Last week it was reported by Reuters that Koninklijke Philips the Dutch conglomerate that started making light bulbs 123 years ago is splitting off its lighting business in a bold step to expand its higher margin health care and consumer divisions.

In many homes, the light bulbs have the Philips name on them, Chief Executive Frans van Houten said he appreciated the magnitude of the decision but the time is right to take the next strategic step for Philips. Mr. van Houten said “Great companies need to reinvent themselves and we can do that, we can stay relevant, we can grow and we can stay successful. It takes courage, but it is a path we have been preparing carefully.”

The move is designed to bring better returns for investors as the lighting division is either sold  off to investors or listed on the stock exchange. Philips has built and spin off other companies including ASML the chip maker, Polygram the music and film label.

Linking to dividend paying stocks, because we are people, we often get attached to the reason why we bought the shares. In Philips case, you might have started buying the light bulbs, researched the company and its share in lighting and then bought. It has evolved and it still a large company. If the lighting is separated from the other sections, the other sections because they make more money on each sale or higher margins, the stock should trade higher on higher multiples. It is important for companies to look at their history and prepare to sell the parts if that is desired by the board.

There are more questions than answers, till the next time – to raising questions