JimPinto.com - Connections for Growth & Success
No. 92 : July 23, 2002
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
- Crony capitalists & piranha politicians
- Automation Update
- Invensys' sale of woe
- JimPinto.com weblogs
- Orwell's 1984 nightmare was reversed by technology
- Soft Solutions for Hard Problems
- Industrial Automation needs new technology boost
- Corporate Greed
- Siemens is repeating old mistakes
- Rockwell, Honeywell & Siemens
Crony capitalists & piranha politicians
Financial markets are fragile, built up with confidence that
accumulates slowly but can quite easily be shattered suddenly.
Confidence has been shaken in America, now hit by a cascade of
corporate scandals that began with Enron and continuing with the
collapse of all the old inequities. Ultimately, we hope that
this shakeup will pay off for all of capitalism's stakeholders
and for society at large.
This shaken confidence is not just about the rising tide of
"restated" earnings. It is about government, business leaders
and the media, cooperating to bend reality to their own selfish
The media covers outraged, the feeding frenzy of holier-than-thou
piranha politicians who are demanding new rules and regulations to
control the very people who have lined their pockets for years.
President Bush condemns behavior that he himself had recently practiced,
but refuses to discuss. Vice President Cheney maintains a stony-faced silence.
Commentators wax eloquent on prime time, while nothing is really
being done. And everybody knows it. Since Enron surfaced, how
many CEO's and CFO's have been thrown in jail?
The drive to increase the penalties for corporate wrong-doing is
political rhetoric. Corporate executives do NOT feel they have
been corrupt; this is simply the way business is being done -
higher and higher pay, bonuses, stock options, company limousines,
corporate aircraft, yachts, expense accounts. Status as a corporate
executive is measured by the plethora of personal perquisites.
This is not illegal; it is simply standard procedure.
Have you seen the movie Distinguished Gentleman? Eddie Murphy
plays a con man who gets elected to the Senate. A senate committee
chairman helps the freshman senator with voting preferences on
several key issues: "Make your own choice - if you're For you'll
get money from this lobby group; and if you're Against you'll get
money from that lobby group!" This would be funny, if it was not
so true. Most politicians admit to getting support from corporate
The stock market is like a running vote of confidence. As we write
this, investors are angry, volatile, scared, and jittery. On Friday,
19 July '02, and then again on Monday, 22 July '02, all the major
stock indices fell below the depths of 9/11. No one can predict
where this will go.
Critical Theory and Capitalism
Forbes: Where Are The Indictments?
Automation update: Invensys - sale of woe
Invensys remains in the doldrums, unsettled by the trouble it is
facing to find a buyer for its power transmission and conveying
equipment business. This sale, which analysts reckon is worth $750m,
is an important part of the Invensys $2b disposal program which was
launched with promises to the banks to reduce their debt burden.
Key competitive buyers are paralyzed - either preoccupied with their
own problems, or concerned by the possibility of lengthy anti-trust
approvals. Private equity firms are the only realistic buyer (former
CEO Allen Yurko is lurking in one of those lairs) but even they are
finding it difficult to raise the necessary financing.
Analysts pointed out that it took Invensys six months to find a buyer
for Flow Controls & Energy Storage, but feel that this follow-on sale
will take much longer in the present climate. This leaves Invensys
turning slowly in the wind.
The controversy about executive pay spread to Invensys recently, when
it became known that Allen Yurko had picked up about $3.5m in cash and
shares in the 10 months before his "resignation" last year, evidently
aided and abetted by Chairman Lord Marshall.
There was a bit of a flap recently too, about whether or not Invensys
had accounting irregularities. A strong statement was issued that
there were none, and the noise subsided. One wonders if that same
statement could have been issued while Yurko was still around.
Yurko's pay was about 40% more than current CEO Rick Haythornthwaite.
Haythornthwaite is apparently not exiting as quickly as I had
predicted. He and CFO Kathleen O'Donovan have both been issued over
two million share options at exercise price of 100.35p, exercisable
after 3 years. Haythornthwaite now has a total of 2.2m options;
O'Donovan has 2.4m.
Invensys shares closed on Monday July 22 '02 at about 69p, which makes
these options valueless. If the trend continues, Haythornthwaite may
see the struggle as futile, and my prediction about his exit may
still come about.
It is interesting that CFO Kathleen O'Donovan still remains; she
joined from BTR with the Siebe merger. Many analysts felt she would
be booted along with Yurko; but she's still there. And the pompous
xenophobe Lord Marshall of Knightsbridge is also a diehard.
Invensys insiders close to the top have told me that their strategy
is to sell the profitable divisions and use the money to restructure
and turnaround the unprofitable ones. That's about as stupid a
strategy that I have ever heard in any business! In the current
economic climate, it's suicidal.
Invensys will be in trouble if Siemens acquires Honeywell's process
automation business, as I have recently predicted. Foxboro, and other
key pieces will inevitably be sold off when the right buyer turns up.
You wanna bet?
Guardian UK : Invensys' Sale of woe
Invensys rewards Yurko for failure
UK Financial Times: Invensys grants CEO and CFO options
Use the JimPinto.com weblogs to read the latest 'chat' and review
the breaking news on Invensys and other automation majors.
If you have any comments, updates, news or views on this, or any
other topic in JimPinto.com eNews, please 'blog'.
JimPinto.com weblog index
Orwell's 1984 nightmare was reversed by widely-available technology
1984, that dreaded Orwellian year, has been swept into the past
century. Orwell's novel, written in 1948, contained the prophecy
that technological advancement would advance totalitarianism,
with individual liberty an inevitable casualty.
Happily, technology has caused the downfall, not of freedom and
democracy, but of totalitarianism itself. In the period from 1989
to 1991, the world watched as democracy and liberty spread (like
a plague to Communism) first through the Soviet satellites and
then into the heart of the Soviet Union itself. It is now
encroaching steadily into the last bastion of Communism - China.
What went right? In the initial decades of the cold war, the
totalitarianism envisioned by Orwell conquered much of the world.
But then, like the Martians in H.G. Wells’s War of the Worlds,
it began to die as if from a mysterious disease: information and
Technology has been the most liberating force in history,
benevolent because it gives access to knowledge. Information
leaked, and then poured, across the walls built by totalitarianism.
People learned that their "worker's paradise" was far inferior
to the capitalist world outside. And the gap was growing.
The technology of liberation in China was initially the fax, used
to receive foreign newspaper reports which the government could
not squash. Realizing that the Internet is necessary to compete in
world markets, China is spending large amounts of money to get the
country wired. And cheap cell phones are invading the developing
world. Now the first Wal-Mart has opened its doors in China.
Orwell’s error was simple: he assumed that only the state would be
able to afford high-tech - an assumption shared by virtually every
science-fiction writer and futurist. But it proved to be wrong.
As late as the 1970s, the driving force for technology in the US
was the military; now Defense requirements are dwarfed by the
consumer market. The military, whenever possible, now orders
commercial off-the-shelf technology. Many of the GPS receivers
used in Desert Storm were bought at Radio Shack. Most of us cannot
even count the number of computers we own, because we don't know
how many are hidden in our microwave ovens and automobiles.
Read this fascinating article from MIT Tech Review -
Who's afraid of 1984?
Soft Solutions for hard problems
Hard realities in a new century bring the recognition that a new
society is emerging - new demographics, institutions, ideologies
and problems. This is quite different from the society of just a
decade ago, and different from what most people expected. Much of
it is unprecedented. And more change is rapidly emerging.
America’s technology and business prowess brought the illusion
of world dominance. But, low-tech terrorists have exposed our
vulnerabilities. Jet-fighters and tanks seem to be powerless
against individuals who sacrifice their lives to make a point.
At the other end of the spectrum, governments seems to be
powerless against individual selfishness and greed.
Indeed, the concurrent collapse of financial markets are bringing
new recognition that many of our problems have little to do with
terrorism, and more to do with our societies blind-spots.
It is clear that the problems we face are hard and cannot be
solved by the old hard solutions that might have been effective
in the past. New, soft solutions are needed. The coming century
must become a century of soft things.
We discussed this topic in JimPinto.com eNews some months ago.
Since then, I have received a lot of feedback and have had a lot
of e-discussions with a lot of people. I have been working very
steadily to develop more practical ideas which can emerge and
crystallize as soft solutions.
The latest summary of my findings will be included as a chapter
in a new book, "Viable Utopian Ideas: Shaping a Finer World"
edited by Dr. Arthur Shostak, Professor of Sociology at Drexel
University, Philadelphia, PA. This book will be published within
the next few months; I'll let you know when it's out.
The World Future Society has published a version of these ideas
on Soft Solutions on their website, with an opportunity to generate
discussion and provide direct feedback. I invite your participation
WFS website: Finding a softer approach for a new century
Soft Solutions for Hard Problems
Industrial automation needs new technology boost
The industrial automation business seems somewhat stale,
waiting for mythical market resurgence. To be successful
in the future, we must use the current lull to get back
to basics: developing new technology, new manufacturing
methods, and new market approaches for a new business
For industrial automation, several new inflection points
will arrive in the next decade. Here are my favorite
My new article was published as Industry View on the back page of InTech magazine, July 2002.
InTech: New technologies will boost industry out of recession
- MEMS - micro miniature sensors & actuators
- NEMS - nanoscale electromechanical systems
- Wireless I/O on the pervasive Internet
- CAS - complex adaptive systems
Read this New-Technologies article at JimPinto.com
Bob Peterson [PETERSONRA@aol.com] wrote on corporate greed:
"The temptation to use accountants to finagle the numbers is a
huge problem. CEOs and other top execs have a big stake in the
profit numbers, yet have no real oversight. Boards of directors
have become staffed almost entirely with the CEO's cronies, and
even so-called "outside" directors, aren't really outsiders -
or they would never get nominated to the BOD in the first place.
Dick Caro of CMC Associates [rcaro@Caro.us] wrote about Siemens
culture, and their possible acquisition of Honeywell IS.
We can only paraphrase some of his comments. You can read the
full text of this eloquent criticism on the Siemens weblog.
Dick Caro on Siemens
"Employee ownership is something you seem to feel strongly about,
yet it has had an uneven record. Often the big shots get theirs
and the little guys end up with very little. Even in large
companies, employee ownership is no guarantee - look at UAL.
"The most important reform would be to have shareholders crack
down on the Directors. The sad fact is that so much stock is
now owned by third parties (mutual funds, insurance companies,
pension plans, etc.) and many of the people running these
organizations are into the cronyism thing as well. When was the
last time you saw even reasonable shareholder resolutions pass?
Boards know that the third parties holding the vote almost
always vote with management, so they are usually safe."
"While we watch, Siemens is destroying the equity they purchased
at Moore Products. It hurts to watch Moore's innovation destroyed
by the forced integration with Siemens technology. Moore APACS
is a very innovative DCS and Safety System. If Siemens was not so
full of German bravado, they would take advantage of APACS,
especially the software, and just slide in PCS7 for the controller
hardware. Sadly, APACS has been reduced to maintenance-only status.
The story on Moore's Procidia is much the same.
A major UK solutions provider (name withheld by request) provided
"Spanish philosopher George Santayana wrote" 'Those who forget
history are doomed to repeat it.' It seems that Siemens management
in the Automation and Controls Business Unit have this as their
business model. I refer to the debacle when Siemens purchased the
PLC division of Texas Instruments about 10 years ago. At the time,
TI was the third ranking PLC supplier in the US, GE probably 4,
with Siemens way behind Omron, Telemechanique and Square-D.
TI was the only PLC vendor to have a significant share of the
process control batch market. The result of Siemens buying TI
was to make GE the No.3 PLC supplier and raise Omron to No. 4.
"Siemens was never able to take advantage of the technology or
market distribution they purchased. The same thing is happening
to Moore Products as it simply becomes a local office of Siemens.
"The US industrial automation market is unique, but Siemens
management keeps trying to fit it to the German business model.
Worse, they do not accept advice from those who are capable of
giving it. And, they still wonder why they are not more successful
in the US market. Buying Honeywell is NO ANSWER!"
"Concerning the news of Siemens possibly getting their hands on
Honeywell IS, this is no doubt going to be interesting to see from
Rockwell Automation's perspective. They have collaboration with
Honeywell for the top end of their ProcessLogix offering (Honeywell
"This could well (at last!) mean Rockwell use their new Supervisory
Edition SCADA as a common platform SCADA for both PLX and
ControlLogix (CLX) and provide a more credible and serviceable
solution to the market which will compete head-on with Emmerson
DeltaV and Siemens PCS7 and I'm sure position themselves ahead
in the hybrid solutions market space.
"My understanding is that Rockwells technology provided to
Honeywell Plantscape is the PLX hardware. Rockwell use the Honeywell
SCADA layer from Plantscape for their PLX solution - i.e. their
server and applications that sit on it."
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