Philippoussis will now face Sjeng Schalken of the Netherlands, who beat 14th-seeded Spaniard Albert Costa.
BBC: Sampras beats 'desert demons'
Second seed Sjeng Schalken followed Novak out, when he was beaten 6-3 6-4 by Thomas Enqvist.
BBC: Top seed Novak dumped out
French qualifier Paul-Henri Mathieu produced a stunning comeback to claim the Kremlin Cup with victory over Sjeng Schalken.
BBC: Mathieu claims shock win
Henman will meet Sjeng Schalken of the Netherlands in the next round.
BBC: Henman wins Brits battle
The Frenchman then increased the tempo, breaking Schalken to win the set at love and the match after 1hr 38 min on court.
Schalken, who is ranked 20 in the ATP race, held firm in the face of some aggressive play from Mathieu to win the first set in 42 minutes.
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