I hope you took note of the innovative Philips Lumalive outfits worn by the gentlemen guiding you into our
conference. Our Lumalive material contains LEDs that can display text, graphics or even animations. They’re soft
and flexible and fit seamlessly into the fabric. It's the perfect combination of art and technology…and a wonderful
example of what we’ll speak of today… “Relevant Innovation".
By Relevant Innovation, I mean an absolute commitment from Philips to bring to market innovative products,
services and experiences that are based on consumer insight. In other words… based on what consumers really
want and need. Often when we hear “innovation,” our minds leap directly to technology.
This year, Philips received no fewer than seventeen 2007 Innovations Awards… and one Best of Innovations
Award from CEA. That’s nearly double the number of awards we won last year. These honors were awarded in
multiple categories including: Audio Accessories, Electronic Gaming, Home Theater Accessories, Home Theater
Audio, DECT and VoIP Telephones and Video Displays. These awards are a testament to our brand promise of
Sense and Simplicity.
In relation to this, Philips gained 5 spots and moved up to number 48 in the Interbrand Annual Top 100 Global
Brand ranking… which means that we are increasingly becoming a “recommended brand” among consumers.
I’m also delighted to announce that the Philips 42" LCD flat TV set was selected as an Innovations 2007 honoree in the Eco-Design category… for such environmentally friendly attributes as consuming 28% less energy than competitor sets… and the elimination of certain hazardous substances.
The 2007 CES Eco-Design Award builds on a platform of honors for Philips in recent years, which also include
the 2006 EISA Green TV Award…the designation as a Dow Jones Sustainability Index 2006 leader in consumer electronics and personal leisure goods (for the fourth year)……and our full participation in the US Federal Government’s Energy Star program.
It’s proof positive of Philips’ commitment to consumers…to quality…to value…to the environment… and to
sustaining forward momentum for years to come.
But the Philips’ concept of Relevant Innovation reaches well beyond technology. Let me give you some further
examples of what is particularly relevant to consumers, especially in terms of innovation.
Philips actually reinvented a product category to make it even more relevant and beneficial to consumers. I’m
referring to Voice over IP. With Voice over IP, we reinvented the existing DECT phone category… where Philips already has a very strong track record… and partnered with a leading IP telephony provider – Skype. Together, we manufactured and delivered a DECT phone that consumers can use to make conventional calls…or crystal clear Internet calls for free -- without the need for a computer. Through this innovative partnership, we created a whole new value space in the home telephony market… with a sensible and simple solution. And this is only the beginning!
Philips innovation in consumer experiential research enables us to discover… open… and actually create new
consumer- focused and relevant product categories. Perfect examples of this are our computer gaming accessories and peripherals.
Forget simply playing the game. Our new amBX total immersion gaming peripherals actually allow you to live the
game. This relevant innovation utilizes coding within gaming software to produce sensory effects such as wind,
light and vibration effects… giving the consumer an immersive gaming experience like never before.
Applying this concept of Relevant Innovation…in our approach to technology, design, marketing…and even in
our partnerships and the way we manage our supply chain…helps ensure what we bring to market is relevant to
consumers…and adds value to their lives. Ten years ago, Philips publicly demonstrated the world’s first plasma
FlatTV. Since then, Philips has reinvented the FlatTV category with our unique Ambilight technology.
How relevant is this innovation? 98% of respondents who purchased an Ambilight TV said it improved their
viewing experience. 87% said watching TV with Ambilight backlighting is a perfect way of relaxing. And 80% said that the viewing experience was …quote, intensified.
Consumers said they felt more involved in the movie or program they were watching. This data truly puts into
perspective just how far we’ve come regarding the FlatTV viewing experience…and since those days when Philips first introduced consumers to the television of the future…a mere 10 years ago. Philips’ first-ever FlatTV was a 42-inch plasma introduced at the CeBIT Home Exhibition in Germany…back in 1996. Only four inches thick with a widescreen viewing angle of 160 degrees, “the world’s first TV you can hang on the wall like a painting” created a worldwide media storm.
According to DisplaySearch, Philips has been the leader in LCD FlatTV sales for six consecutive quarters...…both in the US and around the world. As you know, we have been ahead of the curve with FlatTV innovation since we introduced the concept 10 years ago… and we continue to be market leaders. But now…we have passed a significant milestone. On November 29, 2006, Philips manufactured its one millionth Ambilight FlatTV!
We believe that ten innovative years of Philips FlatTV, our current leadership position …and our one millionth
FlatTV with Ambilight technology are indeed sparkling diamonds of accomplishment. So we decided to
celebrate…working with diamond designer A. Link, a member of the world famous De Beers diamond company
…to create this one of a kind jewel in the Philips crown of FlatTV excellence.
Stewart Muller, President of Philips Consumer Electronics, North America
Now this is a work of art. And the two-thousand diamonds are nice, too. They’re striking. And who doesn’t want to be impressed like that? To be captivated? To be so engaged that you actually are immersed in the experience?
Our research certainly confirms this. Recent Philips’ studies on future trends in culture and design have shown that people want immersive entertainment experiences that are more engaging and personal. They want their hardware to seamlessly blend into their living environment…and décor… but they need it to provide flawless
functionality… with every use.
We met this challenge of full immersion with Philips’ Flat TV. Responding to consumer desires, we have merged
the best of two worlds -- consumer electronics and interior design. The majority of our consumers told us they felt truly immersed in the picture when watching a Philips Ambilight FlatTV. These people were reacting to immersive television experiences on two levels. On the rational level, they responded to Philips’ lifelike high-definition picture quality, stunning colors, contrast and extreme motion sharpness.
On the emotional level, the halo of Ambilight framing the display raised the intensity of their engagement… taking
them to a greater level of immersion. And Philips will continue to provide new and exciting immersive experiences. In sight…in sound…and surround. First, let’s talk sight.
The future of television is flat. DisplaySearch, the foremost display market research and consulting firm, estimates
that approximately 80 percent of overall TV sales will be Flat TVs in 2008. That figure will climb to more than 90 percent in the next three years. In 2007, Philips will maintain an industry leadership position, by offering more than 30 new models of FlatTV.
Our new line of Ambilight FlatTVs 42-inches and larger will be 1080p. And while our sets get larger, the 2007
designs just get sleeker. These new TVs give consumers the best technology, packaged in a sophisticated, slim
design. They’ll offer consumers the best picture quality from any HD source, incorporating the latest innovation in
picture quality with Philips’ unique Perfect Pixel HD Engine. Philips’ Perfect Pixel HD Engine has the processing
power, and processing accuracy necessary to best display 1080p images. Most consumers watching a 42” HDTV screen from 7 to 10 feet away notice differences in picture quality; sharpness; color; contrast; brightness; and motion blur. But these qualities have more to do with processing than with the actual number of pixels.
As a general rule, having enough processing power, and processing accuracy, is three times more important than
just increasing the number of pixels. In fact, if the processing isn’t good enough, problems will be magnified by
adding more pixels… and the perceived picture quality will be diminished. So resolution is of course important,
but the processing power is critical.
Our mission is to focus on the consumer experience…and make it the best it can possibly be. Our new Perfect
Pixel HD Engine enhances content from already pristine sources such as HD signals, Blu-ray and DVDs …and
alters the pixels of an incoming picture to match surrounding pixels.
This results in amazingly sharp and lifelike details. Skin tones are natural…and up to 4 trillion colors pop with
superior dynamic contrast and deep black backgrounds. But wait…there’s more. Our most recent innovation in
ClearLCD technology now combines 1080p panel resolution with a 120 Hz refresh rate. The result is extreme
motion sharpness with a four-millisecond response time. And that’s a giant step forward in LCD picture quality.
As the attraction to Ambilight continues to grow, so does our Ambilight Flat TV line. This year we will expand
our range with three additional sizes, a 32-inch, a 47-inch and our first ever 52-inch Ambilight LCD. Now let me
share some of our newest Ambilight developments …One big development is that the Ambilight effect is now
created by an innovative LED light source which generates more saturated colors… consumes even less power
than our prior best-in-class models… and, most importantly, allows for a more compact set design.
Consumers who demand the finest, most immersive experience from their television will settle for nothing less
than a Philips Ambilight display. Philips one-bar Ambisound technology brings audio to life…enveloping and
immersing the listener in full, multi-channel surround sound, with an elegant sound system.
A sound system that enhances the design advantages of a FlatTV… and eliminates all the clutter of traditional
surround sound solutions. Note how glass and aluminum are used extensively to enhance the feeling of quality…
and create a clean, simple and stylish design. And so the highly-advanced engineering of this system requires
nothing more than an additional subwoofer to deliver a deep, rich surround-sound experience…whether you’re
watching a movie, television or listening to music. But why talk about Ambisound…when you can hear it for
yourselves…Imagine the same incredible sound coming out of the slim Ambisound Home Theatre System.
Ambisound is available on the Philips new DVD Home Theater System. Ambisound is the perfect home theater
for any space… any lifestyle…and adds yet another dimension to the Philips Ambient total immersion
entertainment experience. It’s yet another example of Philips Relevant Innovation delivering on the promise of
sense and simplicity… and giving you surround sound…like never before. All right…we’ve talked about sight and sound…so where can Philips go from here?
Philips is about to transform the entire gaming experience. In essence, the amBX technology you’ve just felt
represents a totally new software language that gives gamers an experience in the real world, not just a virtual world. With amBX, the ambience of an electronic game is extended to the entire room. The subwoofer has dynamic boost, which means an explosion will sound twice as loud…and with no distortion. And the desk fans can blow anything from a high impact blast to a slight draft from under the door. A number of games incorporating amBX coding have been released. Broken Sword: The Angel of Death is available from THQ… and both Toca Racing Driver 3 from Codemasters as well as Defcon from Introversion are amBX enabled… and will be available soon.
Our sensational amBX peripherals are hitting the shelves in the U.S. very soon. And more games, publishers and
developers will soon follow, so there will be a sizeable and growing catalogue of amBX enabled titles… both new releases and previously issued games. Philips Ambilight… Ambisound… and now Ambience to the extreme or amBX… offer truly immersive entertaining experiences. One of the first steps that Philips took in the total
immersion direction was the development of DVD...allowing consumers to be engaged with the TV experience
like never before.
And just as consumers embraced the DVD when they wanted a viewing experience that VHS just couldn’t
provide… we are convinced that consumers will discover the value…and will now embrace the benefits of the HD Experience. The Blu-ray Disc embodies the future for playing movies in high def, for storing personal content, and for recording and playing back HD TV programs. Philips has supported Blu-ray Disc as a standard from the very start.
And now we’ve launched our Blu-ray disc player, our ‘Triple Writer’ PCWriter and 25GB Blu-ray discs in the US Market. In the near future, you can look for Philips Blu-ray 50GB discs here in the US. The Philips’ Blu-ray Disc player is loaded with features that provide the most stunning pictures available, including HDMI output that
supports the latest 1080p resolution… as well as component video output that provides brilliant imagery. Rich
surround sound is heightened with multichannel HD audio decoding and digital audio optical outputs.
Fully backward compatible, the player not only plays your existing DVDs, but also enhances the picture quality,
upscaling it to 1080i…and offering HD-like quality…even from a Standard Definition source! The Blu-ray Disc
has the technological advantage to be the industry leader …with the support of more than 170 companies,
including seven of the eight major Hollywood studios.
Let’s jump into another value space with explosive growth potential for Philips in the coming years: Voice over
IP…allowing for free internet calls. According to a new eMarketer report, the number of households using VoIP
for phone calls will climb from 5.2 million this year to 32.6 million in the next three years. Philips innovative Skype VoIP phones operate on Digitally Enhanced Cordless Technology…or “DECT." This DECT technology
enhances the sound and security available in a cordless phone.
These phones were developed to combine the key benefits of Skype with the advantages of Philips’ DECT
technology. Often with cordless phones you lose some of the high and low frequencies and pick up excess noise
that can distort your conversation. Now, with Philips’ proprietary High Def Voice technology, the full frequency
range puts the clarity back in the conversation. The inclusion of Skype’s rich features mean: free worldwide calls to other Skype users, unlimited calls to landline phones with a subscription, conferencing with other Skype users, and Skype’s Instant Messaging and File Transfer.
Philips has delivered yet another relevant innovation with our digital photo frame. It’s one more opportunity for us
to help consumers liberate their own content… and for Philips to continue to add value and make life that much
simpler. With the clean, simple design of Philips’ 7- or 9-inch PhotoFrame, consumers can easily create a digital
scrapbook to ‘wow’ family and friends. All you have to do is load the images onto the PhotoFrame’s internal
memory directly from a digital camera or from a memory card.
New to the range this year is the advanced Smart Album software. This exclusive software helps users create and manage albums and set-up, adjust and add transition effects to photo slideshows. CEA research indicates that the global market for digital photo frame products will exceed 12 million units in the next 3 years, up from an
estimated 700,000 units shipped in 2005. And Philips will be right there, providing consumers the value they
demand.
Guided by our vision of ultimate personalization and the liberation of the consumer’s favorite content…portability
has become a critical component in the Philips strategy. Our portfolio of products continues to take the lead in
providing people access to their entertainment and information whether at home or on the go. Watching DVDs
and videos on the go just became a lot simpler.
Philips’ innovative portable DVD line provides an extraordinary widescreen platform. And DVDs aren’t the only
media that the portable DVD family can handle. Each product can play a broad range of video-based media. Both models feature a memory card reader which can display digital photos.
Also, I'm proud to announce that we are the first to incorporate video iPod docking into a portable DVD player.
A survey commissioned by Philips revealed that Americans frequently enjoy music all around the home, and in
increasingly personal ways. 45% of American home listeners want to enjoy music in the living room…but also are just as likely to listen in the bedroom and the kitchen…and, yes…even the bathroom.
Philips’ Streamium Wireless Music System, a multi-room solution, allows users to access thousands of songs in up to five music stations throughout their home - all without wires, or even the need for an Internet connection.
Retailers increasingly are looking to offer these products to their customers as part of a complete consumer
electronics portfolio…and Philips aims to be a top global player in the audio-visual, HD, PC and mobility
accessory market. Supporting this position is our recent acquisition of Power Sentry, the dominant player in the
North American surge protection market (sales in 2005 of approximately $50 million). The Philips’ family of surge protectors now includes Expandable, Theatre Director and PowerSquid all which provide protection and
organization for all of today’s computer or home theater applications.
Utilizing proprietary technologies, Philips’ surge protectors ultimately deliver safer, more reliable and longer lasting surge protection. A second example represents an entire new category – Wireless HDMI. Philips has
revolutionized the transfer of high-definition signals with the introduction of our Wireless HDMI. This awardwinning innovation is the first and only device that can transfer an uncompressed HD signal over the air. Philips’ Wireless HDMI is designed to replace conventional home theater wiring…so anyone that currently uses an HDMI cable to transfer signals between their components and TV, can use this unique device.
By operating in the ultra wideband range, Philips' wireless HDMI transfers a lossless 1080p signal… with no
interference from Wi-Fi®, Bluetooth®, cordless phones, microwaves or even cell phones. For people who want
the most advanced technology with the simplest connectivity, Philips Wireless HDMI will be the only way to go.
We’ve spoken about our commitment to Relevant Innovation…and our mission of designing and delivering
products that truly enhance the way we all live. At Philips, we live this philosophy every day. We truly do. We’ve
covered quite a bit of ground today…Total immersion in Ambient Experiences… Ambilight... Ambisound… and
the unforgettable gaming application experience, amBX.
We celebrated one million Ambilight FlatTVs and touched upon some terrific examples of how Philips has put the philosophy of Relevant Innovation to work through our leadership in LCD, HD and Blu-ray development.
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