JimPinto.com - Connections for Growth & Success™
No. 94 : August 8, 2002

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

  • Stock options accounting becomes a PR stunt
  • Automation update - stock options & golden parachutes
  • Low cost personal robots are coming
  • Pinto brothers - powerless pump & Indiatel
  • Never, never be the lowest bidder!
  • eFeedback:
    • Open communications inhibits spread of narrow-minded cults
    • Homesteading in Florida - keeping a mansion after bankruptcy
    • Invensys strategy - sell off the winners, turnaround the losers

Stock options accounting becomes a PR stunt

While political piranhas continue their feeding frenzy, corporate culprits continue to scale down their supposed sins, hurrying to throw out babies with the bathwater.

The politicians orchestrated public "perp walks" - parading people with pin-stripe-suits as perpetrators. Among others, Scott Sullivan of Worldcomm, whose mansion was described in the previous issue of eNews, was dragged off in chains in full-view of TV cameras; he walked away a few minutes later with $10m bail, with that very mansion as collateral.

But these are NOT the only bad guys in corporate America. Top brass at Enron, Imclone, Tyco and others have all run afoul of the law. Of course, WorldCom is already toast. If Sullivan and others (including ex-CEO Bernie Ebbers?) are guilty, let's hope they'll get locked up; I suspect that their lawyers will get them off. Then what will the politicians do?

As if to show that corporate corruption is over, several major companies have suddenly decided to treat stock options as an expense on their P&L statements. While this does stem abuse of the system, it also cuts off a key incentive mechanism that has been used very effectively to develop employee ownership. And too, this destroys motivation for risk-takers in startup situations. The judicious use of stock options is NOT wrong. The wrong people have abused it. Right now, it is being used as the sacrificial lamb, a PR stunt.

The payoff structure for options is interesting. Below a certain "strike price", options are completely worthless, so an executive has a huge incentive to do anything in his or her power to keep the stock price above their option price. The upside can be huge, with no downside at all! Executives with big salaries lose nothing if their options are "under water"; and they gain big time if the stock goes up, with an added expense to the company.

Click Internet resource for calculating and analyzing stock options

Click National Center for employee ownership

Automation update - stock options & golden parachutes

Rockwell Automation revenues decreased 13% to $2.91b for 9 months ended 30 June 02. But net income increased 57% to $177m, perhaps reflecting the recent cutbacks. Meantime, CEO Don Davis' salary remains at $934K with some good stock options in tow. The stock market decline is foiling Davis' plans to sell Rockwell Automation. His target sale price, an insider reports, is $30.00, which would give Don Davis a good payoff on his options. Meantime, ROK has dipped to about $17.00 (August 7 02).

Speaking of stock options, notice that Invensys CEO Rick Haythornthwaite and CFO Kathleen O'Donovan have both been issued over 2 million share options just recently (eNews 23 July 02) at exercise price of 100.35p, exercisable after 3 years. Haythornthwaite now has a total of 2.2m options; O'Donovan has 2.4m. The stock oscillated around 60p this week, so those options are currently worthless. Wouldn't it have been more fair if there was at least some penalty, to compensate for the gain they might make if the stock jumps?

In any case, an insider reports that Kathleen O'Donovan will be exiting soon, as announced at the Invensys annual meeting. So, her 2.4m options are worthless. Apparently, O'Donovan is hard to work for and dislikes a lot of people. If Invensys stock doesn't go back over his option levels, look for Haythornthwaite to jump ship too.

Meantime, Lord Marshall of Knightsbridge is still Chairman, perhaps just to annoy everyone - insiders can't think of any other reason. Marshall, who should have been booted along with ex-CEO Yurko, recently bought 50,000 shares of Invensys stock. Perhaps this was meant to demonstrate his faith in their dwindling fortunes; or perhaps he felt that it would save his job for a while - how could they ask him to step down now?

While we're reforming executive compensation, maybe we could get rid of those golden parachutes that allow CEOs who run a company into the ground to walk away with millions.

Is anyone asking Allen Yurko who ran Invensys into the ground, to payback some of his not inconsiderable salary, or refund the handsome pension he got when he walked away?

Is anyone asking why Michael Bonsignore of Honeywell got several millions of dollars after Larry Bossidy booted him out for screwing up the Allied-Honeywell combination and the GE merger?

Hey, perhaps we can parade these guys with a perp-walk at the next ISA show....

Click Rockwell Automation CEO and CFO File Financial Certifications

Click Invensys rewards Yurko for failure

Low cost personal robots are coming

You know, robots have always been my favorite toys. Even as a kid, I was fascinated by mechanical gadgets that looked like they were thinking and moving. I bought the first Heathkit HERO robot (1975) and programmed it to patrol my home-office, warning the kids when they approached: "You are not allowed to be here!" At odd times, when I was away on a trip, HERO would announce to my wife "I love you!" She called me frantically once while I was in Europe: "How do I switch this thing off!!?" (It was battery-operated; when she unplugged it, it still kept going....)

Since the dawn of the Industrial Age, people have dreamed of intelligent machines to attend to mundane chores. Industrial robots have assembled cars for years, putting the same weld in the same spot hundreds of times a day. But household robots have been difficult to develop because the average home is infinitely more chaotic than the controlled environment of a factory floor.

The market for personal robots has not burgeoned as predicted over the years. But the forecast remains - robots are coming!

The $500 ER1 from Evolution Robotics is arguably the first mass-produced robot to perform helpful tasks. It is essentially a metal box with a camera on wheels; users simply attach a laptop.

The 2-foot tall ER1 is capable of performing 99 distinct behaviors - grab things from the kitchen, greet visitors at the front door, find car keys and snap photos of the baby-sitter. Show it an empty bottle and it scoots across the room to pick out a Heineken from among cans of Coke and Mountain Dew. After grabbing the beer in its mechanical claw, ER1 returns with the brew and a pleasant "Here you go."

Unlike other personal robots such as Sony's humanoid and AIBO dog (eNews 12 Jan. '01; 5 Mar. '02), ER1 is the first mass-produced robot to perform at least nominally helpful tasks.

Evolution Robotics says they can do for the personal robot what Microsoft did for the personal computer by setting a standard operating environment in which others can innovate. The company expects early adopters and hobbyists to develop applications for the robot, much as software developers did for the first personal computers. Once Evolution Robotics determines how people use the robots, they plan to release models pre-programmed for specific purposes - such as security or elderly care.

While the world cup was still being played this year, Honda's Asimo robot kicked a soccer ball to start the RoboCup competition at the Robotrex 2002 exhibition in Japan.

Some people think that the robot will emerge as the driving force of electronics this century, akin to computers and automobiles in the last century. This type of engineering and development seems to be going on more in Japan than anywhere else. Will the Japanese wrest leadership in this key technology, as they have with a lot of other commercial electronics products?

Click Robots called electronics driver of 21st century

Click Personal robot of the future here today

Pinto brothers in India

I'm sure you'll permit me some personal proud proselytizing about what my brothers are doing.
Peter Pinto's powerless pump
My brother Peter Pinto is an inventive engineer, successful at major Indian companies, now retired and living in Pune, India. He recently invented a powerless pump which may interest you.

There are many remote places where water needs to be moved, but no local power is available to operate a conventional pump. Peter Pinto's radical new innovation harnesses the power of flowing water in rivers, streams and canals to pump without using any conventional power. It operates in a running stream of water just 4 or 5 inches in depth, and pumps 5000 liters a day up to 150 feet, running 24 hours a day with very little maintenance.

The Pinto powerless pump is useful for small farms, sprinkler systems and water storage in remote locations. Peter Pinto estimates the manufacturing cost to be about $100 in India. He feels that millions of these pumps could be used if the product is properly marketed.

Click Take a look at Peter Pinto's Powerless Pump

Click Send Peter Pinto email

Jude Pinto - Indiatel
My youngest brother Jude Pinto is founder and principal at INDIATEL, a significant telecomm consulting company in Mumbai, India.

Indiatel provides feasibility studies, market research, business intelligence, economic analysis and entry strategies for India's telecommunications markets. The company helps US and European marketers to assess Indian market possibilities, utilize appropriate technologies and find joint venture partners in India.

Indiatel has a substantial database of Indian markets, technologies, companies, projects and policies. They assist with valuations, tariff analysis, cost modeling for the Indian markets. And Indiatel publishes industry reports on a regular basis. Clients include multinational telecom services, technology companies and investment banks.

Click Visit Jude Pinto's IndiaBandwidth website

Click Send Jude Pinto email

My eldest brother Paul Pinto has settled in Hemel Hempstead, England for many years. Paul is a lawyer, a partner in a prominent law firm in London. He is now retired, and is active as a speaker and theologian.

My brother John Pinto is the founder of Precision Engineered products, a successful manufacturer of machined products in Bangalore, my hometown in India. We'll feature his company and products in a future issue of eNews.

Never, never be the lowest bidder!

When business is tough, some people feel that price-cutting may be the best way to generate business. But, that is a loser’s game, especially in the industrial automation business, which has a high level of applications knowledge and specialization.

Always remember - you are selling value: your knowledge, your experience in the business, your understanding of the problems that are involved, your ability to solve the problems that will inevitably come up, your availability to help the customer when needed.

Don't discount your company, your products, or your self. You might like to read my article on this subject, which has just been published by Automation Techies.com, August 2002.

Click Visit AutomationTechies.com to read this article

Click JimPinto: Never, never be the lowest bidder


I raised again the subject of 'soft solutions' for the hard problems of a new century. And we discussed the freedoms that widespread technology and communications bring to counteract totalitarian trends.

Jake Brodsky [frussle@erols.com] sent this eloquent and insightful commentary (summarized here). You can read the complete text of Jake's comments on the weblog at:

Click Jake Brodsky comments on the "Soft Solutions" weblog

    "With nearly a year's perspective on the events of 9/11, we have begun to realize that Al Qaeda is no more than a wild cult of personality run amok. It's nothing new. Such cults have brought us The Mongol Hordes, The Third Reich, and so forth. All of them eventually fell apart, sometimes after doing terrible damage and destruction.

    "Until recently, timely news and opinion was scarce and easy to control. People believed almost anything that came from authority because there was no way to dispute the leaders. But, no more. The big difference is not just democracy and freedom of expression. It's about control of media: there isn't any! And that is a good thing. The First Amendment of the US Constitution isn't so much a right these days as it is an acknowledgement of a fact of life.

    "Yes, there will always be those who want to simplify their lives by following some cult leader. However, those who do will remain at the edge of the bell curve of society - and they'll never amount to enough to do irreparable damage to anyone's society. Charismatic leaders will have to answer to the unrelenting glare of instantaneously distributed information.

    "Note that Osama Bin Ladin had to recruit and organize from the most backward and remote country in the world: Afghanistan, ruled by the Taliban. He would not have gone nearly as far had he tried this stunt anywhere else. "Technology and Communication in this new century bring the downfall of all would-be egomaniac leaders. When they stop making sense, people will simply ignore them. Our new leaders will be the information gatherers - those who detect trends and articulate them for others to follow. Welcome to the Brave New World!"

Responding to the story about executives of bankrupt companies with luxurious mansions in Florida, Peter Cleaveland [peterc@voicenet.com] wrote:
    "It's a cliché that 'money is how you keep score' among people at this level. Being known for having the biggest pay package is like being known for having the biggest you-know-what; it comes from the same basic impulse. That's human nature, and we're never going to change it.

    "On the other hand, there's a good reason for building mega-mansions in Florida: I believe that Florida, like several other states in the US, has no limit on the homestead exemption in bankruptcy. So if you fear that someday you'll be subject to restitution, you can always claim bankruptcy - and your fancy mansion and grounds are a nice place to stash some of your millions where they're hard to touch."

Responding to my recent negative comment about Invensys' strategy to sell of the good companies and turnaround the bad ones, Stan Devries, [Stan.Devries@Invensys.com] Director of Strategic Marketing at Invensys/Foxboro wrote:
    "I have worked for Siemens when they acquired a piece of Texas Instruments, and I have observed what they did to Moore and others. The best thing for Foxboro is Siemens buying Honeywell Industry Solutions - they will kill it. By the way, my contacts in Siemens say "no way" for valid reasons.

    "The Invensys strategy isn't as suicidal as it might appear. As you know, you build a strategy on businesses that can grow profitably, not on cash cows. The trick of course is to accelerate profitability and cash while implementing some intergalactic, rewrite-the-textbook strategy..."

Pinto comment:
In my opinion, the Siemens/Honeywell deal is still open, bogged down in price negotiations. In any case, Stan Devries' "contacts in Siemens" would not be privy to the negotiations which are at the top-level, and under non-disclosure.

For more on the Honeywell/Siemens situation, visit the JimPinto.com weblogs.

Click Honeywell weblog

Click Siemens weblog

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