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

Nicolas Gaudois - UBS - Analyst That's [good enough], thank you, Pierre-Jean.

Operator Your next question comes from Mr. Simon Smith from Citigroup. Please go ahead, sir.

Simon Smith - Citigroup - Analyst

Hi, thank you. My question is with regard to Healthcare. Obviously we had, I think, versus an expectation, a very good set of numbers coming out of your business showing, as you say, strength in orders, strength in North America. But it is obviously completely opposed to the news that we got out of GE on Friday. And clearly it is very difficult, I suspect, for you to comment on your performance relative to a competitor. But I don't know if you could give me any feel as to what you think may have happened in terms of market share gain in North America. And maybe going on from that, explain why you feel that maybe these gains are sustainable and won't ultimately lead to a pricing war.

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Yes, I won't comment on competition, we never do, and I won't do it on the call. I think we try to give as much disclosure as we can and that's for you guys to reach conclusions.

What I can say, that if you look back at our Q2 -- excuse me, at our Q4 last year, Q4 was already a rather strong quarter in terms of incoming orders. We tempered the enthusiasm by saying that there were two points of growth in that Q4 which was related to -- sorry, four points of growth outside the total amount which was actually linked to multiyear contracts, right? So we tempered a little bit Q4. But still if you look back at Q4 last year our incoming orders was actually a robust quarter and ended up enabling us to finish the year at 6% growth last year.

Now if you look at this quarter, which is up 9%, I will make two additional comments. One, and again, to temper the enthusiasm, because I think it's a very good number, but just to be absolutely transparent, you have to realize that last year in Q1 '07 we reorganized our sales force in the US. You probably remember that. We trimmed down our cost at Medical last year. We focused at that time on our commercial structure in North America and certainly polluted the quality of our work at the time.

So the double-digit growth we've seen Imaging System North America in Q1 certainly comes partly from that. But I would say only partly because when you really scrutinize it, it is robust. It is actually covering a number of modalities. It's covering for instance MR, it's covering as well X-ray, and it's covering Nuc Med, it's covering Cardiovascular. So it is double-digit growth Imaging in North America and that is without a multiyear agreement. So I would say there is some clear robustness in our Imaging orders in Q1. So I'm telling you the two things. It's robust; comparables are made somewhat easier by the weak Q1.

Can we draw a conclusion now for the future, which is your next question. As I've said in the introduction, I would wait until end of Q2 because this is when the various constituencies will give us the decision on further DRA cuts. But certainly this Q1 was, in our book, something that brings us a little bit of confidence, as far as Imaging System North America is concerned, which is of course was where the heart of the issue last year.

Simon Smith - Citigroup - Analyst

Okay. Could I ask a follow-up to that then, that clearly there's been comments in the market of pricing becoming more aggressive within this market And also that community hospitals have maybe found their CapEx budget squeezed, partly in response to the credit crunch. Could you say if you've seen any of those impacts coming through within your business?


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