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CNBC Interview with Philips CEO, Frans van Houten, from the World Economic Forum 2018

Following are excerpts from a CNBC interview with Frans van Houten, Philips CEO and CNBC's Steve Sedgwick and Geoff Cutmore from the World Economic Forum 2018.

SS: Straight, now, to Frans van Houten, who is the CEO of Royal Dutch Philips. Nice to see you, sir, how are you?

FH: Very good to see you again.

SS: Look, you were on the-, the New Health Paradigm panel yesterday. You, and I, and Geoff have been talking about the New Health Paradigm for quite a while. Has Philips got the key portfolio that you always wanted? Because you've done a lot of slimming down.

FH: Yes, but we have also done a lot of investments in research and development, expanding our portfolio, and done acquisitions. So, on the question do we have the right portfolio, what healthcare needs is improved outcomes, and improved productivity-,

SS: Mm.

FH: Right? For outcomes, we need precision medicine, precision diagnostics, clinical decision support systems, artificial intelligence to support doctors, to make the right diagnosis, early on. Philips has a lot of clinical infomatics, and devices to do that-,

SS: Mm.

FH: And on productivity, I believe, and I also mad that point in the panel yesterday, there is a lot that we can do today, to make healthcare more productive. To tear down silos, to integrate care seamlessly-,

SS: Mm.

FH: To take out waste, to adopt best practice, and, again, infomatics and workflow improvements can do that.

SS: I'm a big fan, as you know, of bringing these decides, and healthcare, in to the home, and that's obviously a Philips mantra, as well. So, I'm going to ask you a very blunt question. Why isn't this thing I'm wearing round my wrist, and it's not a Fitbit, but it's another one, why isn't it a Philips device? Why aren't you in that area? Why aren't you in the diagnostics on my wrist?

FH: So, what we do is we take the data from anybody's device-,

SS: Yes.

FH: Right? And integrate that in to our Cloud-based command center-,

SS: Mm-hm.

FH: Where we can interpret that data, automatically, and then make sure that the right kind of care is being given. You know, sometimes that is family and friends, sometimes it's a home nurse visit, sometimes it's sending the ambulance. And we have chosen for that open platform approach, where we do systems integration-,

SS: Yes.

FH: Because there are so many devices out there, so many different fashions-,

SS: I know-,

FH: That I think this is what will make healthcare better.

SS: And some of them even give you an accurate heart rate. Others don't, of course. But in terms of the growth areas for you now, I notice that you've got a lot of headlines about your moving to Cambridge, Massachusetts, your US headquarters, as well. You want to be where the talent is, you want to be where the innovation is-,

FH: That's right.

SS: This is the global strategy of Philips, isn't it?

FH: Yes. We-, we want to be in the hotspots of the world, and, for the United States, where, by the way, it's our largest market, we have the highest employment in North America, and we have-, we are moving our employment to downtown Cambridge-,

SS: Mm.

FH: We have a partnership with MIT, we will have 2,000 R&D people in that area, and we'll also run our North American headquarters from there. Of course, we have other locations, as well. We are in Seattle, we are in Pittsburg, we are in San Diego, so, we are well-established in the country.

SS: Does the administration represent any change of strategy for you?

FH: No, not really. I think our strategy is very much geared towards improving health for people, improving value-based care. We engage with all the large, let's say, health systems, in North America, in the whole world, of course. There is some uncertainty related to, let's say, the accountable care, and how insurance coverage will evolve, but I see that as a-, as a near-term uncertainty. It's very clear that, for the long-term, we need to go towards precision health-,

SS: Sure.

FH: Population health, higher productivity, better integration, and Philips has already left behind, let's say, our transformation from a diversified industrial conglomerate-,

SS: Yes.

FH: In to a focused, health technology company, and our clients know that, so we are committed to drive outcomes.

SS: And, if you had to change one thing about your business, that you need to improve the most at the moment, what is it?

FH: Well, as we have committed to our shareholders, we will be driving, you know, mid-single digit growth-,

SS: Yes.

FH: 100 basis points of profit improvement every year. We are very much focused on organic growth, although we also have done several acquisitions last year, to augment our portfolio, to become even a more prominent player in the healthtech space.

SS: Frans, all way too short, but very nice to see you, and I really appreciate-,

FH: Absolutely, I appreciate it.

SS: You being able to find the time to see us-,

FH: Thank you.

SS: So, Frans van Houten, of course, CEO of Philips.

ENDS