Rockwell Automation doing well under Keith Nosbusch

Several people have asked why we have not made too many comments about Rockwell Automation recently. I had indeed predicted that the company would be aquired sooner or later. But now, with their stock trading up near $60, more than 4x what it was when they spun off Rockwell Collins, they seem to be doing fairly well.

With the departure of Don Davies, who'd perhaps been there too long, Keith Nosbusch jumped firmly into the saddle as Chairman and CEO. Keith, still a relatively young 53, is a lanky (6-foot-2) electrical engineer and former co-captain of the University of Wisconsin football team. He was in charge of the Controls Division before becoming CEO last year.

Rockwell Automation went through a long string of debilitating reductions and re-structuring over the past couple of years, and now seems to have emerged from that turmoil. Now, under Keith Nosbusch, the company seems to be doing well. With their stock at $60, this gives the company a market-cap of $11 billion, which makes them almost impossible to acquire - unless someone wants them really badly.

The possible high-bidding acquirers could only be Siemens or Schneider, who'd both be stopped by anti-trust. In my opinion, Emerson is not interested, and GE is unlikely. And I'm not sure what happened when Sandy Cutler was fishing around for Eaton about a year ago.

I compliment CEO Keith Nosbusch and Rockwell Automation on the progress. I admit that I was wrong about the company being acquired.

Keith Nosbusch now the boss at Rockwell Automation

Well, the announcement came on December 1, 2004. Don Davis is finally about to made his planned exit from Rockwell Automation. Following the company's annual shareowners meeting on Feb. 2, 2005, Davis will retire as Chairman after 42 years with the company.

This leaves Keith Nosbusch in charge as Chairman and CEO. Nosbusch, 53, is a lanky (6-foot-2) electrical engineer and former co-captain of the University of Wisconsin football team. He began his career at Allen-Bradley, and stayed on after Rockwell International bought the privately held company for $1.6 billion in 1985. He was in charge of the Controls Division before becoming CEO last year.

Now that Keith Nosbusch has moved out from under the wing if Don Davis, it remains to be seen what his impact will be on Rockwell. The Rockwell weblog reports a key perception problem - Keith Nosbusch is a detail-driven workaholic, while Don Davis seems to spend all his time with Wall Street analysts. So now, will Nosbusch step up to the plate and initiate some much-needed change?

Will Keith bump his own salary up to the $2m level (which Don Davis was collecting), or will he make up the difference in performance incentives? Employees, who have been hit hard by many cutbacks over the past couple of years, are waiting to experience the Nosbusch factor.

Rockwell moves ahead under Nosbusch

Rockwell was once an aerospace conglomerate (rockets, chips, auto parts) with $13 billion in sales. Then in 1985 it outbid Siemens and others, paying $ 1.6 billion to buy privately held Allen-Bradley, the US leader in programmable controls. Don Davis, a long-term A-B employee, rose to corporate leadership and helped Rockwell to spin off, or sell off, all the other businesses. Rockwell Automation emerged, a pure-play automation business leader, with only about $4 billion annual revenue.

When the industry recession came some years ago, Rockwell Automation stagnated, cutting back to achieve profit objectives. Programmable controllers were now commodities, and Rockwell moved into software and industrial networks. Global Manufacturing Solutions (GMS) was formed to offer systems integration, competing with the company's own systems integrator sales channels.

Don Davis, now 64, has handed over the CEO reins to Keith Nosbusch, while still remaining Chairman. Keith Nosbusch, 52, began his career at Allen-Bradley as an electrical engineer and rose to become President of the Controls Division. He's a decent manager, but doesn't seem to be able to re-motivate his troops, many demoralized by continuous cutbacks.

At the recent RA Automation Fair, things seemed upbeat. A knowledgeable industry analyst reported that RA technologies are really coming together - perhaps the best (outside of Emerson Process) for integrating all platforms, and broader by far than Emerson. It seems like the Distributors are on board for the new ways of selling. The key thing missing was Keith Nosbusch; no keynote speech, no mingling; he wasn't anywhere to be seen (someone said he was there for just one day out of the three). The Rockwell weblog reports a key perception problem - Keith Nosbusch is a detail-driven workaholic, while Don Davis seems to spend all his time with Wall Street analysts. Neither has the charisma of say a John Berra of Emerson.

Interesting new people shift: Kevin Roach, VP at GE Fanuc has joined RA to take over Rockwell Software. Kevin is a smart guy, who sold his tiny company Sensor-Pulse to Total Control Products, which itself was bought by GE Fanuc. Kevin was given responsibility for Cimplicity software and was instrumental in the purchase of Intellution by GE-Fanuc from Emerson. Now it will be interesting to see how the demotivated Rockwell Software group fares under Kevin Roach's leadership.

Rockwell Automation has grown about 5% this year, with revenues of $4.3 billion - mostly hardware, software and systems/maintenance contracts, with some electric motors and drives. All the tough cost-cutting has resulted in profits of about $300 million and 36% increase in earnings per share. Market-cap is a respectable $8 billion.

There are too few strategic buyers who can afford a friendly acquisition of this size. Siemens and Schneider are direct competitors and would likely be blocked by anti-trust rules. GE, Emerson and ABB continue to feign interest, but don't seem to like the strategic misfit. Honeywell (Industrial Process Solutions) was once a strong strategic partner, using RA network software and hardware developments to strengthen its own solutions portfolio; but then that Division of Honeywell itself got into trouble and interest fizzled.

Rockwell's current healthy $ 8 billion market cap makes it difficult for a peer company like Eaton (sales $ 9 billion, market cap $ 10 billion) to acquire at a premium. But, Danaher (sales $6.5 billion, market-cap $ 18 billion) may have a better shot, if it chooses. In the meantime, Rockwell Automation remains "independent".

Don Davis' pay is still more than double that of CEO Nosbusch, plus healthy stock options. But, Don's efforts with the analysts seem to be paying off - ROK stock has climbed steadily to $43 (Nov. 2004), a healthy 25 times trailing earnings and well above the level at which he was supposed to be exiting. But he hasn't departed - yet. So, what's he waiting for? A Nosbusch nudge? Or retirement age?

Stay tuned...