Invensys - Ulf is CEO, Haythornthwaite waits

Haythornthwaite became Invensys' CEO some 3 years ago. He didn't really know too much about industrial automation and strategized the company into a worsening situation. Endless hordes of consultants and new VPs wreaked havoc with long-standing products, employees and customers.

With a quirky twist of strategic logic, Haythornthwaite sold off the best-performing businesses (presumably because he couldn't get a good price for the bad ones) to pay down the humongous debt burden which was the legacy of the old Allen Yurko and Lord Marshall regime. Then, when things got worse, he added to Invensys' woes by re-financing with expensive debt - squeezed by the banks, who evidently made a quick profit with their re-financing fees.

With all these machinations in the background Haythornthwaite waited in vain for revenues and profits to emerge. But, with an endless stream of new managers and consultants, Invensys continued to decline. And then, Ulf Hendricksson was hired from Eaton, with big bucks to match big expectations regarding what he would and could do. Everyone expected Ulf to take over, after a respectable period. Now he has.

Haythornthwiate has "stepped down". An un-named company mouthpiece told the press that Haythornthwaite is not leaving quite yet. "He will leave the company when it has turned the corner. And that job is not yet done." Hmmmm... I suppose he has not found another job yet and needs time to look while still employed, to promote the perception that he saved Invensys from the jaws of death. Look for his exit as soon as he finds a new position. When he does leave, note the size of his exit package; in May 2003, the board agreed to a request for his exit notice period to be reduced from one year to one month.

Of course, there are plenty of boards that will buy Haythornwthaites's story of strategic brilliance and tactical experience, to hire him as their new turnaround CEO. Or, perhaps he can join Allen Yurko as a venture capitalist, to buy some of the Invensys pieces that remain.

All this, while struggling employees suffer under the endless waves of change, hoping and praying that Siemens, or someone else, will buy the company and stop the spiral of decline.

Rockwell moves ahead under Nosbusch

When the industry recession came some years ago, Rockwell Automation stagnated, cutting back to achieve profit objectives. Programmable controllers were now commodities, and Rockwell moved into software and industrial networks. Global Manufacturing Solutions (GMS) was formed to offer systems integration, competing with the company's own systems integrator sales channels.

Don Davis, now 64, has handed over the CEO reins to Keith Nosbusch, while still remaining Chairman. Keith Nosbusch, 52, began his career at Allen-Bradley as an electrical engineer and rose to become President of the Controls Division. He's a decent manager, but doesn't seem to be able to re-motivate his troops, many demoralized by continuous cutbacks.

At the recent RA Automation Fair, things seemed upbeat. A knowledgeable industry analyst reported that RA technologies are really coming together - perhaps the best (outside of Emerson Process) for integrating all platforms, and broader by far than Emerson. It seems like the Distributors are on board for the new ways of selling. The key thing missing was Keith Nosbusch; no keynote speech, no mingling; he wasn't anywhere to be seen (someone said he was there for just one day out of the three). The Rockwell weblog reports a key perception problem - Keith Nosbusch is a detail-driven workaholic, while Don Davis seems to spend all his time with Wall Street analysts. Neither has the charisma of say a John Berra of Emerson.

Interesting new people shift: Kevin Roach, VP at GE Fanuc has joined RA to take over Rockwell Software. Kevin is a smart guy, who sold his tiny company Sensor-Pulse to Total Control Products, which itself was bought by GE Fanuc. Kevin was given responsibility for Cimplicity software and was instrumental in the purchase of Intellution by GE-Fanuc from Emerson. Now it will be interesting to see how the demotivated Rockwell Software group fares under Kevin Roach's leadership.

Rockwell Automation has grown about 5% this year, with revenues of $4.3 billion - mostly hardware, software and systems/maintenance contracts, with some electric motors and drives. All the tough cost-cutting has resulted in profits of about $300 million and 36% increase in earnings per share. Market-cap is a respectable $8 billion.

There are too few strategic buyers who can afford a friendly acquisition of this size. Siemens and Schneider are direct competitors and would likely be blocked by anti-trust rules. GE, Emerson and ABB continue to feign interest, but don't seem to like the strategic misfit. Honeywell (Industrial Process Solutions) was once a strong strategic partner, using RA network software and hardware developments to strengthen its own solutions portfolio; but then that Division of Honeywell itself got into trouble and interest fizzled.

Rockwell's current healthy $ 8 billion market cap makes it difficult for a peer company like Eaton (sales $ 9 billion, market cap $ 10 billion) to acquire at a premium. But, Danaher (sales $6.5 billion, market-cap $ 18 billion) may have a better shot, if it chooses. In the meantime, Rockwell Automation remains "independent".

Don Davis' pay is still more than double that of CEO Nosbusch, plus healthy stock options. But, Don's efforts with the analysts seem to be paying off - ROK stock has climbed steadily to $43 (Nov. 2004), a healthy 25 times trailing earnings and well above the level at which he was supposed to be exiting. But he hasn't departed - yet. So, what's he waiting for? A Nosbusch nudge? Or retirement age?

Stay tuned...

ABB has recovered - growth strategy in China

Chairman Juergen Dormann took over the reins and has lived up to his reputation as a superb manager, putting ABB back on an even keel. The company posted a Q3 2004 net profit of $98 million, improved from a loss of $283 million compared to last year. Sales rose to $4.8 billion, from $4.6 billion in the 2003 July-September period. Orders were $4.8 billion, up from $4.4 billion. Net profit for the first 3 quarters was $188 million, compared with a loss of $388 million in 2003. Sales rose to $14.1 billion, up from $13.7 billion.

Juergen Dormann will now relinquish the roles of president and CEO in January 2005 and revert to his role as Chairman. He is being replaced as CEO by Fred Kindle, who joined ABB in September 2004 from Swiss-based Sulzer AG. It remains to be seen how Kindle will fill Juergen Dormann's big shoes.

Now, with expansionist moves in China, ABB plans to hire 5,000 new employees and double its orders and revenues to $4 billion by 2008. China is currently ABB's third largest market, after the US and Germany. With $18 billion worldwide sales, $ 2 billion now (2004) comes from China. ABB has 105,000 employees, and 7,000 already live and work in China. This will grow to 12,000 by 2008. China will be ABB's number one market in 5 years.

Here is ABB's 5-point strategy for China:

1. 20% growth per year for the next 3-5 years.
2. $600 million new investments.
3. Buying materials locally to build complete product lines.
4. New R&D center in Beijing, to meet Chinese customer needs.
5. Develop local talent.

ISA InTech - weekly Pinto's Points

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