Acquisitions and divestments

2008

During 2008, Philips entered into a number of acquisitions and completed several divestments. All business combinations have been accounted for using the purchase method of accounting.

The major acquisitions in 2008 consisted of Genlyte Group Inc. (Genlyte), Respironics Inc. (Respironics) and VISICU Inc. (VISICU). The remaining acquisitions, both individually and in the aggregate, were deemed immaterial in respect of the SFAS No. 141 disclosure requirements.

Sales and income from operations related to activities divested in 2008, included in the Company’s consolidated statement of income for 2008, amounted to EUR 176 million and EUR 6 million loss, respectively.

The most significant acquisitions and divestments are summarized in the next two tables and described in the section below.

Genlyte

On January 22 , 2008, Philips completed the purchase of all outstanding shares of Genlyte, a leading manufacturer of lighting fixtures, controls and related products for the commercial, industrial and residential markets. Through this acquisition Philips established a solid platform for further growth in the area of energy-saving and green lighting technology. The acquisition created a leading position for Philips in the North American luminaires market. Philips paid a total net cash consideration of EUR 1,894 million. This amount includes the cost of 331,627 shares previously acquired in August 2007, the pay-off of certain debt, and the settlement of outstanding stock options. The net impact of the Genlyte acquisition on Philips' liquidity position in 2008, excluding the pay-off of debt, was EUR 1,805 million. As of the acquisition date, Genlyte has been consolidated as part of the Lighting sector.

The following table summarizes the fair value of Genlyte assets and liabilities:

The goodwill recognized is related to the complementary technological expertise and talent of the Genlyte workforce and the synergies expected to be achieved from integrating Genlyte into the Lighting sector.

The amount of in-process research and development acquired and written off in 2008 was EUR 11 million. This amount is included in the consolidated statement of income under Research and development expenses.

Other intangible assets, excluding in-process research and development comprise:

Genlyte contributed income from operations of EUR 49 million to the Group for the period from January 22 to December 31, 2008.

Respironics

On March 10, 2008, Philips acquired 100% of the shares of Respironics, a leading provider of innovative solutions for the global sleep and respiratory markets. Respironics designs, develops, manufactures and markets medical devices used primarily for patients suffering from Obstructive Sleep Apnea (OSA) and respiratory disorders. The acquisition of Respironics added new product categories in OSA and home respiratory care to the existing Philips business. This acquisition formed a solid foundation for the Home Healthcare Solution business of the Company. Philips acquired Respironics shares at a net cash consideration of EUR 3,196 million. As of the acquisition date, Respironics has been consolidated as part of the Healthcare sector.

The following table summarizes the fair value of Respironics' assets and liabilities:

The goodwill recognized is related to the complementary technical skills and talent of the Respironics workforce and the synergies expected to be achieved from integrating Respironics into the Healthcare sector.

The amount of in-process research and development acquired and written off in 2008 was EUR 3 million. This amount is included in the consolidated statement of income under Research and development expenses.

Other intangible assets, excluding in-process research and development comprise:

Respironics contributed income from operations of EUR 6 million to the Group for the period from March 10 to December 31, 2008.

VISICU

On February 20 , 2008, Philips acquired 100% of the shares of VISICU, a leading IT company which develops remote patient monitoring systems. The acquisition of VISICU will facilitate the creation of products to provide increased clinical decision support to hospital staff, while allowing them to monitor a greater number of critically ill patients. Philips paid a net cash consideration of EUR 198 million. As of the acquisition date, VISICU has been consolidated as part of the Healthcare sector.

The following table summarizes the fair value of VISICU's assets and liabilities:

The goodwill recognized is related to the complementary technological skills and talent of VISICU's workforce and the synergies expected to be achieved from integrating VISICU into the Healthcare sector.

The amount of in-process research and development acquired and written off in 2008 was EUR 4 million. This amount is included in the consolidated statement of income under Research and development expenses.

Other intangible assets, excluding in-process research and development comprise:

VISICU contributed a loss from operations of EUR 16 million to the Group for the period from February 20 to December 31, 2008.

Pro forma disclosures on acquisitions

The following table presents the year-to-date unaudited pro-forma results of Philips, assuming Genlyte, Respironics and VISICU had been consolidated as of January 1, 2008:

The following table presents the year-to-date unaudited pro-forma results of Philips, assuming Genlyte, Respironics and VISICU had been consolidated as of January 1, 2007:

Set-Top Boxes and Connectivity Solutions

On April 21, 2008, Philips completed the sale of its Set-Top Boxes (STB) and Connectivity Solutions (CS) activities to UK-based technology provider Pace Micro Technology (Pace). Philips received 64.5 million Pace shares, representing a 21.6% shareholding, with a market value of EUR 74 million at that date. Philips recognized a gain on this transaction of EUR 63 million which was recognized in Other business income. Two days later, Philips reduced its interest to 17%. The Pace shares are treated as available-for-sale securities and presented under Other non-current financial assets. The shares are subject to a lock-up period which expires in April 2009.

Philips Speech Recognition Systems

On September 28, 2008, Philips sold its speech recognition activities to US-based Nuance Communications for EUR 65 million. Philips realized a gain of EUR 45 million on this transaction which was recognized in Other business income.

2007

During 2007, Philips entered into a number of acquisitions and completed several disposals of activities. All business combinations have been accounted for using the purchase method of accounting.

Major acquisitions in 2007 relate to the acquisitions of Partners in Lighting and Color Kinetics, currently Philips Solid-State Lighting Solutions. The remaining acquisitions, both individually and in the aggregate, were deemed immaterial in respect of the SFAS No. 141 disclosure requirements.

Sales and income from operations related to activities divested in 2007, included in the Company’s consolidated statement of income for 2007, amounted to EUR 262 million and a loss of EUR 39 million, respectively.

The most significant acquisitions and divestments are summarized in the next two tables and described in the section below.

Partners in Lighting (PLI)

On February 5, 2007, Philips acquired 100% of the shares of PLI, a leading European manufacturer of home luminaires. Philips acquired PLI from CVC Capital Partners, a private equity investment company, at a net cash consideration of EUR 561 million paid upon completion of the transaction. As of the date of acquisition, PLI has been consolidated within the Lighting sector.

The following table summarizes the fair value of PLI's assets and liabilities:

The goodwill recognized is related to the complementary technical skills and talent of PLI's workforce and the synergies expected to be achieved from integrating PLI into the Lighting sector.

Intangible assets comprise:

PLI contributed income from operations of EUR 24 million to the Group for the period from February 5 to December 31, 2007.

Color Kinetics

On August 24, 2007, Philips completed the acquisition of 100% of the shares of Color Kinetics, a leader in designing and marketing innovative lighting systems based on Light Emitting Diode (LED) technology for a net cash consideration of EUR 515 million. As of the date of acquisition, Color Kinetics has been consolidated within the Lighting sector.

The following table summarizes the fair value of Color Kinetics' assets and liabilities:

The goodwill recognized is related mainly to the complementary technological expertise of Color Kinetics' workforce and the synergies expected to be achieved from integrating Color Kinetics into the Lighting sector.

The amount of in-process research and development acquired and written off in 2007 was EUR 1 million. This amount is included in the consolidated statement of income under Research and development expenses.

Other intangible assets, excluding in-process research and development comprise:

Color Kinetics contributed a loss from operations of EUR 8 million to the Group for the period from August 24 to December 31, 2007.

Pro forma disclosures on acquisitions

The following table presents the year-to-date unaudited pro-forma results of Philips, assuming PLI and Color Kinetics had been consolidated as of January 1, 2007:

The following table presents the year-to-date unaudited pro-forma results of Philips, assuming PLI and Color Kinetics had been consolidated as of January 1, 2006:

LG Display

On October 10, 2007, Philips sold 46,400,000 shares of common stock in LG Display to financial institutions in a capital markets transaction. This transaction represented 13% of LG Display's issued share capital and reduced Philips’ holding to 19.9%. The transaction resulted in a gain of EUR 508 million, reported under Results relating to equity-accounted investees.

2006

During 2006, Philips entered into a number of acquisitions and completed several divestments. All acquisitions have been accounted for using the purchase method of accounting.

Major acquisitions in 2006 relate to the acquisitions of Lifeline Systems (Lifeline), Witt Biomedical, Avent and Intermagnetics. The remaining acquisitions, both individually and in the aggregate, were deemed immaterial in respect of the SFAS No. 141 disclosure requirements.

Sales and income from operations related to activities divested in 2006, included in the Company’s consolidated statement of income for 2006, amounted to EUR 975 million and a loss of EUR 54 million, respectively.

The most significant acquisitions and divestments are summarized in the next two tables and described in the section below.

Lifeline

On March 22, 2006, Philips completed its acquisition of Lifeline, a provider of personal emergency response services. Philips acquired a 100% interest in Lifeline by paying USD 47.75 per share in cash. Lifeline has been consolidated within the Healthcare sector.

The following table summarizes the fair value of Lifeline's assets and liabilities:

Intangible assets comprise:

Witt Biomedical

On April 26, 2006, Philips completed its acquisition of Witt Biomedical, the largest independent supplier of hemodynamic monitoring and clinical reporting systems used in cardiology catheterization laboratories. As of the date of aquisition, Witt Biomedical has been consolidated within the Healthcare sector. Goodwill on this acquisition is tax-deductible.

The following table summarizes the fair value of Witt Biomedical's assets and liabilities:

Intangible assets comprise:

Avent

As of August 31, 2006, Philips completed its acquisition of Avent, a provider of baby and infant feeding products in the United Kingdom and the United States. Philips acquired Avent for EUR 689 million, which was paid in cash upon completion of the transaction. As of the date of acquisition Avent has been consolidated within the Consumer Lifestyle sector.

The following table summarizes the fair value of Avent's assets and liabilities:

Intangible assets comprise:

Intermagnetics

On November 9, 2006, Philips acquired Intermagnetics for USD 27.50 per share, which was paid in cash upon completion. Additionally, in connection with the closing, Philips provided a loan to Intermagnetics of approximately USD 120 million to pay off debt and certain other obligations, including amounts related to the acceleration of stock-based compensation and expenses incurred as a result of the transaction. Since the date of acquisition, Intermagnetics has been consolidated within the Healthcare sector.

The following table summarizes the fair value of Intermagnetics' assets and liabilities:

The amount of in-process research and development acquired and written off was EUR 39 million. This amount is included in the consolidated statement of income under Research and development expenses.

Other intangible assets, excluding in-process research and development comprise:

Intermagnetics has developed, designed, manufactured and supplied superconducting magnet systems and certain other components used in magnetic resonance imaging systems to Philips for use in medical systems. This pre-existing relationship involved EUR 120 million of Intermagnetics' revenues in 2006.

Pro forma disclosures on acquisitions

The following table presents the year-to-date unaudited pro-forma results of Philips, assuming Lifeline, Witt Biomedical, Avent and Intermagnetics had been consolidated as of January 1, 2006:

CryptoTec

On March 31, 2006, Philips transferred its CryptoTec activities to Irdeto, a provider of content security, and a subsidiary of multimedia group Naspers. Irdeto purchased the CryptoTec net assets for an amount of EUR 30 million. A EUR 31 million gain on this transaction has been reported under Other business income.

Philips Enabling Technologies

On November 6, 2006, Philips sold Philips Enabling Technologies Group (ETG) to VDL for EUR 45 million. The gain on this transaction (EUR 3 million) has been reported under Other business income.

Philips Sound Solutions

On December 31, 2006, Philips transferred its Philips Sound Solutions (PSS) business to D&M Holdings for EUR 53 million. A EUR 43 million gain on the transaction has been reported under Other business income.

FEI Company

On December 20, 2006, Philips sold its 24.8 % interest in FEI Company, a NASDAQ-listed company, in a public offering. The sale provided Philips with net proceeds of EUR 154 million. A EUR 76 million gain on this transaction is included in Results relating to equity-accounted investees.