JimPinto.com - Connections for Growth & Success™
No. 105 : December 6, 2002


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

Contents:
  • Eaton/Cutler Hammer to acquire Rockwell?
  • Ratio between executives & worker's pay - the gap widens
  • Wearable computers and ad-hoc wireless communities
  • First human clone due in January 2003
  • Morley book - Out of the Barn
  • eFeedback:
    • Corporate culture & change management in acquired companies
    • China dominance in valve manufacturing
    • ABB clarifies Oil, Gas & Petrochem divestiture

Eaton/Cutler-Hammer to acquire Rockwell Automation?

During the past couple of weeks, there was more than the usual noise about Rockwell being acquired by Cutler-Hammer. Employees of both companies heard that C-H would be buying Rockwell - effective after the first of the year. This news was not confirmed (or denied) by management of either company. It must be recognized that, if it was indeed true, management would be strictly prohibited from making ANY kind of comment.

The point about "after the first of the year" is based on this: the split into Rockwell Automation and Collins in 2002 included a tax provision that, if anyone buys one of the pieces on or before 1 January 2003, they would be assessed an additional $1b. So, any acquisition can be expected to occur only after that date.

Eaton, which owns Cutler-Hammer, has revenue of $7.1b, with market-cap of $5.3b at current stock value. Alex (Sandy) Cutler (50) is Chairman, President & CEO of Eaton and the key driving force. Last week he was reported to be touring some of the Rockwell facilities - which perhaps gave rise to the new round of rumors.

Rockwell has revenue of $3.9b with a market-cap of $3.8b at current stock price. CEO Don Davis (62) has no clear successor and is clearly looking for an exit, with at least some reasonable valuation for the company. At the local level Rockwell's focus is on operating earnings: "OE in 03", with concern about asset inventory. Some feel that tight controls are in preparation for new ownership.

Who can/will acquire? Only one of the majors can afford a purchase of this size. Honeywell, Invensys, ABB are too busy with their own problems; Siemens or Schneider (perhaps, though it would trigger anti-trust actions), Emerson (unlikely, they consider Rockwell as strategic dead-meat), GE (possibly - they've been buying at high prices recently), Mitsubishi or Omron (never, the Japanese don't know how to acquire), Eaton or Danaher are the only candidates left. With primary offices & facilities in both Milwaukee and Cleveland, Eaton is the best bet.

Rockwell (A-B) and C-H have been rivals for a long time, and perhaps it is that which fuels Sandy Cutler's fire. The cultures are vastly different, and channel conflict would be a big issue, especially in the US. Although some product lines would be compatible, others would be redundant - but eliminating redundancy is a clear win. From a global point of view, the combination of A-B & C-H would put clearly be in a position to compete with Siemens, Schneider, ABB and GE.

Will Eaton acquire Rockwell? Well, I guess we'll wait another month (January 2003) to find out.

Click JimPinto.com eNews 31 Dec. 2002 - Rockwell Reality Regression

Click Powerpoint presentation - Rockwell Analysts Meeting Dec. 5, 2002

Click Eaton Quarterly Report - Nov. 2002

Click JimPinto.com Rockwell Automation weblogs

Executives vs workers' pay - the gap widens

Even during hard times, executive and CEO pay continues to increase steadily. The use of performance-based pay to spur corporate executives are typically short term, encouraging them to pursue short-term gains at the expense of the workforce, and of the company's long-term performance. In fact, itís not unusual for CEOs and key executives to receive big pay increases, bonuses and stock-options, while their companies are laying off frontline workers.

In 1980, the ratio between the average pay for blue-collar-workers and CEOs was about 40. In 1990, this increased to 80 and in 2000 it jumped to an incredible 530! As the wage gap between executives and workers widens, some shareholders are actually working to link executive pay to workers' pay.

CEO pay is much higher in the US than in other countries, both in absolute dollar terms and relative to pay for the average worker. While American CEOs earns about 500 times as much as an average blue-collar worker, German CEOs make, on average, just 13 times as much. In Japan the ratio in Japan is 11, Canada 20. For Mexico (with low-paid workers) the ratio is 46.

Click Business Week: Executive Pay continues to explode

Click CEO Compensation

Click Chief executive officers' pay exploded in 1990s

Wearable computers & networks

At various times, we have covered various types of wearable computers and gadgets in eNews. The trend is increasing, not just for the techy or geeky fashion, but because there are times when it makes a lot of sense.

The crowds who surround us every day constitute a huge waste of information that could usefully be networked. If you live in a big city for instance, there are many people who may pass within a few yards of you each day who could give you a ride home. Or they might want to buy an item you're trying to sell. Dynamic networking makes it possible to tap those resources through a momentary alliance among transient interest groups.

In the world of wireless wearables, computers embedded in clothing could form networks on the fly, prompting software agents to carry out mutually beneficial transactions. For example, people waiting to buy movie tickets in a long line might use an ad hoc network to auction off favorable places in line. Or, as I strolled around with my family and friends in Disneyworld, we could track each others' whereabouts and exchange ideas and comments about where to go next and what to do. Or, you could operate a mini-eBay auction for your bike to departing visitors, instead of locking and parking it.

Your wearable PC will let you know that you are passing a particular store, or give you a choice of restaurants in the mall. Hey! you could even download that MP3 music from a friend, as you walk around the mall.

Click MIT Tech Review - Clothes make the network

Click How are you wearing your electronics?

First human clone due in January 2003

The controversial Italian fertility doctor Severino Antinori announced that the first human baby clone will be born in January 2003. In Italy last week, the researcher said three women he has treated are now carrying fetus clones in the advanced stages of pregnancy. The doctor, who made world headlines in 1994 when he helped a 62-year-old woman have a child, supports the cloning of human beings as a way for infertile couples to have children.

Just days later, a US company claimed that it too had women that were pregnant with baby clones - one of which would be presented to the world before the end of the year. But in the absence of any real proof, not all scientists are convinced. Many think that, based on animal data, it's likely that attempts to create a human clone would result in miscarriages and such pregnancies would carry a high risk of death and deformity.

One thing is clear - whether or not human cloning is safe today, the vast amount of research already being conducted will make cloning safe before too long, and many people will opt for this new way of procreation. The implications are vast. Every aspect of human life will need to adapt to the new realities - theology, ethics, moral, legal, societal.

Click BBC News - Nov. 2002 - Human Clone Unlikely Say Experts

Click NY Times - Italian Doctor Says Cloned Baby Due in January

Morley book: Out of the Barn

Inventor, author, consultant and engineer Dick Morley is best known as the as the father of the programmable controller (his PLC is now enshrined in the Smithsonian). He's an entrepreneur whose consistent successes in the founding of high technology companies has been demonstrated through more than three decades of revolutionary achievements.

For several years, Dick's column "Under Control" in the automation journal "Manufacturing Systems" brought up ground-breaking concepts, presented with characteristic Morley humor and make-you-think challenges. This little book gathers those wide-ranging columns in compatible segments, organized for easy reading. You can open the book and read any article, in any section, to be educated, challenged and entertained.

Here you'll find the history of the programmable controller - when it was developed, how it got its name, it's rise & fall, and many interesting historical anecdotes. You'll find out what Morley was thinking and dreaming about, over several years, even as he is today.

In short, article-length bites, you'll discover a variety of insightful ideas, concepts, predictions and prognostications, mixed in a tasty soup of Morley chit-chat and BS. Dick Morley himself will tell you that he is not sure which is which. But, it'll make you think!

If you know Dick Morley, you'll enjoy reading this to refresh your mind; if you don't know him, you will - when you read this book!

Click Review & Buy Dick Morley's "Out of the Barn":

eFeedback

Regarding the causes of acquisition failures, Lance Ruetimann [lance.ruetimann@cogeco.ca] suggested that more focus should be placed on corporate culture:
    "I think Mike Marullo hit the nail on the head. However, I would like to add the following:
    1. It takes up to one year to develop a strategy.
    2. Add up to one year for reorganization.
    3. Add 2 to 5 years for the internal culture to change and develop.
    "What we see today, is a repetition of 1 and 2, with total ignorance of 3. The culture will develop, but in a protective manner. All pleas and appeals by management will fall primarily on mistrusting ears. Would you like to lead a team that is re-acting on the lowest level of Maslow's pyramid?

    "Further, a Change Management consultant writes in an article recently, that she finds herself holding organizations back from making too many changes. The term Change Fatigue Syndrome was coined, which affects all levels of a company. How tired does one have to be, to finally accept limits set by nature?"

Don Caffee [valpers@yahoo.com] confirmed that China already dominates in at least one segment of industrial automation:
    "I believe you will find China to be the dominant country in manufacture of commodity type valves. Almost all of the major US manufacturers have transferred their commodity valve manufacturing to China. At one point they tried to conceal it but since Chinese quality has improved this is no longer an issue. Prices are very low and US manufacturers cannot compete. The specialty valves are still made in the US because the quantity is low and the Chinese don't want the problems associated with that type of production.

    "We also know of major valve manufacturers who have transferred their engineering functions to India and suspect China will not be far behind India to compete for the business.

    "We are seeing Chinese companies come into the US valve market under the name of a Chinese Trading Company and competing against the US companies that are sourcing products from China. Usually, the prices from the trading companies are lower than the US manufacturers and they are taking some business."

Dave Biros [dave.biros@ch.abb.com], Group Vice President, Marketing Communications at ABB Automation Ltd. wrote to clarify a point in the ABB article in the latest eNews (25 Nov. 02):
    "Please note that the "Oil, Gas & Petrochemicals" business that ABB plans to divest is an Engineering, Procurement and Construction business. ABB will continue to serve oil, gas and petrochemical customers with its core automation and power technology. In fact, ABB has grown its automation business serving the petroleum industry in double digits annually over the past few years, and we are currently ranked No. 1 by ARC in process automation systems sold to the oil & gas industry based on 2001 revenues."

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