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

we talked about was in the 15%. So the combination of all that with I accept it a question mark at this point, despite an encouraging start, but still a question point at this moment on Imaging System North America. I'm sorry I just can't be more specific on that one; I need one more quarter to answer that.

Alex Surla - Merrill Lynch - Analyst How about the impact of GE coming back on-stream?

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Sorry yes, excuse me, well this is the surgery arm part of their -- yes, I think it's impacting our business to some extent, but it's not a major, I would say, breaker in trend. It does help us last year, it has certainly helped us in Q1 this year, but I don't think that it should make me change any of what I've just told you.

Alex Surla - Merrill Lynch - Analyst

And the follow-up question is in Consumer Lifestyle, we've seen obviously a little bit of a slowdown due to the economy in Q1. Two questions, can you clarify, you mentioned it's 3% like-for-like growth excluding Connected Displays, but in the press release it says it's flat excluding CDs. And regardless of whether it's flat or 3% it's obviously slowing. So the question is, how fast can you reduce your operating costs in Consumer Lifestyle division if we see continued weaker economy?

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Okay now I think the difference between the 0% and 3% is important. I think the bulk of the difference come from the lower license income, because the license income actually impacts the bottom line, but it impacts as well the revenue. Because in Philips historically we've always treated the license as a source of revenue. So it's impact bottom line, but it impacts as well revenue growth comparable. So if you exclude license and Connected Displays then you come to the 3% that we have mentioned earlier on in this call.

Now to your specific questions which is, is it slowing down compared to last year? Yes I think Q2 -- excuse me, Q1 last year was a very, very strong quarter. We see in terms of geography we see continuous strong growth in emerging markets, we see growth in Europe, we see a slowdown if not a reduction with one exception which is Shaving and Beauty in North America. So we will have to see how that evolves.

In terms of expenses, yes, in there, especially in the ex-DAP territory, we have a very high level of selling expenses which is, to some extent, discretionary. And we have some flex that we can play there if indeed the lack of growth were to evidence in the coming quarters in the non-Connected Display part of Consumer Lifestyle portfolio.

Operator Thank you, sir. Your next question comes from Mr. Gael de Bray from Societe Generale. Please go ahead, sir.

Gael de Bray - Societe Generale - Analyst

Yes, thank you. In the press release you mention that you would certainly take additional measures to deal with the effect of softening economies, if need be. It seems quite the case now that western economies will increasingly slow down. So could you maybe share with us the kind of measures, for example, you could take to keep your margins where you want them to be?


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