001, revealing a company-record annual loss of $2.3 billion.

Philips needed to change into a high-growth, high-tech company recognizable by consumers, in a vein similar to that of Sony. At the Consumer Electronics Show in January 2002 Kleisterlee gave the keynote speech, commenting on his plans for Philips to focus its technologies on connectivity, storage, and displays. In order to attend to such new technologies he expected to jettison mature or dying technologies, such as videocassettes, or at least outsource their production. Kleisterlee felt that the former chair had overambitiously separated the various divisions of the company; he wanted the divisions to work with each other in order to reach common goals rather than compete.

Forcing the implementation of such a unified approach, Kleisterlee challenged the three Philips divisions to create and produce together a DVD recorderat the time a new technologywith shared deadlines and quickly enough to beat the competition to market. In fact the production of the DVD recorder was completed six months ahead of schedule, allowing the company to attain a dominant market position. Unlike with previous Philips productsand against the grain of traditional corporate beliefsthe DVD recorder's underlying technology was created in cooperation with five other companies, including Philips's archrival Sony. In 2002 Philips focused on trimming itself and advancing research and production rather than on profits.

In 2003 Kleisterlee forged alliances to manufacture semi-conductors along with Motorola and ST Microelectronics, two other Philips competitors. Philips also launched services directly tied to the Internet: with the German company Deutsch Telecom (DT), the music service Philips Streamium 250 Internet, which would be bundled with DT's broadband service, was introduced. Kleisterlee hoped to continue to create such partnerships and expand Internet services and products. Philips entered into additional broadband partnerships with several European telecom companies, including British Telecom and KPN of the Netherlands, to connect nearly any electronic devicesuch as televisions and DVD recordersto the Internet.

Furthering efforts to earn recognition and business in the U.S. market, Philips entered into a partnership with Nike to produce MP3 players for use during exercise. By the end of 2003 the world economy was improving and Philips's business was too. For the first quarter of 2004 the company earned profits of $660 million. The dramatically improved revenues along with brighter world economic forecasts meant that the company would almost certainly remain profitable for some time to come. Kleisterlee began promoting growth in China and set a goal of doubling sales there, from $6.7 billion to $12 billion, in three to five years.

In Electronic Buyers' News Robertson remarked, "Associates describe Kleisterlee as an enthusiastic drum-beater, comfortable with people, and easily approachable" (December 18, 2000).

sources for further information

"Philips Under the Knife?" BusinessWeek, July 2, 2001, p. 26.

Robertson, Jack, "Gerard KleisterleeRoyal Philips," Electronic Buyers' News, December 18, 2000, p. 72.

Rossingh, Danielle, "Philips Signs Up Telecoms to Outsmart China," Daily Telegraph, August 28, 2003, p. 36.

Schenker, Jennifer L., "Fine-Tuning a Fuzzy Image," Time International, March 18, 2002, p. TD2.

"Struggling with a Supertanker, Philips," Economist, February 9, 2002.

Deborah Kondek

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