Growth & Success eNews No. 21, October 21, 2000

JimPinto.com - Connections for Growth & Success™
No. 21 : October 21, 2000

JimPinto.com eNews is a new-age newsletter, published irreverently and irregularly by Jim Pinto.

Business & marketing commentary with new attitudes and no platitudes. We tell it like we see it. No advertising, no fear, no favor. Who's hiring and firing; who is buying up and selling out; who is hot and who is not. Stay e-tuned....

Contents:

Honeywell for sale & sold to GE !
Speed - the "killer-ap"
The Disposable PC
Rapidly Changing Face of Computing (RFCoC)
Nanotechnology is coming
eFeedback & Happy Birthday
Acquisition buzz - eFeedback

Honeywell for sale & sold to GE !

(Yes, yes - I know.....Some of you are not interested in this industry mergers stuff. But, there are a lotttt of others who are. And this is HOT stuff! So, please bear with me. If you find it boring, simply scroll down to the next item. OK?)

Interesting week! The Telegraph (UK) came out with the story that Siemens was preparing a bid for Honeywell IAC - the industrial automation division of Honeywell. About mid-week, Michael Bonsignore, Chairman & CEO of Honeywell declared that Honeywell IAC was NOT for sale. The very next day, news broke that Honeywell itself (the whole enchilada, not just IAC) was being merged with United Technologies. On Thursday, the United offer became less attractive when their stock-price declined. On Friday, United backed off because Honeywell was considering other offers and they had no wish to be in a bidding war. On Saturday, it was clear that GE had made an offer that couldn't be refused. While Siemens and others are reported to be considering counter-offers, it is unlikely that Jack Welch, Chairman of GE, would be willing to lose at this stage.

Read the whole sequence of events and the real-life soap-opera, here and on the web:

Sunday, 15 October: Telegraph Story that Siemens was buying Honeywell IAC

Tuesday, 17 October:
Honeywell denies Siemens will buy IAC.

Dow Jones Newswires - Honeywell Chairman Bonsignore, in an interview with Dow Jones, shot down speculation that Honeywell may sell some or all of its industrial control systems business to Siemens AG. "There's no basis to it," Bonsignore said, referring to a report in a U.K. paper that Siemens was preparing a bid worth up to $1.5 billion for all or part of the business. He called the speculation "from another planet." Bonsignore said industrial controls systems is a core operation. He also said the companies aren't in any talks.

Thursday, 19 October: United Technologies Near Deal to buy Honeywell (Reuters News)

Friday, 20 October: United Technologies ends Honeywell Talks (Reuters)

Saturday, 21 October: GE makes offer for Honeywell (Wall Street Journal)

Pinto's Prognostications:

Honeywell, under CEO Michael Bonsignore, has been in trouble for a while - operating cutbacks and short cuts could not hide the lack of growth and profit. Larry Bossidy of Allied Signal, with no heir to his throne, engineered a merger with Honeywell over a year ago, with Bonsignore as the new CEO. However, Bonsignore did not deliver the restructuring synergies he had promised and his seat was getting rather uncomfortable, to say the least. The best way to escape the hot seat and gain another couple of years is by confusing the issue with another merger. So, while I keep predicting that IAC (the controls group within Honeywell) would be sold off, the whole thing tumbled beyond my prognostications.

United Technologies had some synergies with Honeywell, but with a P/E ratio of about 17 (which declined on the news) they are not in a position to match GE (with a P/E of 50). So, they simply backed off. Several Honeywell business are attractive to GE - about $15b revenue in Aerospace, $5b+ in Plastics, plus Home & Building Automation. Siemens or Tyco may now counter-bid, but they are unlikely to succeed. Clearly, after the dust has settled they can bid for the pieces of Honeywell that GE doesn't want.

Acquisition by GE will simply create more problems for IAC, which becomes an even smaller (and less desirable) fish in a larger pond. GE staff had previously proposed to Jack Welch that GE buy either Emerson or Honeywell, and Welch is reported to have responded : "We have a P/E of 50. If you are viewed as being in the Industrial market you will have a P/E of 20. Why should I throw away 60% of the GE market-cap?" In the case of Emerson, Jack Welch went on to say: “Chuck Knight is legendary in his ability to wring cost out of an operation and to drive operational excellence with his "best cost producer" strategy. Given this, what is the synergy that we will get that would cause GE to buy Emerson?"

In spite of Mr. Weber’s protestations, IAC will inevitably be sold off. The only value left in IAC, after a decade of using it as a cash cow, is the aging installed base of TDC systems. The systems and products are poor designs by today’s standards and there is nothing new brewing. Siemens is probably the only company that would really want it, and their "low" offer price is probably sufficient for GE to dump it. The employees at IAC are the real losers - they have been short-changed for the better part of a decade and now they will simply get jerked around again.

As for Honeywell itself, the merger/buyout is simply an escape route for Bonsignore - he was in trouble and the Honeywell board was already seeking his replacement. With the United merger, he would have become "Chairman" (but not CEO) - which was simply a way to kick him upstairs. With GE, his exit will not be as graceful. Jack Welch is a good friend of ex-Allied (now Honeywell) Chairman Larry Bossidy, whose ego and pocketbook have suffered significantly through his bet on Bonsignore. GE has an excellent management team and they will quickly root out the operating irregularities. Bonsignore will be exited swiftly, but with the undeserved consolation prize of a higher price for his Honeywell stock.

Interesting sidelight: When there is some truth to a "rumor", people typically say "No comment". When there is no truth, they feel free to "flatly deny". Interesting that Bonsignore "flatly denied" that there would be a sale of IAC to Siemens, even as he evidently knew that an announcement of the United deal was pending (the very next day). You know how it is - "it depends what your definition of "is" is...."

Sped is the "killer-Ap"

Carly Fiorina, CEO of HP, was in San Diego, CA. (my home town) recently for the i2 Technologies Planet 2000 Conference. Her message : Partnering, managing risk and open systems that can interface with each other are among the key issues facing companies as they move into the new economy. But the most important will be speed.

"Speed may be the killer app in the world of e-markets!" says Fiorina. "In the economy that exists today, faster is always better than slower, sooner is always better than later. Always."

Read a summary of Carly Fiorina's insightful remarks

The disposable PC

PCs now come in as many sizes and with as many feature sets as most electronics and home appliances. And soon they will reach the point where they're disposable. There are already a number of new machines aimed at this market. There are three factors involved : 1/ The machines are usually legacy-free or legacy-reduced, meaning they avoid traditional PC architecture such as parallel ports, serial ports and the ISA bus in favor of the new standards of USB and PCI, simplifying setup. 2/ They are low maintenance. With nothing to upgrade and little that's breakable, thousands of dollars can be saved in repair costs and the cost of downtime. And 3/ The PC appliances are low-cost to begin with - about $ 500 and reducing.

Read the PC Magazine review and maybe you'll decide you're ready for a "disposable" PC.

Of course, there is another aspect of "disposable" than just maintenance and breakdown - my old 386 PC still works, but chokes on Windows 95. So, it is effectively obsolete and simply gathers dust because : a/ no one will buy it from me; b/ I can't give it away (the local schools laughed when I asked them if they'd like to have it); and c/ I can't bear to throw it away, when I know that it still has power equivalent to a main-frame of just a couple of decades ago. Whatodo...? I'll tell you a secret (don't tell my wife) - I still have my old 286 PC, with 1 megabyte of RAM, up in the attic.....

RFCoC : Read it - or listen

The Rapidly Changing Face of Computing provides "Insight, analysis and commentary on the innovations and trends of contemporary computing, and on the technologies that drive them" - by Jeffrey R. Harrow, Principal Member of Technical Staff, Corporate Strategy Group, Compaq Computer Corporation . You can read it, or listen to it (spoken by Jeff Harrow himself):

Read or listen to Jeff Harrow

Jeff Harrow's most recent issue again sparked my excitement on the coming Nanotechnology - thanks, Jeff !

Nanotechnology is coming

Nanotechnology has enormous enormous potential to change everything. It promises more precisely machined moving parts, which means less wear. Materials will be "built to order," with flawless internal structures that make them stronger and lighter. Electronics will get smaller and hence faster (the speed of light limitation). As things continue to shrink, quantum effects that reign at that atomic scale will lead to computing performance beyond today's wildest dreams.

When might nanotechnology actually happen? George Washington University's GW Forecast suggests that nanotechnology will begin to be commercialized by 2016. As far away as that seems, it is only as far as 1984 is from where we are today. A GW paper which offers a good primer on nanotechnology and interesting insights on its potential is available :

Nanotechnolog Primer

Nanotechnology Magazine, has a lot of good stuff worth reading : What is Nanotechnology? When Will Nanotechnology Arrive? Plethora of NanoPossibilities? Molecular Scale & Complexity Chart; Interview for a New Book - Nano in the 21st Century. Spend some time at :

Nanotechnology Magazine

Eric Drexler's book: "Engines of Creation" was written in 1986 and started the nanotechnology revolution. The book is easy to read - read it!

Eric Drexler's Book

The Foresight Institute focuses its efforts on nanotechnology, the coming ability to build materials and products with atomic precision and upon systems that will enhance knowledge exchange and critical discussion. Visit them :

Foresight Organization

eFEEDBACK

After reading in my article "Companies in Trouble" that Rockwell would be acquired and the new owner would then spinoff Collins Radio (the segment of the Rockwell business which is not related to industrial automation)

Companies in trouble

I received this from someone at Collins :

"There have been plenty of rumors here for quite a while. We are no longer the big fish in the bigger sea. The latest I heard is we (Collins) could be bought by GE Aerospace or Lucas Ltd. There still is active talk of taking the company back private through employee stock ownership, but we would all have to donate/invest or risk our savings and investment plans and our retirement options. Pretty scary stuf!" Pinto's Pointer : Not scary - exciting!

Mark Wells, Runfactory Systems in Toronto, Canada e-wrote :

"I have been following your postings on the Automation list and on your website about the decline of the automation business. I thought you might be interested in the attached spreadsheet showing the number of jobs available on monster.com for selected keywords. For seven major U.S. cities, there are 12 Intellution jobs, 38 Wonderware jobs, and 2033 SAP jobs. I think it gives a good indication of where the automation business might have gone..." You'll be pleased to know that you can find the text of ALL the discussions that took place on the Automation List on the web. Click on "Hot stuff" :

Automation List Text

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