JimPinto.com - Connections for Growth & Success
No. 38 : March 28, 2001
Business, marketing & futures commentary.
New attitudes, no platitudes.
- Will GE dump Honeywell?
- Will Invensys dump Yurko?
- Cluetrain Comments
- Tech Review : Untangling Code - AspectJava
- Napster Update
- eFeedback - Human Cloning, Cluetrain
Will GE dump Honeywell?
The deadline for approval for the GE takeover of Honeywell was March 6
2001. This has now been extended because of a "full probe" by the European
Commission, and may face a four-month investigation.
This relates to whether or not the the Honeywell Avionics business is an
anti-trust issue. Defense and aerospace group BAE Systems probably
initiated the anti-competitive review, and is quickly jumping in to see if
they can buy the Honeywell avionics business; but, Avionics is the very
reason that GE wanted to buy Honeywell in the first place. The rest of
Honeywell is "baggage" to GE, and GE has already said it will not make
significant disposals to get the deal through.
The Yahoo story on the GE/Honeywell EC stall
Sources report that the overall Honeywell and IAC (particularly!) due
diligence results were "really ugly": use of aggressive accounting
practices (e.g. recognizing revenue on a project before you even have the
order!), an eroding product portfolio, a shrinking market position and
costs that are out of control. This wouldn't have been enough to cause GE
to scotch the deal by itself, since GE really did not anticipate much
benefit from IAC in their acquisition model. They would have either sold
IAC or slashed expenses, restructured and harvested it.
This situation - plus the European Commission objection - may be bad enough
to make Jack Welch welch, rather than destroy the GE stock value. The GE
market cap is down almost a quarter of a trillion dollars since they
announced this deal. GE might have just been given a "get out of jail free"
card, since the Honeywell purchase was contingent on regulatory approval.
Mike Bonsignore, the Honeywell CEO is really the one responsible for the
mess. And, interestingly enough, Bonsignore's total personal compensation
for the two desperation sales of Honeywell (first to Allied, and now to GE)
will be about $150 million. Yahoo's insider trading report on Honeywell
lists the following transactions :
Insider Trading for Honeywell
- 5 Feb 01 : Michael R. Bonsignore Exercised Options at $23.10/Share and Sold
at $49.07/Share. Proceeds of $2,597,000.
2 Nov 00 : Michael R. Bonsignore Exercised Options at $17.66/Share and Sold
at $53.19/Share. Proceeds of $3,997,089.
30 Oct 00 : Michael R. Bonsignore - Proposed Sale (Form 144). Estimated
proceeds of $4,915,322.
20 April 00 : Michael R. Bonsignore Exercised Options at $17.49/Share and
Sold at $56.00/Share. Proceeds of $1,545,791.
19 April 00 : Michael R. Bonsignore Exercised Options at $16.14/Share and
Sold at $55.00/Share. Proceeds of $1,551,952.
The GE purchase of Honeywell will fall apart. This will
leave Honeywell in a mess and present a difficult situation for the
Honeywell Board and Bonsignore. If by some chance the sale does go
through, look for Bonsignore to be booted - albeit with a few millions in
Invensys Update : will Yurko be dumped?
After a first-half "profit warning" last September, Invensys has now put
out a Trading Update with another profit warning. After the September
warning, 5,000 jobs were cut (6% of the workforce). Now this latest news
release reports that "cash flow remains challenging as reductions in
working capital, particularly inventory, have proved difficult to effect
and cash severance costs have risen" and promised "further headcount
reductions". Invensys has breached its banking covenants and is having to
refinance its short term debt of £2.5b. As a result, last week Invensys
shares fell more than 13 percent to 112 pence in early trade and closed 9.9
percent down at 116.25.
Invensys News release with the profit-warning
Financial Times Invensys story
Interestingly, all-round declines in the financial markets seem to
camouflage the Invensys problems. This (combined with the fact that there
is no replacement) may yet save CEO Allen Yurko.
However, The London Independent had this to say : "Allen Yurko is coming
under renewed pressure to step down as chief executive of troubled
engineering firm Invensys as the City loses faith in his strategy.
Shareholders are becoming increasingly disgruntled by his management style
and the flow of bad news. Many investors would also like to see the
resignation of the group's chief finance officer, Kathleen O'Donovan, who
joined from BTR, which merged with Mr Yurko's Siebe to form
Over the last year Invensys shares have more than halved in value. One
analyst said: "It has got to the point where a lot of fund managers think
Invensys is just too risky. People won't touch it until Yurko and O'Donovan
have gone". In presentations after the announcements, there was no mention
of "anything being wrong, which left a very sour taste in the mouth." Some
people think that it is not a question of whether, but when Yurko will
exit. Others claim that headhunters are already on the prowl.
UK Independent News : Invensys story
I respect Allen Yurko - he is a tough manager and a sharp individual. But, he made 3
big mistakes :
- BTR was a pig in a poke and Yurko should not have allowed himself to be
talked into buying it. The BTR merger has cost Invensys billions in market
cap and consumed a lot of management energy, with bad results.
- People selection. For example, the recently departed Jim Mueller (COO)
was widely regarded as knowing how to wield an axe but very little about
the strategy or tactical elements of running and profitably growing a
business. As good managers keep trying to run up the down-escalator, they
are being down-graded by additional layers of newcomers who promise a lot
but bring little to the game.
- Distancing himself from the operations. He has viewed himself as the
grand strategist and has taken himself too seriously. People like Mueller
shielded their boss from the "details" and a clear vision of what is
important on the inside. Yurko needs more Management by Walking Around
Tech review : Untangling Code
The Jan/Fe 2001 MIT Review Technology Trends listed their
selection of the 10 most important technology trends:
In this issue we summarize Code Untanglement : technology that allows
software writers to make global code fixes with just one touch of a button.
Current "crosscutting" capabilities include tracing and recording every
operation, security and synchronization (to make sure that two programmers
don't try to access the same data at the same time) etc. However, keeping
track is an error-prone process and very dependent on programmers
"remembering" to keep track.
A new programming language called "Aspect" allows programmers to write,
view and edit crosscutting as a separate entity. Once the programmer is
happy with it, a single keystroke will weave the aspect into the code
wherever it is needed. It's a smart, intuitive, neat solution to an old
problem. Widespread adoption of Aspect holds out the promise of less buggy
upgrades, shorter product cycles and, ultimately, better and less expensive
The idea of "aspects" (with different names) has been around for many
years. But a team at Xerox PARC have taken the concept out of the lab and
into the real world by incorporating the idea into a new extension of the
programming language Java. The beta version of this extension (called
AspectJ) is already available and release 1.0 ready is expected by June.
This practical Java extension makes aspects part of the vernacular of
MIT-Review on "Untangling Code"
Xerox PARC "Aspect-orientated Programming"
Download the free beta-version of Aspect
The legal process ruled that Napster should exclude a list of song-titles
provided by the Recording Industry Association of America. We have
predicted that this would be impossible, with the peer-to-peer (P2P)
operation of Napster.
Now, the Recording Industry Association (bless their hearts) says it will
complain to a federal judge Napster isn't complying with the terms of the
court's injunction. While Napster says it has blocked more than 200,000
sings and is working on more, most users evade the block by mis-spelling
artists' names and song titles. Napster in turn has complained to the
court that the song lists from the record labels aren't always complete.
I tried Napster with several songs in the past few days - and found each
and every song I looked for - some by using just a portion of the name of
the artist or song. Indeed, it seems that users have come up with an
"understanding" to re-name "banned" songs on their own computers, which are
then "free" to be downloaded under the changed names.
Frankly, it seems
impossible to stop this new mechanism without totally closing down Napster.
And if that happens, several new websites and services will sprout, not requiring the
Napster interface. New methods will become available for people to connect
directly to other people who are interested in swapping songs - or any
other information on their computers.
Record Labels file new complaints against Napster
The original RIA Complaint against Napster
New Napster "hack" allows free distribution of Movies and Software
Here are theses 7-12 of the Cluetrain Manifesto :
The spate of comments (and complaints) about Cluetrain continues. Some wax
eloquent about the chords that strike within their heads, while other decry
the self-evident re-statements.
Hyperlinks subvert hierarchy.
In both internetworked markets and among intranetworked employees,
people are speaking to each other in a powerful new way.
These networked conversations are enabling powerful new forms of social
organization and knowledge exchange to emerge.
As a result, markets are getting smarter, more informed, more
Participation in a networked market changes people fundamentally.
People in networked markets have figured out that they get far better
information and support from one another than from vendors. So much for
corporate rhetoric about adding value to commoditized products.
There are no secrets. The networked market knows more than companies
do about their own products. And whether the news is good or bad, they tell
In any event, it is clear that the Internet is causing a revolution that is
changing the face of business everywhere. Everyone everywhere is talking to
everyone everywhere. It matters not whether you are in the next cubicle or
continent - we can talk. If we have similar interests, we feed on each
other with excitement. If our inputs do not strike a chord, they simply
Read the 95 theses and sign "The ClueTrain Manifesto"
Go buy the Cluetrain book
You might be amused by "Gluetrain"
On human cloning, Matthew Dentino [Mddentino@ra.rockwell.com] responded:
"That is a very scary thought! Changing our Ethical, Theological and
Spiritual compass for the sake of technology, especially biotechnology is
dangerous. I think we need only look back as far as Nazi Germany to see an
example of that experiment tried and gone wrong. In the hands of a
perfectly ethical society cloning might be a benefit - but that society
alas does not exist on this world. To see the danger in this is not to
hide or avoid, but to clearly see without the rose colored glasses of
humanism the real danger in the Moral, Ethical, Theological and Spiritual
relativism that is being called for. "
The efeedback on Cluetrain continued. Dave Rich [firstname.lastname@example.org] e-wrote :
"When movable type was introduce-developed and printing industry got its
big start in the 1600 it started the first information age. As such we have
had some more quantum jumps due to technology. I know how friends will want
to tell someone of the problems at work, to unload there woes, to just tell
someone, or to get back at someone. With e-mail they can tell more people
and right - wrong the word can get out and corp. can't stop them. Its a
way for the "little people" can get back at or keep the big people from
getting away with something. e-mail may not really change a company's
course but e-mailers can feel good about telling the "truth". It seems to
me that people can use e-mail to tell the truth to someone and feel they
have done good. The e-mailers can't get the truth to the investors but just
telling the outside probably makes then feel they have done some good. Its
odd how we want the truth known in some parts of our world but not
everything, our age, our weight, etc."
An avid reader, who would "prefer not to be named" on this, e-comments :
"The piece about a boss sacking half the department rings a familiar tone.
In fact most of the controls companies have been doing just that for the
past 5 years. Where do these people go? In the Western world the concept of
a job for life is long gone. Yet in Japan the job for life ideology had
worked well for the post war period, but now they are facing serious
trouble. So who is right?
"The philosophy underlying a market economy is continual growth. That's
certainly a primary objective of nearly all publicly traded entities. Of
course we all know a lot of this growth has not been organic, most is
through takeover and merger activity. Reviewing the past 3 years of the Dow
Jones index it would seem to be suggesting something else is happening?
Clearly there is insufficient resources (and that includes fresh air) to
sustain continual growth of the human population, yet growth of the human
population is the only 'certain' growth area.
"Perhaps our corporations need to take a leaf out of the greenies booklet
(pardon the pun) and start showing their staff how to plan to live with
less and not just less of us! My grandparents made use of everything, they
certainly recycled their newspapers. Maybe it's already beginning, my local
council took away my rubbish receptacle and replaced it with one half the
size. Now we can't afford to throw anything away!
Where's it all heading?"
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