JimPinto.com - Connections for Growth & Success
No. 94 : August 8, 2002
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
- Stock options accounting becomes a PR stunt
- Automation update - stock options & golden parachutes
- Low cost personal robots are coming
- Pinto brothers - powerless pump & Indiatel
- Never, never be the lowest bidder!
- Open communications inhibits spread of narrow-minded cults
- Homesteading in Florida - keeping a mansion after bankruptcy
- Invensys strategy - sell off the winners, turnaround the losers
Stock options accounting becomes a PR stunt
While political piranhas continue their feeding frenzy, corporate
culprits continue to scale down their supposed sins, hurrying to
throw out babies with the bathwater.
The politicians orchestrated public "perp walks" - parading people
with pin-stripe-suits as perpetrators. Among others, Scott Sullivan
of Worldcomm, whose mansion was described in the previous issue of
eNews, was dragged off in chains in full-view of TV cameras;
he walked away a few minutes later with $10m bail, with that very
mansion as collateral.
But these are NOT the only bad guys in corporate America. Top brass
at Enron, Imclone, Tyco and others have all run afoul of the law.
Of course, WorldCom is already toast. If Sullivan and others
(including ex-CEO Bernie Ebbers?) are guilty, let's hope they'll get
locked up; I suspect that their lawyers will get them off.
Then what will the politicians do?
As if to show that corporate corruption is over, several major
companies have suddenly decided to treat stock options as an expense
on their P&L statements. While this does stem abuse of the system,
it also cuts off a key incentive mechanism that has been used very
effectively to develop employee ownership. And too, this destroys
motivation for risk-takers in startup situations. The judicious use
of stock options is NOT wrong. The wrong people have abused it.
Right now, it is being used as the sacrificial lamb, a PR stunt.
The payoff structure for options is interesting. Below a certain
"strike price", options are completely worthless, so an executive
has a huge incentive to do anything in his or her power to keep
the stock price above their option price. The upside can be huge,
with no downside at all! Executives with big salaries lose nothing
if their options are "under water"; and they gain big time if the
stock goes up, with an added expense to the company.
Internet resource for calculating and analyzing stock options
National Center for employee ownership
Automation update - stock options & golden parachutes
Rockwell Automation revenues decreased 13% to $2.91b for 9 months
ended 30 June 02. But net income increased 57% to $177m, perhaps
reflecting the recent cutbacks. Meantime, CEO Don Davis' salary
remains at $934K with some good stock options in tow. The stock
market decline is foiling Davis' plans to sell Rockwell Automation.
His target sale price, an insider reports, is $30.00, which would
give Don Davis a good payoff on his options. Meantime, ROK has
dipped to about $17.00 (August 7 02).
Speaking of stock options, notice that Invensys CEO Rick
Haythornthwaite and CFO Kathleen O'Donovan have both been issued over
2 million share options just recently (eNews 23 July 02) at exercise
price of 100.35p, exercisable after 3 years. Haythornthwaite now has
a total of 2.2m options; O'Donovan has 2.4m. The stock oscillated
around 60p this week, so those options are currently worthless.
Wouldn't it have been more fair if there was at least some penalty,
to compensate for the gain they might make if the stock jumps?
In any case, an insider reports that Kathleen O'Donovan will be
exiting soon, as announced at the Invensys annual meeting. So, her
2.4m options are worthless. Apparently, O'Donovan is hard to work
for and dislikes a lot of people. If Invensys stock doesn't go back
over his option levels, look for Haythornthwaite to jump ship too.
Meantime, Lord Marshall of Knightsbridge is still Chairman, perhaps
just to annoy everyone - insiders can't think of any other reason.
Marshall, who should have been booted along with ex-CEO Yurko,
recently bought 50,000 shares of Invensys stock. Perhaps this
was meant to demonstrate his faith in their dwindling fortunes;
or perhaps he felt that it would save his job for a while -
how could they ask him to step down now?
While we're reforming executive compensation, maybe we could get rid
of those golden parachutes that allow CEOs who run a company into the
ground to walk away with millions.
Is anyone asking Allen Yurko who ran Invensys into the ground, to
payback some of his not inconsiderable salary, or refund the handsome
pension he got when he walked away?
Is anyone asking why Michael Bonsignore of Honeywell got several
millions of dollars after Larry Bossidy booted him out for screwing
up the Allied-Honeywell combination and the GE merger?
Hey, perhaps we can parade these guys with a perp-walk at the
next ISA show....
Rockwell Automation CEO and CFO File Financial Certifications
Invensys rewards Yurko for failure
Low cost personal robots are coming
You know, robots have always been my favorite toys. Even as a kid,
I was fascinated by mechanical gadgets that looked like they were
thinking and moving. I bought the first Heathkit HERO robot (1975)
and programmed it to patrol my home-office, warning the kids when
they approached: "You are not allowed to be here!" At odd times,
when I was away on a trip, HERO would announce to my wife "I love
you!" She called me frantically once while I was in Europe: "How
do I switch this thing off!!?" (It was battery-operated; when she
unplugged it, it still kept going....)
Since the dawn of the Industrial Age, people have dreamed of
intelligent machines to attend to mundane chores. Industrial robots
have assembled cars for years, putting the same weld in the same spot
hundreds of times a day. But household robots have been difficult to
develop because the average home is infinitely more chaotic than
the controlled environment of a factory floor.
The market for personal robots has not burgeoned as predicted
over the years. But the forecast remains - robots are coming!
The $500 ER1 from Evolution Robotics is arguably the first
mass-produced robot to perform helpful tasks. It is essentially
a metal box with a camera on wheels; users simply attach a laptop.
The 2-foot tall ER1 is capable of performing 99 distinct behaviors -
grab things from the kitchen, greet visitors at the front door, find
car keys and snap photos of the baby-sitter. Show it an empty bottle
and it scoots across the room to pick out a Heineken from among cans
of Coke and Mountain Dew. After grabbing the beer in its mechanical
claw, ER1 returns with the brew and a pleasant "Here you go."
Unlike other personal robots such as Sony's humanoid and AIBO dog
(eNews 12 Jan. '01; 5 Mar. '02), ER1 is the first mass-produced
robot to perform at least nominally helpful tasks.
Evolution Robotics says they can do for the personal robot what
Microsoft did for the personal computer by setting a standard
operating environment in which others can innovate. The company
expects early adopters and hobbyists to develop applications for
the robot, much as software developers did for the first personal
computers. Once Evolution Robotics determines how people use the
robots, they plan to release models pre-programmed for specific
purposes - such as security or elderly care.
While the world cup was still being played this year, Honda's
Asimo robot kicked a soccer ball to start the RoboCup competition
at the Robotrex 2002 exhibition in Japan.
Some people think that the robot will emerge as the driving force
of electronics this century, akin to computers and automobiles in
the last century. This type of engineering and development seems
to be going on more in Japan than anywhere else. Will the Japanese
wrest leadership in this key technology, as they have with a lot
of other commercial electronics products?
Robots called electronics driver of 21st century
Personal robot of the future here today
Pinto brothers in India
I'm sure you'll permit me some personal proud proselytizing about
what my brothers are doing.
Peter Pinto's powerless pump
My brother Peter Pinto is an inventive engineer, successful at
major Indian companies, now retired and living in Pune, India.
He recently invented a powerless pump which may interest you.
There are many remote places where water needs to be moved, but
no local power is available to operate a conventional pump. Peter
Pinto's radical new innovation harnesses the power of flowing water
in rivers, streams and canals to pump without using any conventional
power. It operates in a running stream of water just 4 or 5 inches
in depth, and pumps 5000 liters a day up to 150 feet, running 24
hours a day with very little maintenance.
The Pinto powerless pump is useful for small farms, sprinkler systems
and water storage in remote locations. Peter Pinto estimates the
manufacturing cost to be about $100 in India. He feels that millions
of these pumps could be used if the product is properly marketed.
Take a look at Peter Pinto's Powerless Pump
Send Peter Pinto email
Jude Pinto - Indiatel
My youngest brother Jude Pinto is founder and principal at INDIATEL,
a significant telecomm consulting company in Mumbai, India.
Indiatel provides feasibility studies, market research, business
intelligence, economic analysis and entry strategies for India's
telecommunications markets. The company helps US and European
marketers to assess Indian market possibilities, utilize appropriate
technologies and find joint venture partners in India.
Indiatel has a substantial database of Indian markets, technologies,
companies, projects and policies. They assist with valuations, tariff
analysis, cost modeling for the Indian markets. And Indiatel publishes
industry reports on a regular basis. Clients include multinational
telecom services, technology companies and investment banks.
Visit Jude Pinto's IndiaBandwidth website
Send Jude Pinto email
My eldest brother Paul Pinto has settled in Hemel Hempstead, England
for many years. Paul is a lawyer, a partner in a prominent law firm
in London. He is now retired, and is active as a speaker and
My brother John Pinto is the founder of Precision Engineered products,
a successful manufacturer of machined products in Bangalore, my
hometown in India. We'll feature his company and products in a future
issue of eNews.
Never, never be the lowest bidder!
When business is tough, some people feel that price-cutting may be the
best way to generate business. But, that is a loser’s game, especially
in the industrial automation business, which has a high level of
applications knowledge and specialization.
Always remember - you are selling value: your knowledge, your
experience in the business, your understanding of the problems that
are involved, your ability to solve the problems that will inevitably
come up, your availability to help the customer when needed.
Don't discount your company, your products, or your self. You might
like to read my article on this subject, which has just been published
by Automation Techies.com, August 2002.
Visit AutomationTechies.com to read this article
JimPinto: Never, never be the lowest bidder
I raised again the subject of 'soft solutions' for the hard problems
of a new century. And we discussed the freedoms that widespread
technology and communications bring to counteract totalitarian trends.
Jake Brodsky [firstname.lastname@example.org] sent this eloquent and insightful
commentary (summarized here). You can read the complete text of Jake's
comments on the weblog at:
Jake Brodsky comments on the "Soft Solutions" weblog
"With nearly a year's perspective on the events of 9/11, we have begun
to realize that Al Qaeda is no more than a wild cult of personality
run amok. It's nothing new. Such cults have brought us The Mongol
Hordes, The Third Reich, and so forth. All of them eventually fell
apart, sometimes after doing terrible damage and destruction.
Responding to the story about executives of bankrupt companies with
luxurious mansions in Florida, Peter Cleaveland [email@example.com]
"Until recently, timely news and opinion was scarce and easy to
control. People believed almost anything that came from authority
because there was no way to dispute the leaders. But, no more.
The big difference is not just democracy and freedom of expression.
It's about control of media: there isn't any! And that is a good
thing. The First Amendment of the US Constitution isn't so much
a right these days as it is an acknowledgement of a fact of life.
"Yes, there will always be those who want to simplify their lives by
following some cult leader. However, those who do will remain at the
edge of the bell curve of society - and they'll never amount to enough
to do irreparable damage to anyone's society. Charismatic leaders will
have to answer to the unrelenting glare of instantaneously distributed
"Note that Osama Bin Ladin had to recruit and organize from the most
backward and remote country in the world: Afghanistan, ruled by the
Taliban. He would not have gone nearly as far had he tried this
stunt anywhere else.
"Technology and Communication in this new century bring the downfall
of all would-be egomaniac leaders. When they stop making sense, people
will simply ignore them. Our new leaders will be the information
gatherers - those who detect trends and articulate them for others
to follow. Welcome to the Brave New World!"
"It's a cliché that 'money is how you keep score' among people at
this level. Being known for having the biggest pay package is like
being known for having the biggest you-know-what; it comes from the
same basic impulse. That's human nature, and we're never going to
Responding to my recent negative comment about Invensys' strategy to
sell of the good companies and turnaround the bad ones, Stan Devries,
[Stan.Devries@Invensys.com] Director of Strategic Marketing at
"On the other hand, there's a good reason for building mega-mansions
in Florida: I believe that Florida, like several other states in the
US, has no limit on the homestead exemption in bankruptcy. So if you
fear that someday you'll be subject to restitution, you can always
claim bankruptcy - and your fancy mansion and grounds are a nice
place to stash some of your millions where they're hard to touch."
"I have worked for Siemens when they acquired a piece of Texas
Instruments, and I have observed what they did to Moore and others.
The best thing for Foxboro is Siemens buying Honeywell Industry
Solutions - they will kill it. By the way, my contacts in Siemens
say "no way" for valid reasons.
"The Invensys strategy isn't as suicidal as it might appear.
As you know, you build a strategy on businesses that can grow
profitably, not on cash cows. The trick of course is to accelerate
profitability and cash while implementing some intergalactic,
In my opinion, the Siemens/Honeywell deal is still open, bogged
down in price negotiations. In any case, Stan Devries' "contacts
in Siemens" would not be privy to the negotiations which are at
the top-level, and under non-disclosure.
For more on the Honeywell/Siemens situation, visit the
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