The ratings on the Netherlands-based diversified technology group Koninklijke Philips Electronics N.V. (Philips) reflect its satisfactory business risk and modest financial risk profiles. The group's main strengths include its global reach and wide product diversity, strong brand name, and several world-leading market positions in stable cash-generative businesses such as medical systems, lighting, domestic appliances, and personal care. Philips also has a long track record of cash generation. The ratings are further supported by what Standard&Poor's Ratings Services regards as Philips' strong liquidity position. We consider these strengths to be offset by Philips' exposure to competitive pricing and innovation pressure in cyclical end markets. In addition, the ratings are constrained by weak and volatile profitability compared with peers. Further
