Dutch conglomerate Royal Philips Electronics (NYSE:PHG) doesn't get a ton of attention, although we've occasionally given the company its due. This is understandable, since it's smaller than some of the titans it clashes with, such as General Electric (NYSE:GE) and Siemens (NYSE:SI). And aside from its electronics and appliances, much of its business remains below consumers' radar.

There are plenty of moving parts in Philips second-quarter results. Sales dropped 4.4% from last year's second quarter. However, the company's chosen cash flow metric of earnings before interest, taxes, and amortization (EBITA) increased 34%, showing a much healthier underlying business. Perhaps more importantly, EBITA margin increased, suggesting more profitable sales. Net profits aren't terribly meaningful here until you adjust for a one-time gain, but the results there are also largely positive.

Philips is also continuing to change its mix of businesses. It's selling assets and investments such as Taiwan Semiconductor (NYSE:TSM) to repurchase shares and fund small acquisitions that fold into its existing businesses, such as Color Kinetics (NASDAQ:CLRK). The company still holds decent stakes in Taiwan Semiconductor and LG Philips LCD (NYSE:LGL). However, Philips has announced that it will reduce its ownership in the LG venture, and I wouldn't be surprised to see a further reduction in its TSM stake, either.

Wall Street punished the stock Monday for its declining revenue and the company's somewhat struggling electronics business, even though earnings increased and the long-term strategy looks positive. As an investor, I've learned to love situations like this; when sales and earnings don't grow in lockstep, investors often lose interest. A company with declining sales and increasing earnings can be an interesting investment, if the sales decline stems from a conscious decision to abandon lower-margin or unprofitable sales, as Philips seems to be doing. Despite the company's consumer-electronics woes, I plan to look closer here.

Philips has been a decidedly mediocre company for quite a while, but the company's making changes and refocusing its business. In a market short on obviously undervalued companies, I think it makes a great deal of sense to closely monitor firms undergoing change and transformation -- and right now, Philips fits that bill.

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Nathan Parmelee recently picked up a new DVD player from Philips, but he doesn't own any shares in the company or any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.