JimPinto.com - Connections for Growth & Success
No. 49 : June 29, 2001
Business, marketing & futures commentary.
New attitudes, no platitudes.
- Yurko & Invensys - re-arranging the deck chairs
- GE/Honeywell re-negotiation ploy
- Mass Victimization on the Internet
- Mini-plants in mobile containers
- Thoughts on Siemens buying Rockwell or Honeywell
- Empathy for the good Honeywell people being jerked around
- Reminiscing on corporate sins that finally catch up
With a spate of industrial automation news, this remains our key focus
again this week. Technology-trends aficionados please bear with us.
Yurko & Invensys - Re-arranging the deck chairs
Allen Yurko, CEO of Invensys, is a financially driven manager who came from
a Siebe acquisition (Robertshaw) and soon became CEO of the UK-based
Siebe acquired then ailing Foxboro and seemed to revive it through good
management discipline. But Foxboro didn't grow and Siebe continued to
acquire aggressively. In a defensive move to stave off acquisition by
Emerson, Yurko merged Siebe with BTR (a similar UK hodge-podge) and changed
the name to Invensys. The cute name didn't seem to make a difference - the
decline continued. Yurko then unwisely acquired Baan, a bankrupt Dutch
software company, compounding his problems.
A couple of years ago, Allen Yurko seemed dynamic and street-smart, the
driving force behind the formation of Invensys. But recently he has become
defensive, erratic and remote. His moves signal increasing desperation at
his inability to generate the growth and success he had promised.
This past weekend he and other senior executives have agreed to pay
freezes, even after sharp cuts last year. You will note that Allen Yurko
still gets paid $1.2m, and Kathleen O'Donovan (CFO) gets about $700K.
Read this Financial Times article : Invensys Pay Freeze
This week, in a communication to all Invensys employees signed personally
by Allen Yurko, a new "PROJECT UNITY" was announced.
- Rollout of Baan software globally as a common IT platform. Installation
of Baan at most Invensys sites to generate additional Baan revenue.
(Read: Buy Baan, or else).
- Outsourcing of IT internal systems (including hardware and software) and
transfer of current IT employees to IBM through a "strategic outsourcing
arrangement".(Read: layoffs) to take place in "autumn 2001".
(Read: right away).
- Through an outside consultant, assessment and re-design of Finance and
Human Resources administrative processes.
(Read: more layoffs in Finance & HR).
- Implementation of an e-procurement system for MRO and indirect
(Read: more layoffs in Purchasing).
During the growth period in the 90's, financial managers helped organize
good financial results by cutting out inefficiencies and waste. It was
reported that, when Siebe acquired Foxboro, there were 10-15 gardeners
employed at the Foxboro HQ - it didn't take a genius to outsource that
stupidity. Lots of other bloated expenditures (e.g. free and frequent
travel to Europe with "associates") were quickly cut.
But, "cutting" and "building" are two different talents, and few people are
smart enough or adaptable enough to change their MO. Allen Yurko is a
cutter, not a builder. He doesn't recognize the golden ethos, experience
and expertise that Foxboro and other major companies within Invensys will
lose through this new "PROJECT UNITY" program. (I>(Which marketing idiot came up with that name??)
Only new growth can save Invensys & Baan. Cutting overhead does not
generate new revenue. Pushing Baan to subsidiaries makes most observers and
analysts chuckle, and does not really generate any meaningful revenue. What
margins will those bookings generate??
Out-sourcing IT to a friendly dinosaur saves money short-term, but will
throw a lot of valuable inherited expertise out with the bathwater. With NO
Asking Deloitte & Touche, the management-consulting firm, to change Finance
& HR processes will cause yet more valuable people-resources to be flushed
down the drain. Again, short-term savings, with NO new revenue.
One wonders whether Yurko takes advice. If so, from who?
In this fast-moving new millennium, new growth comes through new products,
sold to new customers, in new markets. To achieve growth requires technical
talent, marketing magic and sales savvy. Sadly, it seems that Yurko and his
yes-men minions don't have what it takes. The remaining talent in Foxboro,
APV, Wonderware, Eurotherm, etc. has either departed, or been demolished
through weak and ineffective management. Key new hires, touted as saviors,
depart within weeks or months. Each weekly newsflash announces a new round
of musical chairs.
Allen Yurko does NOT have the two year time-table outlined in his PROJECT
UNITY plan - in fact, I doubt if he himself will last another quarter. The
headhunters are already out interviewing replacements. And, if Yurko is
smart enough, he is already working with those same recruiters to be the
replacement for his replacement.
Judge for yourself - Interview with Allen Yurko on 2001 Results
GE & Honeywell negotiation ploy
On Wednesday (27 June '01) GE is reported to have made an eleventh-hour
effort to win European approval for its proposed $41.2 billion takeover of
Honeywell. The U.S. government unleashed a new broadside in support of the
deal. The new talks seemed to offer a glimmer of hope, but the European
Commission called the proposals insufficient.
GE & Honeywell float last-minute offer
June 28 2001 : EU calls GE proposal 'insufficient'
Richard Corles [firstname.lastname@example.org] ex-Honeywell IAC, Phoenix
Arizona, brought up this interesting thought:
"This GE/Honeywell thing. I think what is going on is positioning to avoid
paying penalties. If I remember correctly both sides agreed to a $1 billion
payment to the other if it backed out of the merger. Therefore when we see
the Honeywell board strongly supporting the merger, and suggesting that GE
could negotiate something, they have in mind getting $1 billion.
Conversely, when Jack (Welch) is saying that the EC is asking too much, it
is trying to put the blame on the EC and allowing itself to avoid the
penalty. Assuming that the merger does not go through, we might expect the
lawyers to working this for a while."
A high level source close to the original GE negotiations provided these
"No one at my level was made aware of the details of the deal that Jack
(Welch) cut with Honeywell in order to get them to drop the United Tech.
offer. We all assume that Honeywell got some financial incentives to
complete the deal; this is usual. The legal teams would have put in terms
on that protected GE from regulatory rejection of the deal. Essentially,
that is the protection that Jack (Welch) can hide behind.
"GE maintained a position of the value of the deal being Avionics and the
capital leverage. All moves the EU asked for diluted that value and did not
allow GE to get what it bought. GE did not want the other pieces and would
have sold them off. Honeywell can ask for a penalty if there is evidence
that GE could really have done the deal, but backed down."
I had previously reported that GE will NOT
proceed with the acquisition/merger of Honeywell, because their due
diligence showed that the deal was simply not clean enough. I re-confirm
JimPinto.com eNews 22 June '01
In the GE/Honeywell merger agreement, when GE offered to top the United
Technologies offer, there was a penalty for backing out of the merger.
Honeywell will no doubt try to enforce that penalty if GE backs off without
GE had previously said that they would not negotiate further. And, last
week's comment from Jeffrey Immelt, GE incoming CEO, that there was "zero
chance" of the deal going through brought a protest from Honeywell (who for
their part insisted that they would "do everything possible" to make the
This new "eleventh hour" try to negotiate is, in my opinion, just a ploy to
placate the political forces, to show that GE is making a good effort to
make the deal happen. In reality, (my opinion) GE is simply trying to avoid
the real possibility of merger-breakage penalties.
Read the complete GE/Honeywell story and analysis
Mass Victimization on the Internet
The increasing reach of worldwide computer communications networks has
changed the economics of crime, and individuals are at risk.
A report by Gartner group suggests that by the end of 2002, at least one
incident of mass, surreptitious victimization of thousands of Internet
users will have occurred in which the object was not vandalism, but theft
(80% probability). Given the nature of the crime, and the state of
international law enforcement on the Web, the identity of the thief will
remain unknown (70% probability). By the year 2004, driven by awareness of
the inadequacies of cyber-law enforcement, and by increasing criminal
opportunities, the economic value represented by cyber-crimes will increase
by two to three orders of magnitude.
The nature of malicious code - code whose explicit intention is to
victimize the unwitting - has changed significantly since 1998.
Increasingly, the purpose of such code is to surreptitiously read or steal
an end user's personal information. A separate, and reinforcing, technology
trend is the widespread use of passwords for electronic authentication and
signature. These two trends in combination provide criminals, who already
possess motive, with both means and opportunity, and will likely lead to a
series of mass identity theft attacks (i.e., attacks in which legitimate
identification is used by unauthorized persons to impersonate the real
owner for criminal purposes).
Review this important Gartner Group Report
Production Mini-plants in Mobile Containers
At least one of the predictions made by Dick Morley in his book - The
Technology Machine: How Manufacturing will work in the year 2020 - is
already becoming reality.
Science Network has developed a revolutionary production method that is
self-contained, immediate, portable, competitive, and accessible because it
is so cost-effective, and transportable by any means whatsoever: by land,
sea, railroad or air. Science Network will supply the technology and the
necessary support to countries and developing regions.
The Mini-plant system is designed in such a way that all the production
machinery is fixed on the platform of the container, with all wiring,
piping and installation parts. The Mini-plant is fully equipped and ready
More than 700 portable production systems will be available: Bakeries,
Steel Nails, Welding Electrodes, Tire Retreading, Reinforcement Bar Bending
for Construction Framework, Sheeting for Roofing, Ceilings and Fašades,
Plated Drums, Aluminum Buckets, Injected Polypropylene Housewares, Pressed
Melamine Items (Glasses, Cups, Plates, Mugs, etc.), Mufflers, Electrically
Welded Mesh, Plastic Bags and Packaging, Mobile units of medical
assistance, Sanitary Material, Hypodermic Syringes, Hemostatic Clamps, etc.
From a technological standpoint, this system is unique in the global arena.
It is aimed at solving the most basic problem: the survival of millions of
Mobile Production Mini-plants
Get yourself a copy of Dick Morley's book
The Technology Machine: Manufacturing in the year 2020
I continue to get a lotttttt of response on my coverage of automation in
Jeff Dean [email@example.com] e-wrote:
"It seems everyone now is making wild guesses about the next
merger/consolidation/etc move in industrial automation. The thought of
Siemens buying Honeywell twist in my stomach almost as much as the
Siemens-buying-Rockwell rumors that have floated in and out over the last
year or two. The feeling must be something like that of the Brits when BMW
came upon Rolls Royce. I don't think Siemens wants the brand name; more
likely they are simply after a US service and support division for their
On the subject of GE backing off the Honeywell deal, Phil Costantinou
[Phillip.Costantinou@indsys.ge.com] was e-sympathetic about the good
Honeywell people who are being jerked around:
"I just hope my friends back at Honeywell land on their feet when this is
all done; I abandoned Allied-Signal 10 years ago during Bossidy's term when
things were well and haven't looked back since."
George H. Morgan [firstname.lastname@example.org] now a patent agent,
"I worked for Bendix in the early "60's. I followed the mobile home
producer take over, the Martin Marrietta attempted merger & the pac man
defense where Bendix wound up as a part of Allied Signal, and the latest
fiasco. What made Bendix, during WWII, were some people who were draft
deferred who figured out some clever ways to triple bill Uncle Same for
aircraft replacement parts, among other things. The way they operated was
such that I am amazed they survived so long. When a firm is corrupt at the
top, they have a corporate culture that eventually catches up with them. I
suspect GE was smart enough to find lots of good reasons for changing their
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