JimPinto.com - Connections for Growth & Success
No. 105 : December 6, 2002
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
- Eaton/Cutler Hammer to acquire Rockwell?
- Ratio between executives & worker's pay - the gap widens
- Wearable computers and ad-hoc wireless communities
- First human clone due in January 2003
- Morley book - Out of the Barn
- Corporate culture & change management in acquired companies
- China dominance in valve manufacturing
- ABB clarifies Oil, Gas & Petrochem divestiture
Eaton/Cutler-Hammer to acquire Rockwell Automation?
During the past couple of weeks, there was more than the usual
noise about Rockwell being acquired by Cutler-Hammer. Employees
of both companies heard that C-H would be buying Rockwell -
effective after the first of the year. This news was not
confirmed (or denied) by management of either company. It must
be recognized that, if it was indeed true, management would be
strictly prohibited from making ANY kind of comment.
The point about "after the first of the year" is based on this:
the split into Rockwell Automation and Collins in 2002 included
a tax provision that, if anyone buys one of the pieces on or
before 1 January 2003, they would be assessed an additional $1b.
So, any acquisition can be expected to occur only after that date.
Eaton, which owns Cutler-Hammer, has revenue of $7.1b, with market-cap
of $5.3b at current stock value. Alex (Sandy) Cutler (50) is Chairman,
President & CEO of Eaton and the key driving force. Last week he was
reported to be touring some of the Rockwell facilities - which perhaps
gave rise to the new round of rumors.
Rockwell has revenue of $3.9b with a market-cap of $3.8b at current
stock price. CEO Don Davis (62) has no clear successor and is clearly
looking for an exit, with at least some reasonable valuation for the
company. At the local level Rockwell's focus is on operating
earnings: "OE in 03", with concern about asset inventory. Some feel
that tight controls are in preparation for new ownership.
Who can/will acquire? Only one of the majors can afford a purchase
of this size. Honeywell, Invensys, ABB are too busy with their own
problems; Siemens or Schneider (perhaps, though it would trigger
anti-trust actions), Emerson (unlikely, they consider Rockwell as
strategic dead-meat), GE (possibly - they've been buying at high
prices recently), Mitsubishi or Omron (never, the Japanese don't
know how to acquire), Eaton or Danaher are the only candidates left.
With primary offices & facilities in both Milwaukee and Cleveland,
Eaton is the best bet.
Rockwell (A-B) and C-H have been rivals for a long time, and perhaps
it is that which fuels Sandy Cutler's fire. The cultures are vastly
different, and channel conflict would be a big issue, especially in
the US. Although some product lines would be compatible, others would
be redundant - but eliminating redundancy is a clear win. From a
global point of view, the combination of A-B & C-H would put clearly
be in a position to compete with Siemens, Schneider, ABB and GE.
Will Eaton acquire Rockwell? Well, I guess we'll wait another
month (January 2003) to find out.
JimPinto.com eNews 31 Dec. 2002 - Rockwell Reality Regression
Powerpoint presentation - Rockwell Analysts Meeting Dec. 5, 2002
Eaton Quarterly Report - Nov. 2002
JimPinto.com Rockwell Automation weblogs
Executives vs workers' pay - the gap widens
Even during hard times, executive and CEO pay continues to increase
steadily. The use of performance-based pay to spur corporate
executives are typically short term, encouraging them to pursue
short-term gains at the expense of the workforce, and of the company's
long-term performance. In fact, itís not unusual for CEOs and key
executives to receive big pay increases, bonuses and stock-options,
while their companies are laying off frontline workers.
In 1980, the ratio between the average pay for blue-collar-workers and
CEOs was about 40. In 1990, this increased to 80 and in 2000 it jumped
to an incredible 530! As the wage gap between executives and workers
widens, some shareholders are actually working to link executive pay
to workers' pay.
CEO pay is much higher in the US than in other countries, both in
absolute dollar terms and relative to pay for the average worker.
While American CEOs earns about 500 times as much as an average
blue-collar worker, German CEOs make, on average, just 13 times as
much. In Japan the ratio in Japan is 11, Canada 20. For Mexico
(with low-paid workers) the ratio is 46.
Business Week: Executive Pay continues to explode
Chief executive officers' pay exploded in 1990s
Wearable computers & networks
At various times, we have covered various types of wearable computers
and gadgets in eNews. The trend is increasing, not just for the techy
or geeky fashion, but because there are times when it makes a lot of
The crowds who surround us every day constitute a huge waste of
information that could usefully be networked. If you live in a big
city for instance, there are many people who may pass within a few
yards of you each day who could give you a ride home. Or they might
want to buy an item you're trying to sell. Dynamic networking makes
it possible to tap those resources through a momentary alliance
among transient interest groups.
In the world of wireless wearables, computers embedded in clothing
could form networks on the fly, prompting software agents to carry
out mutually beneficial transactions. For example, people waiting
to buy movie tickets in a long line might use an ad hoc network to
auction off favorable places in line. Or, as I strolled around with
my family and friends in Disneyworld, we could track each others'
whereabouts and exchange ideas and comments about where to go next
and what to do. Or, you could operate a mini-eBay auction for your
bike to departing visitors, instead of locking and parking it.
Your wearable PC will let you know that you are passing a particular
store, or give you a choice of restaurants in the mall. Hey! you
could even download that MP3 music from a friend, as you walk
around the mall.
MIT Tech Review - Clothes make the network
How are you wearing your electronics?
First human clone due in January 2003
The controversial Italian fertility doctor Severino Antinori announced
that the first human baby clone will be born in January 2003. In Italy
last week, the researcher said three women he has treated are now
carrying fetus clones in the advanced stages of pregnancy. The doctor,
who made world headlines in 1994 when he helped a 62-year-old woman
have a child, supports the cloning of human beings as a way for
infertile couples to have children.
Just days later, a US company claimed that it too had women that were
pregnant with baby clones - one of which would be presented to the
world before the end of the year. But in the absence of any real
proof, not all scientists are convinced. Many think that, based on
animal data, it's likely that attempts to create a human clone would
result in miscarriages and such pregnancies would carry a high risk
of death and deformity.
One thing is clear - whether or not human cloning is safe today, the
vast amount of research already being conducted will make cloning
safe before too long, and many people will opt for this new way of
procreation. The implications are vast. Every aspect of human life
will need to adapt to the new realities - theology, ethics, moral,
BBC News - Nov. 2002 - Human Clone Unlikely Say Experts
NY Times - Italian Doctor Says Cloned Baby Due in January
Morley book: Out of the Barn
Inventor, author, consultant and engineer Dick Morley is best known
as the as the father of the programmable controller (his PLC is now
enshrined in the Smithsonian). He's an entrepreneur whose consistent
successes in the founding of high technology companies has been
demonstrated through more than three decades of revolutionary
For several years, Dick's column "Under Control" in the automation
journal "Manufacturing Systems" brought up ground-breaking concepts,
presented with characteristic Morley humor and make-you-think
challenges. This little book gathers those wide-ranging columns in
compatible segments, organized for easy reading. You can open the
book and read any article, in any section, to be educated, challenged
Here you'll find the history of the programmable controller - when
it was developed, how it got its name, it's rise & fall, and many
interesting historical anecdotes. You'll find out what Morley was
thinking and dreaming about, over several years, even as he is today.
In short, article-length bites, you'll discover a variety of
insightful ideas, concepts, predictions and prognostications, mixed
in a tasty soup of Morley chit-chat and BS. Dick Morley himself will
tell you that he is not sure which is which. But, it'll make you
If you know Dick Morley, you'll enjoy reading this to refresh your
mind; if you don't know him, you will - when you read this book!
Review & Buy Dick Morley's "Out of the Barn":
Regarding the causes of acquisition failures, Lance Ruetimann
[firstname.lastname@example.org] suggested that more focus should
be placed on corporate culture:
"I think Mike Marullo hit the nail on the head. However,
I would like to add the following:
"What we see today, is a repetition of 1 and 2, with total ignorance
of 3. The culture will develop, but in a protective manner. All pleas
and appeals by management will fall primarily on mistrusting ears.
Would you like to lead a team that is re-acting on the lowest level
of Maslow's pyramid?
- It takes up to one year to develop a strategy.
- Add up to one year for reorganization.
- Add 2 to 5 years for the internal culture to change and develop.
"Further, a Change Management consultant writes in an article
recently, that she finds herself holding organizations back from
making too many changes. The term Change Fatigue Syndrome
was coined, which affects all levels of a company. How tired does
one have to be, to finally accept limits set by nature?"
Don Caffee [email@example.com] confirmed that China already dominates
in at least one segment of industrial automation:
"I believe you will find China to be the dominant country in
manufacture of commodity type valves. Almost all of the major US
manufacturers have transferred their commodity valve manufacturing
to China. At one point they tried to conceal it but since Chinese
quality has improved this is no longer an issue. Prices are very
low and US manufacturers cannot compete. The specialty valves are
still made in the US because the quantity is low and the Chinese
don't want the problems associated with that type of production.
Dave Biros [firstname.lastname@example.org], Group Vice President, Marketing
Communications at ABB Automation Ltd. wrote to clarify a point in
the ABB article in the latest eNews (25 Nov. 02):
"We also know of major valve manufacturers who have transferred
their engineering functions to India and suspect China will not
be far behind India to compete for the business.
"We are seeing Chinese companies come into the US valve market under
the name of a Chinese Trading Company and competing against the US
companies that are sourcing products from China. Usually, the prices
from the trading companies are lower than the US manufacturers and
they are taking some business."
"Please note that the "Oil, Gas & Petrochemicals" business that
ABB plans to divest is an Engineering, Procurement and Construction
business. ABB will continue to serve oil, gas and petrochemical
customers with its core automation and power technology. In fact,
ABB has grown its automation business serving the petroleum industry
in double digits annually over the past few years, and we are
currently ranked No. 1 by ARC in process automation systems sold
to the oil & gas industry based on 2001 revenues."
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