BUSINESS ABROAD: The Light of Holland

When Nazi Panzer divisions overran The Netherlands in World War II, one of the places they headed for first was the great Philips company electric works at Eindhoven. But hours before their arrival, 25 top Philips scientists and executives slipped away via British destroyers, carrying with them vital secrets that contributed to radar and other wartime developments. Left behind, loyal Philipsmen cheerfully sabotaged what production the R.A.F. did not pulverize. Last week Philips President Frans Otten gave the latest progress report on Philips’ amazing comeback. In the first nine months this year, sales of Philips’ worldwide empire reached $735,110,000, compared with $636,530,000 in the same period last year, while profits hit an alltime peak of $55,650,000 compared with $40,015,000.

To Hollanders everywhere, a Philips’ incandescent lamp bulb is as much a symbol of their country as a tulip. Founded in 1891 by studious Gerard Philips, 32, a professor at the Delft Polytechnic School, the company started out in an abandoned tannery making 30 light bulbs a day. Though Philips taught himself and then ten ex-farm hands how to make bulbs, he was no good at selling them. In 1895 the company was up for sale when younger brother Anton, 20, quit a promising banking career to take over sales, did so well that by 1897 the company began exporting. In 1898 Anton himself wired home from St. Petersburg the biggest order ever placed: 50,000 bulbs for the Czar’s Winter Palace. Dumfounded, Gerard wired back asking how many of the zeros were a mistake. Rewired multilingual Anton impatiently: “Fifty thousand, fÜnfzig tausend, cinquante mille.” When Germany later cut the rail link to Russia, Anton hired 70 reindeer and sleighs to get light bulbs through to the imperial court via Finland.

Blockade Runners. World War I only made Philips grow bigger faster. To circumvent the blockage of the North Sea, the company outfitted its own fleet of fast blockade-running ships. With the home market protected from competition, the brothers Philips steadily pushed into new lines, made X-ray tubes for Dutch physicians. Seeing radio coming, they were turning out receiver and even transmitter tubes by 1919. After Gerard retired in 1922, Anton aggressively expanded, set up Philips plants in most countries of the world. Today from Eindhoven, one of Europe’s biggest company towns (pop. 160,000), Anton’s son-in-law. President Frans Otten, and Anton’s son. Vice President Frits Philips, direct an industrial empire that has 66,000 employees in Holland, 114,000 in the rest of the world. It thus rates after General Electric as the largest employer in its field, generates 12% of Holland’s industrial export income by turning out scores of products including Christmas tree lights, Norelco electric shavers, television sets, super-powered electron microscopes, hospital equipment and musical recordings. At the drop of an order, the company can overhaul a complete national telephone system, as it did for Argentina, build a 160 million-volt cyclotron, as it did for the University of Paris, or light and wire for sound the Acropolis in Athens.

Freeze Out? Until lately the company has hidden its U.S. light by operating in the U.S. through several affiliates. Recently, it merged three into one company, Consolidated Electronics, which starts out with $90 million in sales. In 1958 the Antitrust Division cited Philips among a dozen companies accused of freezing smaller U.S. TV manufacturers out of the Canadian market. Philips also has a suit against the U.S. charging that the AEC infringed Philips’ Enrico Fermi patents taken out in long-ago 1934-39 and covering aspects of radioisotope production. Both suits are still pending.

In an era of rising volume and constricting profit margins, Philips is the envy of its competitors. Although 1959 sales are 15% over 1958, the profit margin actually is widening (e.g., 7.6% so far in 1959 v. 6.8% last year). Even last year, Philips’ return on sales was higher than General Electric’s, which was 6.1%. Looking ahead, the stockholders, whose investment has appreciated six times in ten years, firmly believe, with President Otten, that “growth is in our blood.”