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

we will see. That one has been a little bit cyclical, so it will be interesting to see how Automotive reacts in the following quarters. I think the rest we've mentioned. We've talked about UHP; we've talked about the other categories.

In terms of geography, Lighting actually had a very strong growth in basically emerging markets. Actually key emerging markets were up 15%; other emerging markets were up 10%; Europe was up 5%, and we were down in North America.

Operator Your next question comes from Mr. William Mackie. Please state your follow-up question sir.

William Mackie - MainFirstBank - Analyst

Thank you, a couple of follow-up questions. First of all, earlier in the call you gave some guidance on GMS. I think you mentioned that the cut in expenditure in brand spend would account for 50% of the reduction in the GMS costs for the year. Can you just confirm effectively what you're saying is you're looking for about a EUR40 million drop in the corporate and regional expense for the division, or for the division as a whole EUR80 million change year-on-year?

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Yes, I think on this particular one we expect -- because this is one on which -- well, first of all the Group management, what we call the headquarter cost, yes will be down. You will not necessarily see it as obviously because as usual on that line we have some one-offs which are not necessarily big, which relate to various elements. But all-in-all, yes, I think, including those one-offs which probably won't be all disclosed, you should see a 50%/50% reduction, 50% coming from brand and 50% coming from the combination of the impact of the one-off and of the reduction of the headquarter expenses. I think that's probably a fair way to look at it for your model.

Operator Your next question comes from Mr. Timm Schulze-Melander from Bear Stearns. Please go ahead sir.

Timm Schulze-Melander - Bear Stearns - Analyst

Hi, just one quick follow-up. With respect to the increase in inventory, you mentioned that in part it's related to essentially your Healthcare Service business. Can you talk a little bit about how that works and why has that inventory uplift? Thanks.

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Yes, I think we are still -- our Service business, especially as a result of the growth in emerging markets, our Service business is increasingly having to face a worldwide presence. We now start seeing these maintenance contracts, which are following on the installation of the units in emerging markets, needing some local maintenance and spare parts inventory. And until such time, obviously, our service business matures in terms of growth, and quite frankly, given the profitability of that business, that's not something we are particularly anxious to see, we will have some pressure on the increase of the inventory of service in Philips.

But I think this is something which -- this is probably the part of the increase of the inventory I feel the least bad about because this is indeed backing a faultless execution on a service business on Healthcare which is high margin and which is having a good growth.


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