Automation companies decline

You know the old saying, "The receding tide beaches all boats". But major automation suppliers have been trying to convince shareholders and analysts that their business is generally more stable - slow to grow, but also slow to decline.

Over the past year, stocks of most major automation companies have declined. Andrew Bond, who publishes the canny "Industrial Automation Insider" has kept track of the ups and downs.

Rockwell stock has dropped 44% over the past year, compared with decline of 42% for Yokogawa, 36% for Schneider, 31% for GE, and 11% for Honeywell. Despite all the talk of recovery, Invensys' stock is down 33% over the same period. Giant Siemens dropped by 34%, and just announced that it will eliminate 16,750 jobs (4.2% of its worldwide workforce) to cut costs and boost margins.

By comparison, Emerson and ABB are the only automation stocks which are actually worth more now than they were a year ago. Emerson is up about 5%; ABB is up 23%. Keep ABB growth in mind as we discuss the prospects for a Rockwell acquisition.

Old Pinto Prognostications: why is Automation declining?

Click Industrial Automation Insider website

Get your subscription to Andrew Bond's Automation Insider

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Rockwell dangles within acquisition range

Here's some history: The core of Rockwell Automation was PLC market leader Allen-Bradley, privately held till it was bought in January 1985 by aerospace and technology company Rockwell. The company then divested fax/modem chips and the like, and later spun off Collins (aerospace), leaving Automation as the primary focus. Sadly, beyond its once powerful PLC base (now decimated by low-cost competition as the PLC became a commodity) the company never quite achieved any real results under Allen-Bradley veteran, CEO Don Davis. It was a ripe plum for acquisition, for anyone who wanted the strong customer-base.

After Don Davis exited (Feb. 2005) I reversed my prediction that Rockwell would be acquired, suggesting that Keith Nosbusch, a solid engineer and long-term A-B employee, would raise the company to new heights. But Keith has never quite lived up to those expectations. He fumbled the shift from PLCs to software and services, and never made any meaningful acquisitions. After nearly 4 years, I reverse my reversal: Rockwell is again a distinct acquisition possibility.

One Rockwell insider recently complained via the weblog, "With their HQ-centric driven, do-it-or else, micro-management style, along with their hard-headed, no turning back, crippling re-organization, there is no faith and no morale in the field." Other stockholders and analysts have also provided their commentary (weblink below).

Keith Nosbusch claims that an independent Rockwell is more valuable than it would be either merged or acquired. But, with a stock price in the 40's (about what it was when Don Davis retired) the chances of recovery in a slumping stock market are slim. Keith seems to be mouthing mostly wishful thinking.

Rockwell's revenue is about $5.5B. Market-cap is about $6.2B, down 45% from recent $10-11B. This is a price/sales ratio of less than 1.2 - eminently acquirable.

If ABB or GE (or a Chinese or Indian company) offers a 60% premium over current stock-price, say $70/share, this would recover the stock to close to the April 2007 peak of $77/share, and most stockholders will likely fold.

GE, ABB and other major acquirers recognize the growth barriers for Phase-5 companies like Rockwell and they watch it dangling helplessly in a bear market. Too, they lust after Rockwell's customer-base and N. American market-share. At the right strike price, they'll move. This is why I think that Rockwell is a clear acquisition target.

Why Rockwell is a primary acquisition target

Rockwell 2005 - Davis retires, Nosbusch takes helm:

Reshuffling the Automation Majors

Rockwell weblog - Read and provide your own views

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Religion is becoming "inclusive"

• Scenario 1 - Exclusivism: I'm Right and You're Wrong
• Scenario 2 - Pluralism: Despite Differences, We Can Live Together
• Scenario 3 - Inclusivism: We're Becoming One Family

Many futurists believe that increasing communications will bring a steady shift towards "pluralism", and an enlightened humanity will eventually become "inclusive".

Here's good news: A recent Pew Research Center survey of more than 35,000 Americans found that a majority (about 70%) of Americans with religious affiliations have a non-dogmatic approach and do NOT believe that their religion is the only true way to God and spirituality.

This openness to a range of religious viewpoints demonstrates the great diversity of American religious affiliations, beliefs and practices. The study shows that more than 50% of Americans say that religion is important in their lives - they attend religious services regularly and pray daily. But still, they willingly accept that others may have different beliefs.

The survey confirms the close link between Americans' religious beliefs, and their social and political attitudes. The relationship between religion and politics is particularly strong on social issues such as abortion and homosexuality, with several religious traditions expressing more conservative political views.

On other issues such as environmental protection, foreign affairs, and the proper size and role of government, differences based on religion tend to be smaller.

Pew study of religion (includes survey stats)

Religions are a divisive force in the world

The roots of religious conflict

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TED - videos of world-class speakers - the top-10 list

TED just passed an important milestone: 50 million TED talks have now been viewed worldwide, nearly half of them outside the US. To keep pace with demand, a new talk is released every weekday.

Review the list of the Top 10 TED talks (below). The most popular, viewed over 2,500,000 times and counting, features neuroscientist Jill Bolte Taylor, who observed her own stroke while it was happening.

My favorite is Boston Philharmonic conductor Benjamin Zander, who was a huge hit at this year's conference. He'll convince you that you like classical music. Wanna bet?

Click TED website - go visit

My personal favorite - Benjamin Zander: Classical music with shining eyes

Watch the Top 10 Talks highlights video

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The pleasure & punch of Poetry

There are some things that are too serious, and yet so funny, that they can ONLY be expressed as poetry. My Fieldbus poems, and the latest on the Wireless Standards fiasco, are good examples. Stating the same things in prose may be considered offensive; but almost anything can be expressed in poetry without giving offense. That's the pleasant punch.

My Bill Gates poems (Bill negotiating with the devil, and then with God) have been widely published. Both my books ("Automation Unplugged" and "Pinto's Points") include poetry sections. Indeed, many of my speeches often conclude with a poem, which generates a lot of smiles.

I started writing poetry through Phil Cerasoli, my friend and guru who worked with me at Action Instruments, decades ago. Phil's poems are the only non-Pinto material published on the JimPinto.com website.

Phil and I still have lunch regularly, and he recently started a popular Poetry blog (link below). Click and enjoy.

Take time off and read some poetry. It'll give you a different perspective. And hey, send me some feedback.

Jim Pinto Poetry Index

Phil Cerasoli Poetry blog

The Industrial Wireless Quadrille

Video poem - The Apache Odyssey

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eFeedback

"The high Muslim birth-rate is changing France's composition. That country was completely demoralized by the two wars, after which the Christian population bought into birth-control and limiting family sizes. Post-war immigrants had different ideas. This is why many people think Europe is going Muslim, and eventually the US may also go that way.

"Hispanics are the future of the Roman Catholic Church. 90% of Hispanics are at least nominally Roman Catholic. 40% of the Roman Catholic Church in the US is Hispanic.

"Some of us are convinced the current US immigration policies are aimed at Hispanic immigration precisely because they are Catholics. I drew that conclusion from activities where my Scottish-Irish name entitle me to hear opinions from fellow Republicans that most people don't get to hear.

"People protest they are anti 'illegal' immigration. However, immigration policies and procedures coupled with under-staffed immigration processors is resulting in much tension and concerns among legal immigrants. The process is a bureaucratic nightmare. Also, these glitches complicate obtaining drivers' licenses, bank accounts, and other similar matters.

"Let's face it, our great country was founded as a militant white Protestant Nation. The ones that don't fit the mold have had horrific problems in the past, and still do.

"As one whose ancestry is Scotch Irish, some American Indian, German, and German Jewish, I can see all sides of the question. As my Indian ancestors said when they saw the big canoes with wings approaching, 'There goes the neighborhood!'

"On the other hand, if my German-Jewish great-grandfather hadn't gotten out of Germany, I might have wound up as a bar of soap."

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J.K. Bhalla [jkb@austin.rr.com] compares corruption in India and America:

"The corruption in America is far more wide spread than India. Corruption in India does not take money away from the poor.

"The big difference is that we have legalized it in America by calling the perpetrators 'interest groups' and 'lobbyists'. Corruption in the US is by rich people at the expense of the middle-class - the sub-prime mortgage mess, hedge funds, the war in Iraq (enriching the industrial/military complex), telecom companies getting away with bogus charges, etc.

"Let's take the example of OSHA - the organization that was created to improve safety. After chasing them for two years, I finally found out that they are not in business to improve safety. Their primary work is for the lobbyists.

"There are many issues too numerous to mention - diesel engine over speed safety issues which have resulted in big explosions at BP, BLSR and Alon refineries.

"When the CEO of the Chemical Safety Board exposed OSHA on CBS 60 minutes on June 8, she was made to resign the very next week. What do you call that?"

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Joseph Fillion [joseph.fillion@ips.invensys.com] comments on the shifting tides of change:

"It seems that a country has to level itself every 50 years, so that it can get rid of all its baggage.

"Japan was an economic power never seen before during the 80's. Why? Well, their country was totally leveled in WWII. Their steel industry, for example, was totally new versus the US where most sites (example Bethlehem steel) were built 100 years ago for 100,000 workers and now are used for 3,000.

"Look at what Japan did to the US in the Semiconductor industry. They took all of the low end memory chips. Well, Korea, China, India and others have taken the low end market away from Japan and as they change generations, their infrastructure is getting dated and the playing field is being leveled.

"Yes, China has millions of low skilled & cheap labor to fuel their economy. But what about their water supply issues, and their pollution? Look at the Yellow river - perhaps they'll soon re-name it the Yellow ditch. They have some serious issues.

"India, has many smart people but MANY more poor beggars and they do not have the infrastructure to support this. With great leadership, these countries can continue, but things will have to change.

"The US has had the worst president in decades and he retires soon. Hopefully, our next President will help change some of the fundamentals."

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