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A SHAKEN CEO AT PHILIPS (int'l edition)Personal woes and corporate setbacks undercut Boonstra
Of all the European chief executives on the hot seat recently, none has come under greater pressure than Royal Philips Electronics CEO Cor Boonstra. In the past month, he has stirred controversy by pulling the plug on a mobile phone venture with Lucent Technologies Inc. and announcing the closure of one-quarter of the company's 230 factories worldwide.
Those moves have come just as Boonstra grapples with personal troubles. First there was his public liaison with Sylvia Tth, 54, an entrepreneur and one of the Netherlands' richest women. A well-known society figure, she made her fortune by founding and later selling the temporary work company, Content Beheer, and she sits on several corporate boards. Boonstra's high-stepping, heavily reported in the press, rankled Philips old-liners.
Far graver, on Nov. 13, thugs broke into the Boonstras' country chateau in Belgium and abducted the CEO's estranged wife, Hansje Boonstra-Raatjes. They later left her bound and beaten on the beach south of the Hague. As the victim remained in serious condition in a Dutch hospital a week later, police were investigating whether the attack was an act of vengeance against Boonstra or Philips.
NO PAYOFF. Now rumors are swirling that the 60-year-old CEO may step down. The company denies it, saying only that Boonstra is ''extremely upset.'' Still, Boonstra recently disclosed that he plans to retire in two years--earlier than most would expect in a company without a mandatory CEO retirement age. There's no doubt that recent blows to Boonstra's private and public lives have left a shaken leader at the helm of the electronics giant. Boonstra refused to be interviewed for this story.
If Boonstra is to lead the long-awaited turnaround at Philips, thIs trying period is clearly his time to rally. In his first two years as CEO, he has made dramatic changes--unloading Polygram Records, for example. Trouble is, his moves have aroused enemies but not yet produced a payoff. Operating earnings are expected to be down 3% this year to $1.3 billion on $38 billion in sales. And the stock has fallen 40% since its July high.
A key problem is that Boonstra, like his predecessors, has failed to articulate a clear vision for the lumbering electronics giant. The closest he has come was his sTated goal of reaching the ranks of Nokia, Ericsson, and Motorola in phones. Since the Lucent venture barely got off the ground, that stands as his greatest failure. ''Investors will give Boonstra one more chance,'' says Woulther de Ridder, a technology analyst at Kempen & Co. in Amsterdam. ''If he makes another mistake, he's gone.''
Boonstra faces plenty of opposition. At headquarters, say people close to the company, executives grumble about Boonstra pushing them relentlessly for returns while he chalks up a $525 million loss this year in cell phones. Traditionalists still object to the former Sara Lee executive as an outsider. They resent that he moved the company last year from its ancestral roots in Eindhoven to livelier Amsterdam. Labor unions are livid about the plant closings. And a former CEO, Wisse Dekker, has criticized Boonstra on TV, calling his announcement of plant closings to a foreign newspaper ''un-Dutch.''
As Boonstra recovers from November's setbacks, he must mobilize his team for ever-tougher missions. Although he has yet to detail a strategy, he has hopes of turning Philips into a leader in digital communications, from TVs to Web-surfing machines. Trouble is, he's plunging into the most brutal of markets. Many say it's unlikely that Philips--with its emphasis on engineering rather than speed, price, and marketing--will be able to score quick wins.
At his age, the most Boonstra can probably hope for is to nudge Philips down the road toward success. It's likely to be a far cry from the transformation he intended when he started.
By Stephen Baker in Paris and William Echikson in Brussels
Updated Nov. 19, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.