JimPinto.com - Connections for Growth & Success™
No. 104 : November 25, 2002

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

  • Uneasy thanksgiving in a precarious world
  • The ABB blues
  • Invensys slips & slides
  • Nanotechnology & Moore's Law
  • Tech toys, gadgets & trends
  • eFeedback:
    • Warning to manufacturers who move to systems & services
    • Chinacosm - what about software protection?
    • Root causes of the dismal success rate of acquisitions

Uneasy Thanksgiving in a precarious world

This week in the USA we celebrate Thanksgiving, our annual tradition to give thanks for the bounty with which we are blessed. And yet this year, Thanksgiving brings queasy feelings, even before we feast. More than ever before we realize that our bounty is tinged and tainted in an uneasy world.

We are poised on a narrow ledge of uncertainty in a global village that considers the bounty of the wealthy western world greedy, isolationist and selfish. We live in a land of plenty, surrounded by hordes of helpless and hungry hangers-on, and an angry element that is bent on the destruction of our society.

The new century has brought into focus the stark reality of our vulnerability in a supposedly free world. We are suddenly nervous and jittery about terrorists infiltrating our neighborhoods, anthrax in our mail, pedophiles among the clergy, greedy corporate CEOs, a sinking stock-market, and a hundred other horrible happenings that bombard the news. We are subjected to a constant cacophony of bad news, and vociferous videos with a half-hour refresh time.

As we approach Thanksgiving, perhaps the most important thing going on in the world today is the impending war with Iraq. This war will be different from what nearly everyone expects. It will not be another Desert Storm, nor a repeat of the Afghan war. No one can predict whether this will fizzle out, or flare up into a larger conflagration. The potential for horrifying escalation in the flash pan of the Middle East is horrifying!

Richard A. Muller who writes regularly for MIT-Tech Review suggests in their Nov. 15 issue that war with Iraq is really like a game of Chess. Even if we know the rules and the strengths of the players, there are two sides. Early choices made by the opponents can drastically affect the course of moves as well as the outcome. He describes one plausible scenario. Read it, to broaden your own view of the possibilities.

Let us give thanks this year, as indeed we must, for our bountiful lives and the blessings of our free society. And too, while we give thanks, let us think about solutions for the problems we face. Let us work on the things that will make us thankful in the years to come, the different thoughts we must think, the different things we must do to help make this world a better place. For us, and for the future.

Click Uneasy Thanksgiving in a precarious world

Click Finding a softer approach for a new century

Click MIT Review - War with Iraq As Predictable as Chess

The ABB blues

A major advertisement in InTech Magazine shows the logos of several companies blended against a process background: Fischer & Porter, Hartmann & Braun, Taylor, Bailey, Sensycon, Kent. And the headline proclaims : "The experience of many, makes us stronger as ONE."

In a declining market, trying to pull this plurality of process controls companies into one bag has gotten ABB into trouble. Juergen Dormann, the 62-year old German manager who has taken on the tough task of turning around the ailing giant was back in front of investors last week, trying to win back their damaged confidence with brutal honesty.

With nicknames of "Boardroom Rambo" and "Magic Dormann", Dormann insisted on keeping ABB's ambitious profit target for 2002 (4-5% of sales). But this became a little shaky and he dropped his projections to 1.5%, which hit ABB shares. He told investors there was a long road ahead, perhaps 2 years.

Dormann said that ABB should be concentrating on just one business, with re-alignment by 2005. ABB has already placed several businesses for sale - oil, gas, petrochemicals, building technology. When asked whether he would sell off the process automation business, Dormann said that was possible, depending on the circumstances.

Pinto Perspective:

    Jurgen Dormann must be admired for his guts, to jump in when others have failed. One can only hope that he does not get pushed into the catch-22 dilemma that is troubling Invensys: Selling off good businesses to raise cash to pay down debt, and keeping the poor performers with the conviction that good management can do a turn-around. Good luck, Rambo!

Click Dormann tries to regain trust in ailing ABB

Click Read the ABB Weblog & provide your own comments

Invensys slips & slides

After reporting a 7% fall in first-half profits and predicting a flat second-half at best, Invensys shares dropped drastically to around 45p (ending the week at about 51p). While reporting results, Rick Haythornthwaite tried bravely to put on a positive spin, but was clearly rattled. Invensys' membership of the FTSE 100 index is now in jeopardy.

Analysts and investors are worried about working capital and free cash flow. Invensys is seeking to improve operating margins in the production and energy management divisions by March 2004, and about 1,000 more jobs will be cut to help achieve the target. The banks are still driving the disposal program, which is ahead of the target.

Pinto Perspective:

    With most of the restructuring and cuts in the USA, Europe is dragging Invensys down by keeping all the costs there; perhaps this is Chairman Lord Marshall's xenophobic influence. One wonders what Haythornthwaite will do when the divestitures are all done, and the supposedly core businesses aren't improving enough to get premium performance.

    The new Foxboro Archestra gives Invensys some positive PR and self-gratification, though it doesn't appear to have much real meat, or benefits for the customer. They are still spinning the same old "plant floor to board room" song - which no one really wants or needs.

    Rick Haythornthwaite's recent stock options 3-4 months ago (over 2 million shares at an exercise price of 100.35p), are way under water. It will be interesting to see if these options are re-issued at a lower price, to keep Slick Rick.

Click UK Independent - Invensys dives on fresh profits alert

Click Read the Invensys weblog & provide your own comments

Nanotechnology & Moore's Law

Discussions at the recent Intel developers forum indicated clearly that Moore's Law (doubling of computer power every year or two) will get a new lease on life through this decade because of nanotechnology. New materials and chip structures possible with nanotech will continue the doubling of transistor count on die, keeping Moore's Law going for longer than its previously predicted demise by 2020.

Some features of computer chips are already pushing past the 100- nanometer mark, into the nanotech realm. Pentium 4 processors with 90 nm transistors are already in production. A nanotech project at Intel is developing a tri-gate 3-D-like cell that could lead to terahertz transistors (1 trillion cycles per second). The race is on to build computer circuits from molecules, so that more and more components can be crammed into less and less space, using less and less power.

Another promising approach is carbon nanotubes, which can now be grown on silicon wafers, brining the possibility of combining nanoscale circuits with conventional chip manufacturing.

The huge markets involved have inspired many teams of researchers to explore nanometer-scale structures, looking for new ways to manufacture circuits from single molecules.

Click Nanotechnology expected to extend Moore's Law

You will enjoy this new book by Douglas Mulhall (Pub. July 2002) which predicts breath-taking changes ahead. Mulhall think that every home will have a desktop fabricator, able to create any 3-D object desired; he envisions being able to change the color of a car, or clothes; he believes that nanotechnology will bring technological advances that will change every aspect of our world, including our own species. Good book - read it!

Click Our Molecular Future: How Nanotech, Robotics, Genetics & Artificial Intelligence will transform our World

Tech toys, gadgets & trends

The year end and holiday season is fast approaching and I have a serious problem. I don't know what I want for Christmas. Actually I do know - about 100 different robots, toys and gadgets....

The latest issue of Newsweek (Nov. 25, 2002) has a special report on the latest popular tech-trends - Internet community games (cover-story - The Sims), robots for the home, cars of the future, technology which allows anyone to make good movies, digital entertainment systems, e-paper, smart-name-tags - the list goes on.

Click Newsweek special report: @home & @play

The latest issue of Time magazine offered a complete list of the best of the best inventions of 2002, arranged in categories such as Transit & Talk, Home & Safety, Robots & Tech, Toys & Sports, Clothing, Medical etc. Check them out.

Click Time : Best inventions of 2002

Interestingly, Captain Kirk of Star Trek (also known as William Shatner of Priceline.com) has come out with a new book that reviews how close the tech-world of today is to the visions of the creators of Star Trek. It turns out that things are surprisingly close.

Click CNN : How close is the world today like Star-Trek?


Daniel Greenberg [danielg@us.ibm.com] read my recent article on the subject of products companies becoming services companies or "total solutions providers". He provides insightful feedback:
    "Lured by attractive economics, many manufacturing firms have attempted to establish complementary services businesses only to find themselves trapped far short of the profitable growth that they originally imagined. Recent analysis at the IBM Institute for Business Value suggests that services success depends on a firm's positioning itself as an indispensable part of its customer's value-creation process - not simply by providing a valued service, but by helping the customer create more value overall.

    "Our research showed that the transformation is possible, but it's hard. And the penalty for not making it is worse than failure - it's a purgatory of having to continue to provide all of the services that customers have come to expect without making a good return on all the added effort."

Click Daniel Greenberg's paper on IBM.com on this topic

Regarding the prospect (or specter) of Chinacosm & Indiacosm, Alex Pavloff [apavloff@eason.com] wrote:

    "China has a much looser idea of Intellectual Property than the West. I suppose that happens if you're told for 50 years that everything belongs to the people. A direct effect of this is that the Chinese have a very high software piracy rate and are much more disposed to free/open source software than western countries that have become accustomed to paying for software.

    "So, if manufacturing moves in large droves to China, what software will be running on the machines there? What happens to Wonderware, et al , when they can't sell their software because its pirated or because the cheap software development houses in India have written custom software for the factories in China?"

Mike Marullo [mam@oncfari.com] of cfar International Ltd. agreed with Steve Cuff's assertion that the record of successful acquisitions is dismal. He comments on some of the root causes of failure:
    "It is rarely the executive greed factor that kills acquisitions, although it is often the crowning blow that finally does them in.

    "Failures are most often the result of unrealistic expectations, fed by misguided strategies, followed by poor execution. Acquiring companies are prone to making acquisitions on an purely financial basis. They rely exclusively on EBIT, book value and earnings analysis. They overlook other critical success factors like corporate culture, present/future market value, business synergies and lots of other non-financial parameters.

    "These problems are pervasive, regardless of company size. Typical acquisition policies and procedures are terribly outdated, especially for technology-centric deals.

    "Successful "caretaker" companies with a stable business base and consistent results are almost always a poor match for entrepreneurial driven companies that are far more comfortable with risk and ambiguity. The risk-taker always thinks that the caretaker will use its strength and position to invest and nurture. But that almost never happens. Instead, the caretaker looks for immediate returns by applying its own business model. This can be anathema for a growing business on the fast track.

    "The 'executive greed factor' usually starts creeping in only after it becomes apparent that the original goals and objectives will not be met. At that point, the people brought in by the acquiring company start looking to feather their own beds, since they almost never have any 'personal skin' in the acquired company anyway. Once they realize that they're at the helm of a sinking ship, survival instinct takes over. Desperation has an amazing ability to make the end seem to justify the means.

    "Bottom line: If you want a successful acquisition, look beyond the bottom line!"

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