The company expects the changes to improve its performance to mid-single-digit comparable sales growth with a low-teens adjusted EBITA margin by 2025, and to mid-single-digit comparable sales growth and mid-to-high-teens Adjusted EBITA margin beyond 2025.

The layoffs come after Philips announced it would cut 4,000 jobs in October 2022 while dealing with a dip in sales.

As part of the changes, Philips will pivot its innovation model by concentrating more of its research and development (R&D) resources in the businesses––90% compared to 70% in 2022. The company will invest 9% of its R&D in sales going forward, compared to 10.5% in 2022.

“As a result, part of Philips’ corporate innovation activities will move into the businesses,” Philips said. “Additionally, the company will focus on fewer, better resourced, and more impactful projects, with patient safety, quality and customer need at the heart of innovation design.”

The job cuts were stressed as part of the company’s overhaul to be dependent on “lean central functions” and right sizing. The leaner model will have a significantly reduced cost structure, the company said.

The announcement comes shortly after the company appointed Roy Jakobs as CEO. Philips has faced a dip in sales growth as of late, and the company report a 3% decline in comparable sales growth in 2022. Income from operations amounted to a loss of EUR 1.529 million, Philips announced in its end-of-year earnings report.

““Philips operates in attractive health technology market segments with good growth and margins,” Jakobs said in a statement. “The company has built leading market positions based on meaningful innovations and high customer intimacy, further supported by a compelling purpose, a strong brand, and clear ESG commitments. However, given our significant operational challenges, we are not fully extracting the full value of our businesses, as also reflected in our 2022 results.”