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Interview with Eric Rondolat, CEO of Philips Lighting, from the World Economic Forum 2017

Following are excerpts from a CNBC interview with Eric Rondolat, CEO of Philips Lighting from the World Economic Forum 2017 with Geoff Cutmore and Steve Sedgwick

GC: Well, let's move on and talk more about the business environment. Philips Lighting overtook Germany's Osram to become the world's largest independent lighting maker, following the spinoff from its Dutch parent company, it enjoyed an impressive stock market debut in May last year, when shares soared 8% in one day. Since the IPO, the stock has held on to almost 6% of that initial surge, which will be great news for Eric Rondolat, the CEO of Philips Lighting. Eric, good to see you this morning.

ER: Good morning, thanks for having me.

GC: Thanks very much for joining us. Look, just give us a line on the business outlook for 2017, as far as you're concerned.

ER: Well, as you may know, you know, we are in a period, the closed period-,

GC: Oh, don't give me the old 'closed period'-,

ER: We are-, we are-,

GC: Come on, I'm not asking you for revenue numbers, I'm asking you how you see the world in 2017. Brexit, Donald Trump, Chinese protectionism, there are lots of issues floating around. Are you going to have a good year this year, or not?

ER: You know what, they told me be careful, t hose guys are extremely impatient, and I think that impatience is a quality, but on Monday we're going to be able to tell so much more about how the company has been performing in Q4, and also for the full year and also we will be giving, at this time, an outlook.

GC: Okay, well that limits us somewhat, if you're not prepared to talk about the state of the global economy, but let's talk more broadly, then about technology and the opportunity that you see for innovation for Philips Lighting.

ER: Yes, I think it's absolutely massive, and this is what we do here in Davos. You know, I think it's the right time of the year, you know, at the beginning of the year, to be able to discuss with government leaders, but as well with business leaders, about what are the big challenges moving ahead, and technology is one of them. You know, we talked here in Davos about the fourth Industrial Revolution. Internet of Things, artificial intelligence, you know, robotics, and this is also touching the lighting business. You know, I will tell you that the technology has only revealed a very minor aspect of its potential moving forward. In Q4, you know, we have been supplying, you know, in Jakarta, 90,000 street lights, fully connected to a backbone software system which is on the Cloud. So can you imagine, in Jakarta, the before and the after with the new lights, safer, that is lighting the city in a better way, with less accidents but also-,

SS: Eric, I like your products, and I like Osram's products, and I like GE's products, as well. I am a buyer of the 21st century lighting solution, okay? And I've said this to you before. But the fact of the matter is, it's a very expensive product, and it's also a product that lasts a very long time. And so you have competitors out there who are cheaper Asian manufacturers, who want to eat your lunch at a cheaper price, who also want to have products that last a very long time, as well. Is the business model flawed by the fact that A) the product lasts a long time, so there isn't a renewal cycle very much, and B) that there's always going to be an Asian competitor who's going to want to undercut you?

ER: I think, you know, we have proven in the past, and we have proven in the very recent past that we can compete. You know, we also manufacture in Asia ourselves, but what counts is not only having a good product at a low cost. It's also having a strong brand, which is the case, you know, of Philips in the lighting industry, but also being capable to innovate on the market. Let me give you an example. We have put on the market, in the same light bulb, three different (?? 07.09.01), so if you push the switch three times you get different color temperatures within the same bulb. So that's the type of innovation that you can bring with digital lighting.

GC: To what extent are environmental concerns going to remain a key driver around lighting innovation and manufacturing?

ER: I think it's fundamental, and I would take that at two different levels. You know, as a company, of course we bring into the market as much as we can, offers that are sustainable, and we've made a strong commitment that by 2020, 80% of our revenues will be sustainable. We have also made another commitment that between 2015 and 2020, we will be delivering to the world 2 billion LED lamps. But as a company, we also believe that we need to show the example. In Davos we are talking about responsible leaders, so we've also said that we will be carbon neutral in 2020. And you've talked about renewable, you know, with the President interview, and it's extremely important also for us to make sure that 100% of our energy comes from renewables in 2020. By the way, it's already the case for us in the US at the end of 2016.

SS: It's a real pleasure speaking to you Eric, and despite our badgering, we will definitely carry on being impatient, that's kind of our job, but-, and also your job to rebuff us as well. So we'll look forward to looking at the results and we'll paw through those and we'll speak to you again at some stage. Eric Rondolat, who's the CEO of Philips Lighting.