JimPinto.com - Connections for Growth & Success™
No. 224 : 24 January 2007

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

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12 mins.

Automation majors - 2007 Pinto prognostications

Most automation companies showed reasonable growth & profit in 2006, a turnaround from leaner years. Emboldened by better results, many of the majors are seeking new growth opportunities, and some good-sized acquisitions will occur in 2007.

In 2006 Rockwell divested Reliance, which was engaged primarily in old businesses such as motors, bearings and gears, and will utilize the money to fuel growth in new technology businesses. Honeywell and Emerson are doing fairly well and will likely acquire smaller companies that fit their wireless strategies, plus some larger mid-size players to strengthen their portfolios.

ABB is doing well consistently and its stock is climbing again. Now the company may fuel growth with judicious acquisition choices. Someone on the JimPinto.com weblog suggested that Rockwell (perhaps the old PLC business embodied by Allen-Bradley) was an ABB acquisition candidate.

After divesting the more profitable companies in the group, Invensys has recovered from its bout with bankruptcy. Foxboro, Wonderware and allied process controls businesses are now the central focus.

Aggressive French giant Schneider is busy buying many mid-size pieces, putting together its bid for significance in a fragmented automation marketplace. It is evident that, unlike Siemens' mishandled US acquisitions, Schneider is managing its newly acquired brood remarkably well.

The Japanese Omron and Yokogawa continue to look for growth and market leadership. Because the Japanese don't really understand how to make acquisitions, they will only attempt smaller buyouts, and most of their expansion will come through strong growth in the Far East.

By the end of this decade, look for the automation big-10 list to shrink to about half that size. 2007 will bring the first of the major buyouts to start the reshuffle.

Click Automation World: Pinto Prognostications 2007

Click Automation.com: 2007 Technology - Pinto's Picks

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Invensys leadership changes

Someone on the weblog said of Invensys, "The more things change, the more they stay the same". CEO Ulf Henricksson has just appointed Paulett Eberhart CEO & President of Invensys Process Systems (IPS).

Ken Brown, who had been in the position since the sudden exit of Mike Caliel about a half-year ago, was supposedly one of 3 internal candidates vying for the job and he was unaccountably bypassed. Foxboro loyalists are clearly disappointed, and are wondering what changes this new chief will bring.

With a long background in EDS (computer services), Ms. Eberhart (52) has more of a financial background, with no experience whatsoever in the industrial automation and process controls business. Seems like yet another deja vu experience for fatigued Foxboro.

After being left to manage a too-heavy debt-burden, Ulf has put Invensys on a somewhat reasonable financial footing again. My guess is that he is preparing for his own graceful exit by selling off Invensys for more than its current market value - still a mediocre GBP 2.4B ($4.7B), about 1:1 with annual revenue. Keeping Ken Brown in the role of President would have meant that the objective was to complete the hard-slog of returning to stability. Bringing in an outside bean-counter can only mean polishing the business to prepare for a sell-off.

Another move, more sensible and long overdue, was the exit of Peter Tompkins as President of Eurotherm. He was replaced by Jeff Green who was VP of Manufacturing at Process Systems and previously with Flowserve Pumps. Eurotherm is still handled separately within the group, probably because it has only legacy temperature control widget products and is worth more as a divestiture.

Whoever buys Invensys will be buying it for Foxboro (installed customer-base and market presence), Wonderware (Archestra), Triconex and other good parts of Process Systems. Any likely buyer will simply sell off Rail Systems, Eurotherm and other non-related business for whatever they can fetch.

For an acquisition of this size, the only possible buyers are large, overlapping competitors: Siemens & Schneider (who need more process control); Honeywell (unlikely, because they're a direct competitor, and Process Systems is itself just a segment); Emerson (possible, though unlikely, because they're a direct competitor and don't need Foxboro); GE (unlikely, because Jeff Immelt is off buying other more juicy businesses); Yokogawa or Omron (unlikely, because the Japanese don't know how to accomplish acquisitions of this size). Who else? Your guess is as good as mine.

Click Invensys website - Financial information

Click Walt Boyes' blog - Ulf torpedoes Ken Brown:

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Honeywell and Emerson battle for wireless turf

A couple of weeks ago (Jan. 2007) Emerson Process Management held its European wireless meeting in Bologna, Italy. Attendees reported that, though the program was great and the attendance excellent, there wasn't much that was new.

The primary difference in Europe is that the 900 MHz frequency band which the Emerson wireless network uses in the US is not available in Europe - it is dedicated to emergency services. So, Emerson has now released wireless products in the 2.4 GHz band.

After attending the Honeywell European User's meeting a couple of months ago (Nov. 2006), Andrew Bond provided an excellent summary of Emerson's meeting in his UK newsletter "Industrial Automation Insider", comparing the Honeywell and Emerson offerings.

Honeywell is pushing for wireless standards (SP-100) and puts wireless in the wider context of plant wide communications. Emerson has focused primarily on eliminating copper between control systems and field devices.

Both companies have adopted self-healing mesh-networks, but are deploying them at different levels. Honeywell's solution is based on a network of AC-powered iNodes, while Emerson markets battery powered field devices.

Honeywell claims that unpredictable loads can result in unpredictable battery life. Emerson responds that their mesh protocol monitors loading if individual nodes and avoids that problem.

For the skeptics who still may have had doubts at the Emerson meeting, a project leader for the BP refinery-of-the-future talked about successful trial runs of both the 900 MHz and 2.4 GHz products. He reported that much of the installation is straight-forward and requires very little engineering or training for the wireless part; configuring for power management requires some thought, to assure adequate battery life; and the physics of the shorter wave-lengths on the 2.4 GHz models requires some knowledge for setup.

While Honeywell and other suppliers suggest that site surveys are needed for reliable operation, Emerson insists that none are required. Emerson says that site surveys are often obsolete during the time between doing it and actual systems implementation - things get built, tank cars move, etc. When signal reliability is important under changing plant conditions, mesh operation helps greatly.

And the turf battles continue in this important new arena. Stay tuned...

Click Gary Mintchell's Blog - Emerson's European announcement

Click Andrew Bond's Industrial Automation Insider

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Apple iPhone - another winner?

Somehow, Steve Jobs and Apple seems to do it again and again - launch products with hype and hoopla, generating spontaneous applause and the urge to buy as soon as available.

Apple's new iPhone combines three products - mobile phone, widescreen iPod and Internet communications email, web browsing, maps, and search. It also has a slick user interface, letting you control everything with just your fingers.

Apple may have moved too fast - the iPhone won't be ready till about June 2007, and the name is owned by Cisco (new Linksys VOip phone). One wonders if this is a major Apple slip-up and they'll have to switch names. Aphone?

Apple's hype moved its stock up (for a while) but the arrogance is often irritating - pre-announcing products, talking with Cisco about the name and going ahead anyway, charging for some software extensions that should be free, shutting out third-party developers - the list is long. But hey, that may just be good marketing.

It's significant that the basic design choices include newly available technologies, but Apple gets to bring them all together first. The applause comes from people who instantly recognize the innovative leap, often from the feeling of, "Hey, I thought of that!"

Take a look around you and see what people are doing with their cellphones - not just talking, but playing games, text-messaging, taking spontaneous pictures, watching videos, listening to music.

The new Apple gadget gives you much more to play with - 2 megapixel camera, 4GB (or 8GB) of storage, Bluetooth 2.0, WiFi that automatically engages when in range, quad-band GSM radio, OS X support, Google Maps, Safari web browser, Yahoo free push iMAP email. And iTunes of course.

The iPhone (or Aphone?) will be out in June, exclusively through Cingular. Hey, anyone want my NEW touch-screen pocket-PC cellphone?

Click Apple: Will corporate miscues bruise its image?

Click Steve Jobs iPhone demo at Macworld

Click iPhone's missing features

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2007 hot consumer products

Hey, what new hot widgets are you going to buy this year? The Consumer Electronics Association show in Las Vegas showed a plethora of products - new HDTV, cellphones with video and touch screens, multicore computing, ubiquitous broadband and third-generation cellular networks.

As digital TV prices fell, sales jumped to more than $23B. Now all those digital TV consumers want content that will show off their new gadgets. This year it will arrive through the Internet and the likes of YouTube. Already I'm receiving more YouTube links via email than I get with jpg pictures.

As digital TV and cellphones converge with the Internet, improved device management and navigation become necessary. In the home, remote controls have become unmanageable - the arrays of buttons on different devices and the on-screen menus are maddening. Also, as smart phones become smaller, with more features, the interface needs change. Apple is setting the pace by eliminating hard buttons in favor of on-screen dynamic manipulation of icons.

Voice control interfaces are becoming surprisingly accurate. You'll be seeing more voice-command in automobiles this year. And soon, you'll simply be telling your TV which channel you want to watch, when to turn up the volume and when to mute. And lots more things you didn't think you really needed.

Click PC World - The 20 Most Innovative Products of the Year

Click Forbes - The Hottest Technology Of 2007

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Ed Schwehm [EdSchwehm@brundage-inc.com] brought global dimming to my attention, and he is passionate about global warming:
    "If the scientist's are correct, and global warming does melt enough ice to cause the oceans to rise, the subsequent devastation and displacement of people will be catastrophic.

    "Just as the tobacco industry would bring out 'experts' who claimed there was no link between smoking and lung cancer, expect companies who have a stake in CO2 emissions to also bring in experts who will claim that the link between global warming and pollution is still in debate."

    "Look at the problems we are having in New Orleans where about 100,000 people have been displaced. Imagine a world where 100 million people are displaced because the land they were living on is now underwater. Even if the oceans only rise a few inches, coastlines around the world will change dramatically as currents and tides begin working the shoreline in different ways. A rise of 2-3 feet would have an extreme impact on shorelines. I don't even want to think about a rise of 10-20 feet. Climate change will effect our ability to grow food. So not only could we have millions of displaced people, we may be unable to feed them.

    "I believe we can and will solve this problem. But things are going to get much worse before they get better. It's not that people don't want to care, it's that we are all busy with our own lives and problems that we want someone else to deal with this.

    "In the meantime, do what you can. Make your next car a Hybrid. Use energy efficient lights, caulk those leaky windows. Plant a tree. Every little bit helps."

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Andrew Bond [andrew@abpubs.demon.co.uk] whose monthly "Industrial Automation Insider" is well worth reading, provides some insightful comments on the Control top-50 list:

    "The CONTROL Top 50 tells an interesting story if you dig a little deeper into the figures.

    "Based on their US revenues the top 10 reads Emerson Process Management, Rockwell, ABB, Siemens, Invensys, Schneider, GE, Ametek and ThermoElectron. Incidentally, basing this year's rankings on total automation rather than just process automation revenues seems to have had little effect on the overall pecking order, suggesting perhaps that the problem before was that some vendors with both process and discrete interests had been less than scrupulous in distinguishing between them.

    "However, the picture is rather different if we look at worldwide automation revenues and, even more so, revenues generated outside North America. Thus the worldwide market leader is, as might be expected, Siemens with revenues in 2005 of $8.8B. Second is ABB, third Emerson, and then Schneider, Rockwell, Honeywell, Omron, Invensys, Yokogawa and GE.

    "The European domination becomes even more marked when North America revenues are excluded. Siemens' ROW (Rest of the World) revenues are more than 50% greater than its nearest rival and only one North American vendor, Emerson, makes it into the top seven."

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Ron Davis [ron.davis@sunapsys.com] again brings up a point that I support strongly - abolish two-party politics:

    "Think about the impact of abolishing our current two party political system.

    "What if each candidate had to stand on their own platform and not be burdened with polarizing political labels, left and right? Think about how this would reduce the influence of extremists from both ends of the political spectrum. Think about how this would encourage new ideas that do not fit today's political left-versus-right thinking.

    "More moderate centrist candidates would not be pushed out of the system during the primaries for not being 'extreme' enough to pass the parties muster. Politicians could vote without worrying about the repercussions of voting outside the party line."

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