Background

The Chuck Knight culture remains and is still one of the key things that differentiates Emerson. For all their companies, as well as acquired businesses, Emerson’s management simply does not accept poor profitability. It acts very quickly to keep and expand profitability when markets decline, and when changes or problems arise.

Emerson is the quintessential management-driven company. Key people always have direct operating background and hands-on experience. CEO David Farr has been VP planning & development, group VP for the industrial components and equipment business, president of the Asia-Pacific group and executive VP for the process control business. He's known as a good manager, not just a bean-counter. John Berra, president of Emerson Process, has spent 34 years working in the process automation industry, first at Monsanto as an end user and then as a supplier. He is well known and respected in the instrumentation business for his strong involvement and consistent contributions.

The primary segments of Emerson's $14bn business are:

• Process Control 24%;
• Industrial Automation 18%;
• Appliance & tools 24%;
• Electronics & Telecomm 18%;
• HVAC 18%.

Emerson Process Management

With sales of about $3.4bn in 2002, Emerson Process includes several other Emerson-owned companies related to process control. Together they offer virtually all of the devices, systems, software, and services that process end-users need to automate their plants. Products are very evenly divided across measurement instruments, systems and software, valves and regulators, and services and solutions. The best know systems are PlantWeb and DeltaV, generating leading market-share for distributed controls.

One of the key recent Emerson initiatives has been to manufacture products in China and completely handle project management there. The Chinese engineering center there has the capability to stage and test systems, giving them a significant advantage in China and for many Far East projects.

2003 update

According to reports published at year-end 2002, the process controls & industrial automation segments are expected to decline during this year (2003) though they will remain profitable - a sign of strong management.

In an uncertain economy, where all others are showing poor performance, Emerson continues to demonstrate excellent strategic planning strengths and strong tactical implementation. The company remains very cautious and expects minimal revenue growth in 2003. Strategic themes include investment in technology to drive growth, and cost reduction through moving an increasing proportion of global manufacturing to low cost countries, especially China.

Like others who have seen no growth in the products business, Emerson Process is working to transform from a components to a solutions supplier. Emerson is well suited to doing this, because it has always been involved with systems integration through its involvement in control system and its history with the “Fisher Reps”.

By contrast, Rockwell is best known as a product (PLC) supplier, selling through distributors. Rockwell is trying to develop a systems business - Global Manufacturing Solutions (GMS) - that competes against independent systems integrators who are loosely tied through Rockwell distributors. Many integrators will quickly lose loyalty and migrate to other product suppliers.

Pinto Prognostications

It is unlikely Emerson will be interested in Rockwell - the synergy of strategy and management is simply not there. However, the company is certainly involved in bidding on some of the Invensys pieces that are currently (as of Sept. 2003) for sale.

For Emerson Process, both Honeywell IS and Foxboro are possible targets to broaden and strengthen Emerson Process leadership in process controls markets. In my opinion, it is likely that Siemens will eventually buy one of those companies, and Emerson the other.

Look for Emerson to gain steadily, through both organic growth and acquisition, in the lineup of major automation companies.