Invensys in decline

Invensys was formed by Allen Yurko, after UK-based Siebe merged with BTR.

Siebe had previously acquired Foxboro, Wonderware, Eurotherm and several others, hoping to generate growth from industrial automation. When growth eluded Yurko, and Siebe was a target for Emerson, he merged Siebe with BTR, another UK hodge-podge, and changed the name to Invensys. With further decline, Yurko bought BAAN, a bankrupt Dutch software company, a risky move that didn't pay off.

Allen Yurko departed Oct. 1 '01, pocketing a princely pension - after having put the company into a downward spiral, with serious cash-problems and troubled loan covenants. Under the new CEO, Rick Haythornthwaite, Invensys will inevitably move towards break-up and a piecemeal sale.

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eNews : 12 September '00

Crunch time at Invensys

Shares in Invensys, the UK-based industrial automation leader, fell by 36% (to 167p) on Thursday (7 Sept.) after the company warned that results would be down on the same period last year and up to 3,000 jobs were to be cut. On Monday, 11 September, as this eNews goes out, shares closed at about 155p.

Invensys was involved in the controversial and risky takeover of Baan, the Dutch software group just a couple of months ago, though Allen Yurko, the Chief Executive insists that poor results have nothing to do with that move.

Click UK Financial Times news story

Click Blunt LEXnews analysis

Click More comprehensive UK FT article than the others

Click Read the complete Invensys+Baan story and Pinto Baanalysis

eNews : 20 September '01

Invensys crunch-time (continued)

The shares of Invensys plummeted by about 50% when their recent press release warned about poor results. The company, renamed after the merger of Siebe and BTR, is now under heavy fire. Invensys has made several acquisitions that have failed to excite investors. Its recent (July '00) acquisition of Baan, the Dutch enterprise-software company, is clearly fraught with risk.

Invensys Read the Invensys press release that started the stock-slide

Pinto's Perspective
The Invensys strategy has been to consolidate similar companies, divest the dogs and build a pool of cash to make new, attractive acquisitions. Although Baan is NOT the cause of the immediate problems, it is the biggest bet and will not produce results fast enough to make a difference - indeed, it will likely have a negative impact that will mask gains in other areas.

Invensys CEO, Allen Yurko, is intelligent, ambitious, aggressive and an excellent manager. Unfortunately, he appears to have been poorly advised, particularly in the acquisition of BTR, which was a poorly managed hodge-podge and simply compounded Yurko's problems. It is unlikely that he will survive the current situation - I give him a few weeks, at best. Pity, because there is no leadership alternative within the company. Yurko's exit will simply put Invensys in the hands of an interim CEO who will seek an acquirer. The current stock-price makes Invensys a clear target for either Siemens or Emerson.

eNews : 6 February '01

BAAN achieves Q3 profit - will that save Invensys?

From time to time, I discuss industrial automation events and companies - relating to the many enews readers who are in that type of business. Others, please bear with me while I provide my opinions and feedback.

You will recall that we featured the Invensys acquisition of Baan in August 2000. The latest release of details of performance for the third quarter (Dec. 31 2000) shows that Baan has returned to profitability far faster than even Invensys had forecast. After nine consecutive quarters of significant operating losses, Baan's growth in revenues and successful program of cost reduction combined to achieve an operating performance above break-even. Baan grew total sales to $100 million, an increase of 37 percent over the prior three months. Looking forward, Invensys expects Baan's sales in the final quarter of the current fiscal year to be similar to the third quarter.

Click Invensys press release about Baan's performance

The Invensys Interim statement for the first half (September 2000) starts:

    "A challenging second quarter in the automation and controls market, combined with certain cost overruns and margin pressures, has reduced our overall profitability in the first half. We are responding with specific actions to return the Group to profitable growth. Our decision to fully separate our Power Systems business also underlines our clear commitment to restore shareholder value."

Click Invensys Intermin Statement - Sept. 2000

Pinto Prognostications
Will these moves allow Invensys' gutsy CEO Allen Yurko to keep his job and save Invensys from being sold off? Probably not.
  1. Yurko is a strong financial manager, and is pushing his people to yield every penny of profit they can muster, to close the year (March 31 2001) with a positive result. But inevitably, short-sighted short-cuts cause damage as the mindless minions rush around frantically cutting advertising, development and growth opportunities to boost the bottom line. Invensys is known to walk a taut financial tightrope and canny analysts see through the short-term shenanigans.
  2. The move to spin-off Power Systems may indeed provides some additional shareholder value, but will inevitably highlight the poor performance of the remaining pieces, negating the positive intentions.
  3. On 6 Feb 2001, Invensys share-price was at 178p, an improvement from its lows of 120p a few months ago, but still a major drop from the 52-week high of 310p, which itself was a big decline from the higher levels at which companies like Eurotherm and Wonderware were acquired.

The big test will come with year-end results (April 2001) when Yurko must deliver credibility - not squeaking through the short-term, but demonstrating that organic growth is indeed possible for the company mainstream. With industrial automation still in the doldrums, those dreams are doubtful.

When asked about interest in acquiring Invensys, one key player retorted:

    "Our ardor for Invensys has cooled. We know way too much about the shape of their operations and technology. It is very unlikely that Invensys will be sold complete. Dismemberment seems the most likely possibility. BTG and Baan are very effective poison pills."

Tyco, Emerson, Siemens and a couple of other majors are waiting out there, ready to pounce on the pieces.

eNews : 28 March '01

Invensys Update : will Yurko be dumped?

After a first-half "profit warning" last September, Invensys has now put out a Trading Update with another profit warning. After the September warning, 5,000 jobs were cut (6% of the workforce). Now this latest news release reports that "cash flow remains challenging as reductions in working capital, particularly inventory, have proved difficult to effect and cash severance costs have risen" and promised "further headcount reductions". Invensys has breached its banking covenants and is having to refinance its short term debt of £2.5b. As a result, last week Invensys shares fell more than 13 percent to 112 pence in early trade and closed 9.9 percent down at 116.25.

Click Invensys News release with the profit-warning

Click Financial Times Invensys story

Interestingly, all-round declines in the financial markets seem to camouflage the Invensys problems. This (combined with the fact that there is no replacement) may yet save CEO Allen Yurko.

However, The London Independent had this to say : "Allen Yurko is coming under renewed pressure to step down as chief executive of troubled engineering firm Invensys as the City loses faith in his strategy. Shareholders are becoming increasingly disgruntled by his management style and the flow of bad news. Many investors would also like to see the resignation of the group's chief finance officer, Kathleen O'Donovan, who joined from BTR, which merged with Mr Yurko's Siebe to form Invensys."

Over the last year Invensys shares have more than halved in value. One analyst said: "It has got to the point where a lot of fund managers think Invensys is just too risky. People won't touch it until Yurko and O'Donovan have gone". In presentations after the announcements, there was no mention of "anything being wrong, which left a very sour taste in the mouth." Some people think that it is not a question of whether, but when Yurko will exit. Others claim that headhunters are already on the prowl.

Click UK Independent News : Invensys story

I respect Allen Yurko - he is a tough manager and a sharp individual. But, he made 3 big mistakes :
  1. BTR was a pig in a poke and Yurko should not have allowed himself to be talked into buying it. The BTR merger has cost Invensys billions in market cap and consumed a lot of management energy, with bad results.
  2. People selection. For example, the recently departed Jim Mueller (COO) was widely regarded as knowing how to wield an axe but very little about the strategy or tactical elements of running and profitably growing a business. As good managers keep trying to run up the down-escalator, they are being down-graded by additional layers of newcomers who promise a lot but bring little to the game.
  3. Distancing himself from the operations. He has viewed himself as the grand strategist and has taken himself too seriously. People like Mueller shielded their boss from the "details" and a clear vision of what is important on the inside. Yurko needs more Management by Walking Around (MBWA).

eNews : 29 June 2001

Yurko & Invensys - re-arranging the deck-chairs

Invensys Allen Yurko, CEO of Invensys, is a financially driven manager who came from a Siebe acquisition (Robertshaw) and soon became CEO of the UK-based industrial conglomerate.

Siebe acquired then ailing Foxboro and seemed to revive it through good management discipline. But Foxboro didn't grow and Siebe continued to acquire aggressively - Wonderware, Eurotherm, APV etc. In a defensive move to stave off acquisition by Emerson, Yurko merged Siebe with BTR (a similar UK hodge-podge) and changed the name to Invensys. The cute name didn't seem to make a difference - the decline continued. Yurko then unwisely acquired Baan, a bankrupt Dutch software company, compounding his problems.

A couple of years ago, Allen Yurko seemed dynamic and street-smart, the driving force behind the formation of Invensys. But recently he has become defensive, erratic and remote. His moves signal increasing desperation at his inability to generate the growth and success he had promised.

This past weekend (June 25, 2001) Yurko and other senior executives have agreed to pay freezes, even after sharp cuts last year. You will note that Allen Yurko still gets paid $1.2m, and Kathleen O'Donovan (CFO) gets about $700K.

Click Read this Financial Times article : Invensys Pay Freeze

This week, in a communication to all Invensys employees signed personally by Allen Yurko, a new "PROJECT UNITY" was announced.

  • Rollout of Baan software globally as a common IT platform. Installation of Baan at most Invensys sites to generate additional Baan revenue.
    (Read: Buy Baan, or else).
  • Outsourcing of IT internal systems (including hardware and software) and transfer of current IT employees to IBM through a "strategic outsourcing arrangement".(Read: layoffs) to take place in "autumn 2001".
    (Read: right away).
  • Through an outside consultant, assessment and re-design of Finance and Human Resources administrative processes.
    (Read: more layoffs in Finance & HR).
  • Implementation of an e-procurement system for MRO and indirect purchasing.
    (Read: more layoffs in Purchasing).
Pinto Prognostications
During the growth period in the 90's, financial managers helped organize good financial results by cutting out inefficiencies and waste. It was reported that, when Siebe acquired Foxboro, there were 10-15 gardeners employed at the Foxboro HQ - it didn't take a genius to outsource that stupidity. Lots of other bloated expenditures (e.g. free and frequent travel to Europe with "associates") were quickly cut.

But, "cutting" and "building" are two different talents, and few people are smart enough or adaptable enough to change their MO. Allen Yurko is a cutter, not a builder. He doesn't recognize the golden ethos, experience and expertise that Foxboro and other major companies within Invensys will lose through this new "PROJECT UNITY" program. (I>(Which marketing idiot came up with that name??)

Only new growth can save Invensys & Baan. Cutting overhead does not generate new revenue. Pushing Baan to subsidiaries makes most observers and analysts chuckle, and does not really generate any meaningful revenue. What margins will those bookings generate??

Out-sourcing IT to a friendly dinosaur saves money short-term, but will throw a lot of valuable inherited expertise out with the bathwater. With NO new revenue.

Asking Deloitte & Touche, the management-consulting firm, to change Finance & HR processes will cause yet more valuable people-resources to be flushed down the drain. Again, short-term savings, with NO new revenue.

One wonders whether Yurko takes advice. If so, from who?

In this fast-moving new millennium, new growth comes through new products, sold to new customers, in new markets. To achieve growth requires technical talent, marketing magic and sales savvy. Sadly, it seems that Yurko and his yes-men minions don't have what it takes. The remaining talent in Foxboro, APV, Wonderware, Eurotherm, etc. has either departed, or been demolished through weak and ineffective management. Key new hires, touted as saviors, depart within weeks or months. Each weekly newsflash announces a new round of musical chairs.

Allen Yurko does NOT have the two year time-table outlined in his PROJECT UNITY plan - in fact, I doubt if he himself will last another quarter. The headhunters are already out interviewing replacements. And, if Yurko is smart enough, he is already working with those same recruiters to be the replacement for his replacement.

Click Judge for yourself - Interview with Allen Yurko on 2001 Results

eNews : 3 July '01

Invensys in decline - Marshall's involvement

Allen Yurko spoke last week at Wonderware's trade show in Las Vegas. He actually talked at length about "Project Unity" and mentioned that the number of Invensys "data centers" would be reduced from several hundred down to 6, and ERP systems from 150 to 1.

Most people assume that the remaining data centers will be at Foxboro, the UK, and other places that are "politically plugged in" to the decision makers. If you're an Invensys-company IT person who isn't at one of the privileged sites, you've probably already been told of your impending transfer to IBM. Of course, this assumes that Project Unity continues to its completion. When Yurko departs, who knows what the new CEO will do. The current "supporters" will quickly change their tune.

Lord Colin Marshall, Invensys Chairman of the Board, shares a lot of blame for the decline of Invensys. Marshall, who actually precipitated the Siebe purchase of BTR, openly boasted at the time that that his primary motivation was xenophobic (dislike of foreigners) and anglocentric. Interestingly enough, Marshall is now trying to point the finger at Allen Yurko and is Yurko's biggest enemy.

The BTR decision alone has cost Siebe billions in market cap. BTR has consumed 150% of the energy and efforts of Yurko's management team that should have been fixing what they had vs. buying and restructuring BTRs really lousy assets.

Some institutional investors have clamored for Marshall's resignation. The London Observer reported recently that Marshall is preventing the return of shareholder confidence. Marshall sits on lots of boards (10 or so, including British Airways) most of which are in not-too-good shape. He is rather arrogant, but the pressure must be getting through.

Some UK Invensys people have actually said, and I quote: "It is the Chairman's (Lord Marshall's) job to oust the CEO when needed". Ouch#@!*% Sources report that Marshall has already instructed recruiters to look for a replacement.

My own advice to Allen Yurko (which I know he doesn't need): "Watch your back!"

Click Invensys buys Baan - background and follow-on impact

Stay tuned...

eNews : 9 July '01

Invensys : Yurko prepares for October exit

The UK Guardian (Friday July 6, 2001) had this story:

Allen Yurko, the embattled chief executive of Invensys, appears to be preparing the way for a smooth, lucrative departure from the troubled engineering group. According to the latest annual report and accounts, Yurko's retirement package was "sweetened" this year to provide him with a potential $7.5m pay-off through his pension deal alone.

Yurko is now able to take the contributions totaling almost $450,000 a year which the company would have made into his pension fund in a single cash payment should he leave after the age of 50. The Invensys website lists his birth date as 25 Sep 1951. So, he should be able to exit on, or any time after, that date.

The sudden change in the small print of his contract increased speculation that he was prepared to take the blame for the 20% slump in share price to 120.75p yesterday (Thursday 5 June 2001). The stock price was over three times that before the big decline, with a 52-week high of 277.50p and low of 106.5. Early today (Monday 9 July '01), Invensys stock hit a low of 116.75p.

The sale of Yurko's $6m home in the Surrey stockbroker belt on the edge of the celebrity-packed Wentworth Estate in Virginia Water added to the speculation last night. The sale is said to be merely because Yurko is tired of commuting (from the home that was close to the old Siebe office in Windsor) and is moving his family to the similarly up-market Kensington area of west London.

An Invensys insider provided this not-surprising insight: "If Allen Yurko left, Invensys would collapse in short order - there is no internal succession."

Concurrently, 2 separate sources reported that Kathleen O'Donovan (Invensys CFO, who came with the BTR merger) is also looking for an exit. With the recent pay-cut and pay-freeze, and all options massively underwater, friends report that she wants a quieter life.

Click Read the Guardian story

On the Invensys website, you'll find an excellent video interview with Allen Yurko: a controlled, yet arrogant response to questioning about the ugly preliminary 2001 results. Judge for yourself.

Click Yurko Interview

eNews : 20 July '01

Invensys decline continues

On Thursday 19 July '01 (as we go to ePress), Invensys shares closed on the London exchange at 102.95, with a low during the day of 101.25. Compare this with a price of about 400 when Wonderware and Eurotherm were acquired, before the BTR acquisition. It seems likely that a drop to two-digit-p will occur soon.

The UK Guardian newspaper wrote this on July 12, 2001 (summarized here):

    "Invensys came under fresh attack yesterday amid fears that management will be forced to revise earnings guidance and scrap plans to float its power systems division. A profits warning from US rival Emerson Electric was the catalyst for the latest speculation, which left Invensys shares down 11.25p at 115p. Over the past month they have fallen by 25%.

    Traders were said to be advising clients that Invensys shares were heading for 100p and profit forecasts were too high in the light of recent poor news from the industry."

Click Guardian (UK) - July 12, ‘01: Electric shock for Invensys

Following previous Invensys coverage in eNews, I received a flood of support and appreciation - for news and views that no one seemed to be willing to report. A group of Invensys managers in Europe sent me this (summarized here):

    "The focus at Invensys is profit and cash. Everyday we receive messages like this :
    • Suspend payment to suppliers;
    • Avoid business travel;
    • Suspended all salary increases;
    • Suspend all new investments.

    Mr. Yurko seems like an Emperor surrounded by "yes men". The divisional chiefs spend all their time finding ways to present information to him, fearing his negative reactions. Yurko imposes an order just one millisecond after the answer is "yes". These so-called "senior-managers" then come back and present the decision saying, "We are sorry, but it is impossible to say NO in front of Yurko."

    Morale practically does not exist. Every one seems to be looking for a new job, because they know that sooner or later they will be fired. The only Yurko strategy that anyone understands is to make a profit by reducing people.

    Everybody has heard about Project UNITY. The question arises: Does this man know what he is saying? How is it possible to realize a project like this when BAAN is losing people every day and the software is practically a disaster? Project Unity mentions Deloitte & Touche - and everyone knows that the real target is to outsource accounting."

A senior manager at Invensys in Europe, after reading this lengthy diatribe, responded supportively :

    "Invensys may be teetering, but so are a number of others in the sector. We are not isolated from a declining market.

    "I don't think Yurko has swung from "good" to "bad" in the course of a year. He has reacted, perhaps too quickly, to a series of pressures and has obviously upset some people, not for the first time. But his perspectives and vision remain valid in a number of ways. Particularly the integration of software and hardware offerings is, in my opinion, market-leading."

I (Jim Pinto) had previously suggested that Allen Yurko was an excellent manager. Someone recently asked whether I had changed my mind. This feedback from Dave Hillquist, Plant Engineer, Inland Paperboard & Packaging, Ontario, California, changed my perspective:

    "It is interesting that you describe the calamitous misadventures of Invensys and then call CEO Allen Yurko an excellent manager. Is there any meaningful way to judge a manager's competence or effectiveness, other than by the results he or she achieves?

    "Yurko has all the resources at his direction, and, certainly, determining whose advice to follow is a fundamental part of his responsibility. I think the evidence shows Yurko to be a poor manager who has made bad decisions. Yurko may be able to explain his failures; he may be able to convince some that he is not responsible for them; but he really has no excuse. In this age of elaborate explanations it would do many people good to consider the difference between explanations and excuses. Yurko cannot escape his responsibilities by offering explanations.

    "There is a pervasive crisis at the highest levels of business management, which is illuminated by the situation of Invensys. It seems trite to say that management has a fiduciary responsibility to guard the interests of the stockholder, and yet this fundamental principle has been widely betrayed. Upper-level management has become a self-serving clique of insiders who each takes a turn at plundering the resources of the business. They receive fantastic sums in pay and bonuses whether they achieve positive results or not. In many prominent examples they leave serious damage behind them but depart cordially with high praise and still more exorbitant bonuses heaped upon them by the other insiders who wait in the wings for their own turn at the plunder.

    I think in most cases the actions in this deplorable scenario are motivated not by cynicism but by ignorance, arrogance and naiveté."

eNews : 24 July '01

Yurko out - stock dives

On Tuesday, 24 July, the Invensys board accepted the request of Allen Yurko to retire on 31 January 2002. Rick Haythornthwaite (45) will be appointed as Chief Executive on 1 October 2001.

The Invensys announcement commented that since Yurko is retiring at his own request, there will be "no severance payment to Yurko for his loss of office". What a bunch of baloney ! Yurko's ability to withdraw his pension plan as a $7.5m lump-sum was just approved weeks ago, indicating that he was about to exit any time after his 50th birthday (25 Sept. '01). With that in mind, note the dates above.

Chairman, Lord Marshall (when will he be booted?) was pleased that Kathleen O'Donovan, who had indicated that she wished to stand down, has accepted the request to stay with the Group and work with the new CEO. Of course, this is till he finds a new CFO replacement - which she surely knows, and probably accepted a "settlement" to not rock the boat with her own departure at this time.

On Tuesday, the Invensys stock traded as low as 73p, and ended the day at 85p. And now the group is being stalked by the likes of Alchemy (failed Rover bid, bought ICS and sold off parts) - for a break up play.

Click CBS Marketwatch - Invensys CEO goes, warns on profits

eNews : 27 July '01

Invensys after Yurko

After the Wednesday (July 25, 2001) Invensys annual meeting, The UK Times wrote (summarized here) - read the complete article for yourself.

Either the global economic scene is worsening at an alarming rate, or some executives are clutching at the R-word as a justification for abysmal performance on their part.

Invensys profits are a 30% less than forecasted just 3 months ago, and the fact that the CEO is resigning indicates an acceptance that the short-fall may indeed be Invensys’s own making. Although that was not what Chairman Marshall or the departing Allen Yurko were saying.

As if the merger of Siebe and BTR had not been unfortunate enough, bundling Baan into the group compounded the problems. It may be that within Invensys there is a strong, specialist automation business just waiting to storm ahead as soon as the market improves, but Yurko failed to convince anyone of that.

The new CEO Rick Haythornthwaite (45) was introduced to Marshall by Yurko himself, just two weeks ago - there was no waiting-line for the role. The remuneration package that he is still negotiating will hopefully tie his rewards firmly into what he can achieve. Sticking to a one-year contract will be evidence of his determination to avoid any charge of "fat-cattery".

How can Haythornthwaite realize some shareholder value out of this sorry tale? A break-up of the business would certainly be tempting were it not for the fact that prices at the moment would be of the knacker’s yard variety. So he will try to impose new leadership and focus, while the company goes through another miserable round of job cuts.

Yurko, although he leaves "without a cheque to ease his ignominious departure", is hardly being consigned to poverty. A pension of close to $500,000 a year for a man not yet 50 should provide a cushion of comfort. If he opted to take a cash payment instead, he could be banking more than $7 million - not bad for eight years’ work and the achievement of reducing Siebe, once one of the great names in British engineering, to the muddle that is now Invensys.

Pinto Prognostications:

"Lord Marshall of Knightsbridge" who chaired the birth of Invensys, remains as chairman. One wonders how long he will continue to oversee this debacle? It will be interesting to see how he exits. If he had any class, he'd recognize the part he played in the whole ignominious BTR-Siebe linkup and remove himself. But, he is now busy pointing the finger at departing Yurko, so perhaps that is too much to ask....

Invensys is in bad shape. Most analysts think the net asset value is far below the already low stock. They expect Yurko to have taken a lot of financial short-cuts, which the new CEO will quickly disclaim, to make himself look "clean".

The major controls/automation companies are all interested - Emerson, Tyco, Siemens, Schneider are capable of doing a deal of this size, but they will NOT want all of Invensys, won't want to be doing the divesting of unwanted pieces, and won't want to take the write-offs.

So, the only acquirers left are the "vultures" - the people who will buy Invensys for the assets, and sell off piecemeal. Alchemy (who bought ICS, failed bid for British Rover) is on the list - but there are others. And, as the UK Times suggested, they'll pay "knacker's yard" prices.

Click Read for yourself : The Times (UK) dated July 25, 2001

eNews : 5 August '01

Invensys : Yurko's definition of what IS is

Apparently, Allen Yurko's full-scale retreat from the bloody corporate battlefield was summed up perfectly at last Wednesday's annual meeting, when he marched onto the podium to the strains of Tchaikovsky's 1812 Overture. (The piece was written to commemorate the disastrous retreat of Napoleon's bedraggled and downtrodden army from Moscow.)

In an interview with the UK Sunday Telegraph, a still unrepentant Allen Yurko brazened it out. He kept defending his strategy - merging with BTR and buying BAAN - with an arrogance reminiscent of the Clintonesque "depends on your definition of what IS is". Yurko on the merger with BTR : "The BTR deal was the smartest thing I have ever done." (Hmmm... that's not very smart.))

Recognizing how important BAAN was, perhaps "it should have reported directly to me." (That is an unfair slap to Bruce Henderson and others, who ran it admirably well, given the circumstances. Perhaps if Yurko had run it himself, it would not be in its present recovery mode...)

Yurko: "I do not accept that I have ever changed strategy." (Hmmm... in a fast-changing environment, that's a stupid statement.)

Yurko keeps falling back on his biggest excuse - that the US industrial economy is bleak - ignoring that fact that he had kept pushing his managers mercilessly for profits and cash-flow, which was a short-sighted palliative and would merely heighten their plight.

Yurko : "My mistake was believing things were going to get better way too soon, but that was my guidance." (Hmmm... who exactly was giving him guidance? People who worked with him report : "He'd never listen!")

Yurko summarizes: "I do not expect sympathy. I am not expecting people to give me high marks. I do not want the tone of this to be that I am feeling bashed. I am a big boy. I wanted to do the right thing and am not asking for special consideration." (Hmmmm... Who is offering sympathy? Who is giving him high marks? His pension of $500k/year or $7.5m immediate cash-out was "special consideration" indeed.)

One senior cohort reported: "Allen seemed sad, during a lunch last week". I must admit I couldn't stop laughing.

Click Read for yourself : Telegraph Interview with Allen Yurko

Invensys for sale

The UK Observer reported on Sunday (29 July '01) that Invensys "is putting itself up for sale". The newspaper quoted senior company sources as saying the board was interested in attracting bidders. "If there is a sensible offer made for Invensys or any part of it, we would definitely consider that very seriously."

The unofficial price tag was set at 8-9 billion pounds - compared with market-cap of 2.9 billion pounds (on Friday 3 August '01, the stock closed at about 82p, compared with 400p when this mess started). Underlying message : Invensys is for sale - make an offer.

One Invensys employee from Australia wrote this : "I hear that INVENSYS can be bought for 8-9 billion pounds. I wonder how much they expect to get for me?"

Click Financial Times Market-watch - Invensys keen to sell up

The new CEO, Rick Haythornthwaite (45) will be paid about $1m per year (a cut from Yurko's salary of $1.2m). No one knows yet what Haythornthwaite's incentives are, for saving (or selling off) Invensys. His biggest claim to fame is that he sold a cement company to its major competitor.

The new million-$ man, wrote this to his new employees (extracts from his memo):

    "I took this job because I am convinced that there are fundamental strengths in the Group and its people which are just waiting to be released. My first impression is that Invensys is a good company, with the potential to be an even better one. We have a strong base on which to build: strong market positions, advanced technologies and good relationships with our customers."

Hmmm... Haythornthwaite seems to be rehearsing his pitch to possible buyers.

    "My first priorities will be to stabilize the business, build confidence in Invensys' future with the financial community and develop my understanding of the Group as rapidly as possible."

Hmmm... It will be interesting to read Haythornthwaite's words when he announces to the same employees that they've been sold off.

Click Invensys Chiefs come under fire

Pinto Prognostications:

I had ONE nameless email feedback - "Give the Yurko and Invensys bashing a rest. Every major industrial controls company is suffering from poor sales." When I asked the person for a name (which I would have kept confidential, in any case), there was an ominous silence.

In the meantime, I have received a lotttt of appreciation, especially from employees: "Pleeeease continue - we get very little feedback internally; everyone is paranoid about what is going on."

All things considered, I'll continue to provide a summary of new-news, sprinkled with some of my own prognostications.

eNews : 10 August '01

Invensys : Yurko's last stand

Earlier this week (Monday, August 6, '01) the soon-to-be-departing Allen Yurko sent this letter to all his key staff (summarized here):

    "Comments about the Group following announcements last week have raised concerns. These comments refer to our financial position, particularly our debt levels, and also the future of the Group as an independent company.

    "What Invensys is going through is no different or more extreme than most of our competitors, or industrial companies in general. Our debt levels are manageable and we do not expect to break the covenants that govern them. We are actively managing down our working capital and containing capex. In short, we are implementing exactly the right programmes to weather this storm and emerge stronger, without sacrificing any aspect of customer service.

    "I believe that Rick Haythornthwaite will therefore have a solid platform from which to build winning strategies to catch the maximum benefit from the upturn when it comes - which inevitably it will. And make no mistake, Rick was brought in to GROW the Group, not sell it. If the Board had wanted to do the latter, they would not have needed a new CEO, they would simply have asked me to do so.

    "As for Rick's former company, he did not set out to "sell" it. He substantially improved its performance, reshaped it and then was forced to fight off a prolonged hostile bid, which he did, successfully. Ultimately, however, the offer was increased substantially and became friendly. Rick's Board, in the interests of good corporate governance, had to accept. So in fact, Rick is today widely admired for actually fighting hard to keep Blue Circle independent.

    You need to share these insights with your customers and suppliers. You need to get across our key message - "it's business as usual at Invensys"."

Pinto Prognostications:
This letter is all "flannel". No one can expect Yurko to say: "we are in desperate shape and need to sell assets to keep afloat." While this is the truth, to announce it would reduce the value they could get for those assets. They are now considering all offers for pieces or all of Invensys. As Yurko suggests, they must - "in the interest of good corporate governance".

That Invensys is doing badly, like everyone else is baloney! Invensys was going wrong for some time before the US slowdown started. Invensys and Emerson are the two closest comparators and actually make very similar products. Invensys profits will halve this year; Emerson will be down about 10%. Others too have had downturns, but (other than Honeywell) no one is "in extremis".

Right now, Invensys finances look very stretched. The new CEO appears to have no idea of what he is getting himself into and he is soon going to find that the accounts are in bad shape. Best guess is a big restatement, asset write-done, yet more restructuring and probably a fire sale of assets, maybe even an emergency rights issue.

Yurko was a good Manager. But, over the last couple of years, he fell prey to the notion that he could delegate and didn't get down into the details. Make no mistake, he was fired and is (in American lingo) "the fall guy" for Marshall - who is now steadfastly avoiding blame in the Invensys disaster. A review of all the companies that have Lord Marshall of Knightsbridge on their board is a painful one. The City of London is quickly wiseing-up to that fact.

There is little doubt that Rick Haythornthwaite currently believes all that Yurko’s letter contains. He is in for a rude awakening - soon. When he does, his Blue Circle background might stand Invensys in good stead.

eNews : 20 Sept. '01

Haythornthwaite fiddles while Invensys burns

Invensys stock closed at 38.00p on Wednesday 20 Sept. '01, bringing market cap to 1.330b British pounds, or $2b. The latest share price and market-cap has always been reported on the Invensys home page - now it is conspicuous by its absence.

Meanwhile, Rick Haythornthwaite who officially becomes CEO on 1st October (his compensation package still not disclosed - if it is and you know, let me know) sent out the first of his to-be-regular memos to all Invensys employees.

The departing Allen Yurko is still poking his finger in the pie with memos to all employees. Perhaps he is protecting the few shares he purchased recently - now down to a fraction of what he paid. One would think his handsome pension and departure-perks should obviate that need.

Haythornthwaite’s first memo says he wants to "come up to speed as rapidly as possible to steer Invensys to higher growth, profitability and performance". He asks for "the commitment and energy of every person in the Group" and invites people to send him questions and comments:

  • Fax : (44) 20 7821 3709
  • Email :

Hey, if you are a concerned Invensys employee, why don't you do just that? Email (or fax) a copy of this segment of eNews - let's see how many copies Haythornthwaite gets.

Will Project Unity go ahead in the way it was originally planned? Haythornthwaite gives a "straight" answer: "Unity is absolutely the right thing to do. However, it is also obvious that our exact requirements for Unity are dependent on the shape and future direction of the Invensys strategy".

The "however" is the out. In my opinion, as soon as Haythornthwaite recognizes that vital elements of Invensys companies will be destroyed by project Unity , and the divestment value will decrease, he will cancel it. Perhaps he is placating the still-around Yurko (who came up with this dumb idea) and will dump the decision when Yurko departs.

In the meantime, key Invensys IT employees have stated:

    "I'd be more than happy to be outsourced to IBM as it is a much more stable and secure company than Invensys is at this point. It's very difficult to work at Invensys now - we haven't paid many of our vendors for weeks now and will continue not to pay them until October. Many companies don't want anything to do with us."

Click Invensys statement (19 Sept. 01) response to share-price movement

eNews : 28 Sept. '01

Invensys : Recovery or bust

A new report on Invensys has been published by Peter Reilly and others at Deutsche Bank, UK. It addresses various potential scenarios and concludes that Invensys will trade out of difficulties, but with the possibility of financial default.

The collapse in the Invensys share price creates a stark dilemma: at a price of 34p, the stock market appears to be assuming that Invensys is not financially viable. Shareholders face the possibility that the new CEO may restate historical profitability.

Three quarters of the Invensys enterprise value is now debt. The company’s debt and committed facilities give it sufficient headroom for maneuver for the time being. But, the worry is that it may breach its covenants for the year to March 2002, which might enable the lenders to impose a restructuring program including forced asset disposals or even force the company into liquidation.

For a copy of the complete Deutsche Bank report, contact Peter Reilly :

eNews : 5 Oct. '01

Invensys - what's for sale

The new CEO, Rick Haythornthwaite sent this personal message to all his key people :
    "Stay focused on your customers, chase down every order, make that sale, save money wherever you can. Remember that seven days can bring a lot of income into a Group as big as ours. There is work to be done and a significant prize to play for."
Most know what Haythornthwaite's prize is, though they don't know what's in it for them, and are doubtful whether they'll be around to collect anything other than a pink-slip.

Industry analysts remained glum and confusion remains over Invensys' GBP 3.2 billion debt position and banking covenants.

Haythornthwaite has said he plans up to GBP750 million of asset disposals. But, since most buyers are aware of Invensys' need to raise money quickly, they'll simply offer fire-sale prices. So, it's no small task.

Someone at Alchemy (the bottom-fishing UK vulture-capitalist which bought ICS) reported that the breakup process is already well underway and that the divestment of several units is already proceeding to the due diligence stage. The process they are using is to basically put everything on the block and find the businesses/sectors that offer the highest gain potential. Once a business has been set up for divestment, other units that are similar will also be divested. Those divested will be publicly declared "non-strategic" and the residual balance of undivested elements will be spun under the cover of "we are retrenching to our core competencies". Of course, the core competencies in this process are only those they cannot sell on a net-gain basis.

Meantime, within Foxboro, APV and others, speculation is mounting over which units will be sold.

One insider reported :

    "We have heard that Foxboro is for sale and there are several interested parties. But, Foxboro is being bundled with Wonderware and (are you ready for this?) BAAN - that wonderful company that Yurko wasn't sorry he bought."
RIF Rules: "The penalties for amputation and dismemberment are severe!"

Click FT (UK): Cool head takes charge to guide Invensys forward

Click FT (UK): Invensys plans up to GBP 750m asset disposals

eNews : 12 Oct. '01

Invensys proceeds towards dismemberment

Bruce Henderson Departs (last of the good-guys)
Allen Yurko has departed (October 1), presumably pocketing his princely pension, leaving his replacement Rick Haythornthwaite to preside over the dismemberment of Invensys. The following is the gist of a Haythornthwaite memo issued this week:

    "Bruce Henderson, Division Chief Executive of Invensys Software Systems, is leaving the Group. Effective immediately, the division will report directly to me."
The rest of the memo was a poorly written, thinly disguised blah blah about Henderson doing an excellent job, etc. You don't make a major move like this, unless you have a successor at the gate. It simply means that Haythornthwaite had no choice; Henderson was the last of the good-guys. I challenge anyone to come up with a single name within the totally depleted management ranks that could have replaced him. The hordes of hungry hangers-on will simply fall in line, meekly awaiting dismemberment.

And so, dismemberment proceeds. An insider close to the top sent this:

    "Rick will sell whatever he can get a decent price for. I can't see that either the existing divisional structure or any previous ideas about what is or is not core business will be relevant; "cash is king" in this situation.

Project Unity proceeds
I had guessed that Haythornthwaite would waite till Yurko departed before he cancelled "Project Unity" - the outsourcing of IT and some key functions to IBM and others. I was wrong - it looks like he is fighting too many alligators to stop the momentum. One wonders whether IBM knows that what they're really buying is a relationship with a fast disintegrating organization.

Click IBM and Invensys team up

Action Instruments Manufacturing shutting down
Forgive my picking on a fast-declining Invensys. In the past I had no "grudge" - only encouragement and appreciation from lots of Invensys employees worldwide, who wrote:
    "No one tells us anything! Your clear, blunt reporting of the facts is critical at this juncture. Career decisions need to be made to adjust to the situation and your emails are very informative."

Now however, I am genuinely upset!

Action Instruments - the company I founded 30 years ago, acquired by Eurotherm (my choice), which in turn was sold to Invensys (not my choice)- has been informed that all manufacturing will be outsourced. So, some 60-80 manufacturing people (some there for over 20 years) will be out of a job. Under these conditions, how many others do you think will stay?

How can I comment on this stupidity? I shall - in an article I have brewing: Stupidity is more destructive than Malevolence!

Here is the theme: If someone set out deliberately and maliciously to plan the demise of good companies like Action (or APV, Foxboro, Eurotherm, Wonderware) they could NOT do as much damage, as quickly, as sheer stupidity.

The Invensys yes-men, middle-men who perpetrate such idiocy will get short-shrift when the parts of Invensys are sold off soon to hopefully more sensible acquirers.

'nuf said. I'll let you know when and where my commentary is published.

eNews : 22 October '01

The fall of Invensys - tracking the story

Invensys has already admitted that it is in danger of breaching its banking covenants and wants to sell up to GBP 750m of businesses to cut its debts. Interesting, this is almost exactly the amount that Allen Yurko paid for almost bankrupt BAAN, just over a year ago.

According to the UK Independent (Sunday, 21 Oct. 2001), Invensys now has a potential value of zero, implying that it could go into receivership. "We have assumed the company fails to reduce debt and falls into the hands of its bankers."

Click UK Independent news story (21 Oct. 2001)

This past week Invensys stock climbed inexplicably to mid-50p, amid some rumors that Foxboro and other ISS companies are already in the final stages of being sold off. Some suggested that Bruce Henderson was no longer needed, because the acquirer would bring in new management anyway and Haythornthwaite would be "acting" out the role during the due-diligence period.

About my labeling of Bruce Henderson as "the last of the good guys", one insider retorted:

    "You must be joking! Every time you mentioned Al Yurko and his yes-men minions, I would envision Bruce Henderson's face. Bruce was an invisible manager, and thus it is unlikely that he will be missed here at Invensys. The inside word is that Rick had no confidence in his ability to execute."
Regarding my challenge to name just one good-guy who could step in as Henderson's replacement, the same knowledgeable insider responded:
    "That's a tough one! The division as organized makes no sense. Some of the pieces have obvious synergies, but who would place APV within a software company? The inside word has it that Mike Carmen (you know - that savior who left within weeks) figured this out but dishonored those who hired him when reporting that the combination of APV and Foxboro to form a division made no sense.

    "It's pretty clear that Rick is going to have to sell things, and it is also pretty obvious that the timing could not be worse. It's awfully hard to deny that he has started to dismember the thing. You have to wonder how he will get on with the dismemberment while the company is busy dissolving legal entities and the infrastructure that made up some of the saleable pieces.

    "Guys like Haythornthwaite negotiate their golden handshake on the way in...."

eNews : 28 October '01

Invensys : Leo Quinn is new ISS Chief - but is GE buying Foxboro?

Battling bravely to stay afloat, Rick Haythornthwaite, who had only just announced that he would assume departed Bruce Henderson's role, came back the following week with the announcement that Leo Quinn had taken the job. All businesses within the ISS Division now report to Leo Quinn, except Baan.

Leo Quinn (44) left Tridium, where he was the "President of Europe, the Middle East and Africa". This title meant hardly anything, except an honorific, at Tridium, a small (about 100 people), privately-held company based in Richmond, VA. (USA).

Interestingly, Tridium was started by technology visionary Jerry Frank, formerly from Robertshaw Building Controls & Energy Management systems which became part of Siebe (Invensys). Jerry Frank quit in disgust when he was rebuffed by George Sarney, the dour, uncharismatic chief of Siebe Industrial Controls (long since departed). Small world...

Before Tridium, Leo Quinn spent 17 years at Honeywell, most recently in Home & Building Controls. No one who is anyone at Honeywell seems to know much about his track record - good or bad. (If YOU know something, let me know). It seems to me that Haythornthwaite dumped the job on the first person that agreed to take it.

Leo Quinn quickly sent off an email to everyone at ISS (the words eerily similar to the one composed by Haythornthwaite just a couple of weeks earlier): "Ultimately, our ability to succeed rests on your very capable shoulders. Meeting as many of you as possible, getting your input and discussing our objectives, is one of my immediate goals. I also welcome any comments or questions you may wish to send me via email and promise to respond to them directly."

Hey, Leo Quinn may indeed be a good guy - give him a chance! Tell him what you think - send him an email.

  • Leo Quinn Email :
A senior Invensys executive commented:
    "Invensys has proven much better at acquiring assets than consolidating those assets into something more valuable than the sum of the parts. There have been some recent moves to address this, but it will probably be a year or more before we can actually measure the results. I question whether Leo Quinn and Invensys Software Systems will get that year."
Meanwhile, a Foxboro insider reported:
    "We just heard indirectly (through a GE owned company) that we now belong to GE. We are not exactly thrilled - GE is said to out source everything and they started checking serial numbers on all the machines today."
A UK financial analyst who reports regularly on Invensys stock, wrote:
    "Let's stay tuned for Haythronthwaite's comments with the 15 November interim financial report. Those comments could speak volumes."

eNews : 25 November '01

Invensys still stewing

Invensys’ interim results for 6 months ended 30 September 2001 were announced by the new CEO, Rick Haythornthwaite. Apparently, a lot of investors felt that the worst was over, and the stock jumped over 100 (from a recent low of 27) - not bad!

Haythornthwaite warned that it is entirely feasible that Invensys will be a very different looking group and warned that a break-up cannot be ruled out. He confirmed that a variety of businesses would be sold off, but the new shape of the company would not be revealed until February. He announced that another $0.5m might be spent in another shake-up; even as he spoke, Foxboro and others reported more RIFs and layoffs.

One distraught Foxboro employee reported:

    "On bloody Monday, Nov. 12th, 150 people were axed in the USA, Business Solutions was slaughtered and Performance Solutions was decimated. 125 were axed at EMEA, with additional reductions in the Pacific Rim. VP of Technology Larry Gozzard, who was brought in about 2 years ago, was let go on Friday. 500 more Invensys employee layoffs are planned."

Another long-term insider gave this news:

    "After being split a couple of years ago, Foxboro's systems division and the M&I (Measurement and Instrumentation) divisions are being merged (again) by March 2002. Out of this, one Quality Manager, one Test Engineering Supervisor, etc. will survive the cuts. All for the good of the bottom-line."

A source close to strategic high-command at Invensys whispered:

    "Invensys will completely ditch the Process Solutions side of the business, and will concentrate on the hardware and the servicing of their hardware alone. Talk about being myopic, it really signifies the beginning of the end. Most companies acknowledge the fact that the I&C market in North America is shrinking, and growth lies in service. Invensys will swim upstream to (maybe) spawn, but certainly die. I guess that a process solutions market value of $5 billion dollars is not worth it to them. So, is this what Leo Quinn the new President of ISS is doing?"

When rumors persisted that GE is buying Foxboro, a knowledgeable major competitor commented:

    "GE is smart enough to NOT fall for the fluff - it would be a complete surprise. We have been in talks with Invensys about buying pieces and I think that they would surely tell us to try to get some bidding going, but who knows."

Click UK Observer - Jury is still out on Invensys

Click All the Invensys you could possibly stand at MotleyFoolUK site

eNews : 25 November '01

UK worst bosses 2000 - Invensys 2 out of 5

Last year, the UK Investors Chronicle ran a story on Britain's worst bosses in 2000 - five people who had tried and failed to live up to their jobs. The five included 2 from Invensys:
  • Allen Yurko, Invensys CEO till 6 weeks ago
    During Yurko's tenure, shares in Invensys fell from an all-time high of 400p to less than 30p recently, wiping out more than $15b of shareholder value. During the recent announcement of results Haythornthwaite, the new CEO, gave a damning indictment of the way Yurko had run the troubled company. Yurko had spent so much time on "excessive restructuring" and shedding jobs that the company had failed to look after its customers. In less than three years Yurko had shed 23,000 jobs and issued a series of profit warnings, till he eventually "resigned" (with a $ 7.5m pension in his pocket). He was paid about $1.5m a year, while the new CEO gets "only" about $1m.

    In the midst of this lambasting, Yurko "agreed to remain" till January 2002; one wonders what he is doing, and is he actually being paid a salary in the interim. Still a young man (50), where will he turn up next? Perhaps there is still someone out there who hasn't read the headlines and can still believe the Yurko yuck.

  • Lord Marshall of Knightsbridge (to give him his full title)
    The pompous and xenophobic chairman of Invensys (and also British Aerospace) is responsible for talking Yurko into merging Siebe with pig-in-a-poke BTR. He sneakily sidestepped the blame as Yurko was ditched. Now Invensys is close to dismemberment, and BA (the airline) faces perhaps its biggest challenge yet. Under pressure to resign, Marshall gave up the deputy chairmanship of BT; one wonder when he will actually be booted out of his remaining charades.

Click Britain's worst bosses 2001: where are they now?

Stay tuned....

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