JimPinto.com - Connections for Growth & Success™
No. 4 : June 5, 2000


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Contents :

  • Baanalysis - Invensys acquisition of Baan
  • Intelligent, connected appliances
  • What the *** is C-Commerce?
  • Manufacturing Growth Continues
  • Hot Book - The New Pioneers
  • Leadership in the New Environment

Baanalysis - Invensys acquisition of BAAN

Invensys Last week Invensys announced a takeover of Baan, a Dutch business software company that provides integrated services to engineering and manufacturing companies. Invensys will create a new Software and Services Division that will consist of Foxboro, Wonderware, APV, Triconex, and Baan. This group of businesses, which will be led by Bruce Henderson, President of Invensys Intelligent Automation, will have about $2billion in sales and holds significant growth potential.

Invensys Baan was Europe's second largest software company, just behind Germany's SAP. Once valued at about $10b, Baan has been suffering worsening financial difficulties, reporting seven consecutive quarterly losses and bleak prospects. Things worsened further when it lost its chief executive officer and chief financial officer at the start of the year. Baan had a reasonably robust $197 million in cash and securities but a mere nine million dollars in shareholders' equity at the end of 1999 when it reported a loss of $289 million. It is currently valued at about $600m, when compared with the Invensys cash offer of about $725m. Invensys itself currently has a market-cap of about $14b.

To restore Baan to profitability, Invensys plans to implement a rigorous restructuring and cost management program under which costs will be reduced by approximately $60 million to $120 million per quarter by Q4 2000. Invensys expects to incur restructuring charges of $400 million over an 18-month period from the date of acquisition. Invensys believes that implementation of its restructuring plan will return Baan to breakeven within 12 months.

Most analyst reports were cautious to decidedly negative on the Baan acquisition. Many questioned the logic, given the unproven synergies of the BTR acquisition and the sickness of Baan. Key new projects may be lost to Honeywell and Emerson, as attention is diverted to fixing Baan. Invensys was downgraded by several of the major brokerages, and its stock has declined to about $3.75.

Bud Keyes, Senior Vice President, Emerson Electricís Fisher Rosemount gives his view :

    "Of all of the ERP vendors Baan has, perhaps, the most modern architecture. They have explicitly recognized the existence of and need to interface and integrate with legacy systems, other competitors products and complementary software packages and have accommodated this need in their design. It is easy to interface other applications and legacy systems to the Baan core offering. On the other hand Baan has been very poorly managed and has a huge customer and financial community credibility problem as a result of their financial instability.

    This acquisition will be a huge challenge to Invensys. Baan must be restructured and restructured swiftly to stop the bleeding. Confounding this necessity is the fact that any restructuring will come at huge expense due to the Baan location (Netherlands - it costs a lot per head to scale back there). It will also be very, very costly to retain key Baan people during this restructuring and change. The market is hot for skilled ERP technologists and managers and many of these key people have already left or are being aggressively recruited.

    If Invensys can pull it off (a very big if!), the strategy makes some sense to me. But, I don't see this strategy surviving without major damage to Invensys profits, which will not be treated kindly by the street. Generating shareholder value with this one will be the hardest thing that Allen Yurko has ever done and it remains to be seen whether it will work. "

Walt Boyes, industry expert and market observer comments:
    "With Baan, Invensys is now the ONLY Company with the ability to integrate from the machine or the process all the way to the display in the boardroom. This should shake up every other major industrial automation and enterprise integration company. The question is whether Invensys can grasp internally the magnitude of what they've done quickly enough to move on it before Emerson, Danaher, Honeywell, SAP and the others start forming protective alliances."

Jim Pinto Baanalysis :

Buying Baan was a gutsy thing to do - and Allen Yurko, CEO of Invensys is clearly the one who DID it! CEO's have endless advisors, usually advocating caution. This is a risky move, with high stakes and a good payoff. It takes guts to move, and Yurko has guts, with a good track-record of implementation. This move will will be good for Invensys

Here are some good web-links to reports that you can read for yourself.

Info-appliances - the post-PC world

Move over, personal computers. Portable information devices that have the power of a PC, the networking of the Internet, the vivid images of television, and the convenience of the telephone are becoming more popular, says the George Washington University Forecast.

In a few years roughly a third of computer users will use portable devices rather than PCs for making telephone calls, sending e-mail, watching video, transmitting documents and data, conferencing, and other forms of computation and communication in general.

Here are some Hotlinks :

C-Commerce

Just when you thought you might be getting control of your e-business strategy, the winds of change pick up again. A new Web-based business model is emerging that GartnerGroup calls c-commerce. Gartner defines the new strategy as collaborative, electronically based business interactions within a company, between a company and its business partners, and among customers throughout a given trading community or industry segment.

C-commerce permits companies to go beyond rigid supply-chain models and simple information sharing to create, execute, and monitor business processes with their partners.

Manufacturing continues to grow

The Purchasing Managers' Index rose to 53.2% in May, the 16th consecutive month of growth in the manufacturing sector.

Hot Book : The New Pioneers

The New Pioneers - The Men and Women who are Transforming the Workplace and Marketplace. By : Thomas Petzinger, Jr.
About the powerful revolution that is reshaping the face of American business and creating an opportunity-rich economy. The vanguards of change are most visible in spectacularly successful innovative and growth-orientated small companies. Tom Petzinger, a terrific writer and someone whose thinking I respect greatly. He spent many years at The Wall Street Journal and is a prizewinning business author and financial journalist. Understand the people-revolution in the age of participative management - read this book!

Pointers: Leadership in the new environment

You know, a lot of people complain simply because there are always a lot of things to complain about. During times of change, the things we did to generate growth and success in the past may not work anymore. Everything and everyone is tested anew everyday.

If you are buying products and services, the supplier who provided the best price and delivery the last time you bought that product may not be able to supply it again for any one of a thousand reasons. If you are selling products and services, the customer who gave you that big order the last time may quite easily have changed their specifications, price and delivery requirements. You will need to prove your superitory again.

Have you noticed that, when people lose, they will give you a thousand excuses, placing the blame anywhere and everywhere else, except themselves? Winners don't complain - they just DO!

Leadership is NOT a one-time thing - it's an everyday thing. The relentless urge to be the best!

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