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Latest Invensys ResultsFor year ending 31 March 08, Invensys had revenues of £2.1B up 4%, with operating profit of £254M up from £216M. Operating profit margin was up from 10% to 12%, while orders were down slightly, from £2.1B to £2.036B.
Invensys Process Systems (IPS), which includes Wonderware, is the largest part of Invensys. IPS revenues were up 9% to £870M and operating profits grew 16% to £117M, with operating margin up from 13.4 to 14.1%. Orders were up 5% to £870M.
Wonderware has operated as a largely autonomous entity and its financials are always buried within IPS. But a canny analyst at the recent meeting managed to elicit a response that Wonderware was "in broad terms about 20%". That puts Wonderware revenues at about £170m ($330M). Clearly, it is the most attractive and the fastest-growing part of Invensys. Wonderware customers have recently been sent a questionnaire which asks, among other things, what their reaction would be to re-branding Wonderware and its products as Invensys. Hmmm....
Invensys still has its problems. The once healthy Eurotherm (bought by Yurko for some $ 350M) saw revenues grow 5% to £115M, but operating profit declined to just £9M. Eurotherm is now about 10% of IPS, and not worth keeping.
Invensys has clearly made big strides. CEO Ulf Henriksson must be congratulated for leading the company back into success. While he claims that he will continue the transformation, clearly the best bet for him, and for Invensys, is to remain solvent and show promise till someone decides to buy.
As previously discussed (weblink below), it's difficult for a Phase-5 ($1-5B) company to grow past that plateau. Invensys market-cap is still only about £2B, which makes it a target for any one of the biggies who wants the pieces.
Ulf joined Invensys in 2004 from Eaton and Honeywell. At 45, with the Invensys turnaround as a feather in his cap, he won't want to stick around for too much longer. Beyond just big bucks (his total-comp. is around £2M) he'll do better by moving as CEO of a healthy growth company. He is already on several head-hunters' short-lists.
Invensys recovery perspectivesInvensys now claims that it has saved itself from financial disaster and is back being "normal". Management claims that the company is now "effectively debt free" with £200m in cash and expecting to renegotiate financing with the banks which have, till recently, ruled the roost.
The company is even cocky enough to promise dividend payments and expects to make acquisitions, though Ulf Henriksson was quick to announce that they "won't be doing another Baan."
Somewhere in his banishment to the fringes, Allen Yurko must be squirming at the reference to his egotistical acquisition of Baan; this has now become a metaphor, and even an adjective. The bull-headed, yes-demanding former CEO of Invensys bought Baan for a cool £1B; it was eventually sold off for a pittance. Yurko was ejected, and his crony Lord Marshall of BTR was booted off the Board.
Interestingly enough, Yurko's successor, Rick Haythornthwaite, once hailed as the savior, didn't do much more than sell off Invensys to the banks. Knowing zilch about industrial automation, he was clearly out of his depth. His best move was to bring in Ulf Henriksson before making a graceful exit. After cooling his heels for a while, he shifted to totally unrelated jobs, and most recently moved (we heard from and Invensys weblog) as Chairman of a UK real-estate company.
After the Yurko disaster, Invensys was removed from the FTSE 100 Index. The company is now again in FTSE and will be re-classified in the "Software" sub-sector of the "Technology" super-sector, effective 23 June 2008. The "Software" classification tells a lot about how the future Invensys wishes to be perceived.
Invensys stock price was 320p at the time the latest results were announced, and has since dropped to 281p. When the Yurko-generated troubles started in mid-2000, shares were over 3000p (equivalent before the 10-for-1 reverse-split) and dropped to 128p. So 300p is not exactly a "recovery" for any shareholders who've been holding on.
Growth strategy maximizes Invensys valueThere are lots of clues to the new growth strategy. Invensys is becoming "hardware independent", with greater emphasis on solutions and specifically on integration between the plant floor and ERP. It's clear that future investment and acquisition plans will be focused around Wonderware, ArchestrA and InFusion.
The reduced emphasis on hardware and products, leaves Foxboro, I/A, Triconex dangling in the wind. Rather than let them die of neglect, they'll likely be sold off. Key buyers may emerge from India or China (hint-hint).
The uneven nature of Invensys' Rail business is a drag, and is awaiting a reasonable buyer. Eurotherm too will be sold off as soon as they find the first buyer who can be convinced to buy the pig-in-the-poke.
Ulf Henriksson is now targeting "small bolt on acquisitions" within his budget of about £20m, which he says will happen within the next year or so. It's a good sound-byte, and makes him sound aggressive.
On strategy, Ulf keeps repeating, "We are different from our competitors, and we’re creating growth platforms for competitive differentiation. We are going away from being a diverse manufacturing company in electronics and solutions, to becoming a technology and a control company."
Highlighting differences from the competition also highlights strategic attractiveness. Ulf acknowledges that, but insists, "We are not managing this company to sell it..."
But of course. He cannot be expected to announce, "Hey, we're healthy again and now ready to be acquired!" That's the unspoken assumption that everyone recognizes. It's prudent to continue to develop a sensible independent growth strategy to maximize value.
The new Invensys strategy is based on the belief that the current strength of the market for control hardware and instruments will decline as user companies expect to achieve a much higher return on investment by focusing on higher level integration and plant wide optimization. So, this is the necessary transition from hardware and system supplier to supplier of engineered solutions and services - which explains the difference in performance between Invensys and such competitors as ABB and Emerson.
And that, of course, attracts the strategic shoppers - not only at ABB and Emerson, but also at Siemens, Schneider and GE - who are clearly tuned in to the goings-on. And, as suggested, look for new automation-supplier buyers to emerge from $-rich India and/or China.
A large amount of the information for these Invensys insights are from Andrew Bond's monthly "Industrial Automation Insider". Of course, the extrapolations are my own.
InTech eNews - Pinto's Points with video summariesMany of you read my regular "Pinto's Points" with the weekly ISA InTech eNews. Now you can "view" video summaries.
Recently, we're linking a short (2-3 minutes) video to each Pinto's Point item, with good success. Many prefer to view the video summary, and then read or file the more detailed text, as a way to absorb more of the content.
Take a look for yourself.
The "Innovation Series"
Wii - The Exercise Video GameI've always been a gadget freak. But I don't own any video games. Till now.
I used to enjoy playing early video games like Pong, Tetris and Mario Bros. But crashing cars and battling aliens are not for me. They're played mostly by teenagers. I browse the video-games aisles now and then, but nothing is even remotely interesting.
The along comes Nintendo's Wii (pronounced We). Time to get away from my keyboard and in front of the TV (but not on the couch). This is the physical side of TV watching. I work up a sweat playing "Wii Tennis," a game that replicates racket swinging with motion-sensing controllers. Some say they can keep fit and lose weight playing "Wii Sports" for about 30 minutes a day.
Now a new game - "Wii Fit" - focuses on physical workouts, with a weighing scale and digitized fitness trainer. There are already 9.5 million Wiis in US households, and 4 million are expected to buy the additional $90 Wii-Fit balance-board bundle.
It's strange, in the age of over-supply, Nintendo's Wii has been sold-out in most of the stores, and it's available only at a higher re-sale price from online sellers like Amazon.com.
Watch the videos (links below). Then go get your Wii.
eFeedbackMy old friend from England, Nick Sion [email@example.com] now lives in Canada. He sent me these insights:
Now the tide has turned, and the outflow is becoming inflow, just like the 1980s when the Japanese paid $1.2 billion for a golf course. The bubble burst and they sold it back at a mere $ 200 million. Similarly the Rockefeller Centre in New York was sold for $700 million, after being bought for over a billion.
"What am I trying to say? Governments make money on the movement of money, i.e. transactions where they collect taxes, and from import/export whichever way it is heading. US goods are now cheap and so they will export more and the government will collect more.
"In 1973 President Nixon removed the $ from being pegged to gold at $35/oz. and supplemented it with the IOU by the US Federal Reserve Bank; i.e. they just print paper, backed by the industrial output of the USA. Now this is declining and has shifted elsewhere, and hence the dollar is dropping. Will a gallon of gas become the new world standard? Or will it be the Kilowatt?
"With a declining $ comes a political power shift. I only hope the transition will be seamless, and in the same way that the British Empire ceded to the US 'empire'.
"Back again to my own admiration of the US; when it had absolute power in the 1950's it did not exercise that power by imposing its will by nuking China or Russia, but lent a helping hand, even to Russia while they dismantled the Soviet Union. The US never took advantage (this statement may be disputed) but I qualify it - to the same extent as previous imperial powers."
"This is the product of a long and deliberate drive by successive French governments to induce higher fertility through family-friendly policies (a successful public policy lasting through decades! Now that's a scoop!).
"In addition, contrary to all the gloom and doom propagated by many right-wing French politicians and American conservatives, this is not that much driven by large immigrant families: it would be 1.9 without them, i.e. comfortably close to 2.1 anyway.
"The automation business has shrunken from the heyday of the 80's and 90's. The engineers are still here. But they all have jobs now with better pay and working conditions.
"As manufacturing competitiveness has tightened, customers are tight with an automation buck. Here in the Midwest, when the auto industry needs a system, they get 5+ bidders who are "capable" to bid the job, and the award usually goes to the company that made the biggest mistake on the bid (the lowest bidder).
"Working 9-5 beats the heck out of weeks on the road doing startups. The controls guy doing the startup gets to take the heat, under intense pressure to get the thing up and running. Long hours, out of town, people breathing down your neck. Not exactly a rewarding experience. Even staff engineers now are working incredibly long hours, under the same kind of pressure, to maintain/troubleshoot old equipment and keep complex technology running. They're not out of town, but they still never get to see daylight outside the plant. All this for a pay scale that just meets the average for an engineer/programmer, and maybe even less.
"Most of the smart people that I know who were formerly in the controls and system integration business are now writing software for financial services, healthcare, web applications, or doing validation services for the pharmaceutical industry. Or they're in a completely different business. A little tweaking of your skill set, and you can do something that might be a little more boring, but doesn't beat you up nearly as badly. You get the same pay, and you get to sleep in your own bed at night."
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