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Apr. 14. 2008 / 4:00AM, PHG - Q1 2008 Royal Philips Electronics Earnings Conference Call

Timm Schulze-Melander - Bear Stearns - Analyst

Morning. Congratulations on a good set of results. Just one clarification and then a question. So the first was on the Connected Display. I just want to make sure that I understand this correctly, including the USA divestment, this will not be enough to restore Connected Displays to profitability for the year. Is that a correct conclusion?

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Yes, I think this year will be a year of transition on Connected Displays. Yes, I think this will be a year where we'll probably lose money, but we, as I have said, with a strong action plan to address the heart of those losses on the basis of last year where the heart of our losses last year was actually in the US.

And, as you've seen, this should be addressed starting September 1, because of the transfer of that business. And, to an earlier question, we should be able to get a license, actually income on the back of that business versus losses we had in 2006 -- excuse me, versus 2007.

In 2008 first quarter we had losses (inaudible) in Europe. And there, I want to make it clear that we are addressing that as well. And that is why we took more than the strict cost of the Funai transaction. We took some cost in order to basically address the efficiency of our Europe business as well in the course of this year.

And in terms of the way that money is being spent, you could say that about 50% of the money relates to the Funai transaction. And, as I mentioned earlier on, the other 50% will be the overall supply chain of our business with all those costs looking at something like a one year payback.

Timm Schulze-Melander - Bear Stearns - Analyst

Okay. The follow-up I just again wanted to draw down into Healthcare, because obviously, I think judging from GE, a lot of concern that maybe things developed very quickly in that business. You talked about the orders being up solidly double digit in Diagnostic Imaging in North America. I understand the caveat you made about here the comparable period. But if you add back then the 4% to 5% pricing pressure, if you're solidly double digit, that really sounds like you're sort of high teens in terms of value of order intake. How comfortable are you that that's not going to decelerate materially?

And the second part of that question, just for modeling purposes, can you talk a little bit about Respironics? Obviously next quarter we're going to have a full contribution from Respironics. What should we be thinking in terms of how that's going to impact the revenue and the order bookings line?

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Yes. First of all on the incoming orders of Imaging Systems, because I understand that's your specific question for North America, no, I think it's absolutely like-for-like. So the numbers are absolutely comparable. So what is not comparable is indeed the fact that our Q1 of last year, for the reason I mentioned, was actually quite modest. So this is why I'm saying I enjoy having those numbers, but I want to put them into the right context. They are solid numbers clearly because they do not include multiyear type of agreements. So this is what I call robust. It's easier comparables, right?

Now the follow-up in your question was, can I say that will continue? No. I am saying I don't know. I'm saying that we are not changing our guidance for Healthcare, the one we had given earlier on, which was to say that we see a flat Imaging Systems North America market for the first six months.


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