JimPinto.com - Connections for Growth & Success™
No. 126 : 24 July 2003

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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Automation updates

Honeywell & Siemens
The Honeywell weblog reported that John Bolick, President of Industry Solutions, held an all employee meeting last week. Bolick was upbeat and conveyed CEO David Cote's compliments on how IS had shown a 4.0% gain for the quarter, plus Experion PKS orders and backlog have continue to grow at "remarkable" rates.

With persistent weakness in its aerospace sector, Honeywell had a 31% slump in Q2 profits, and expects a similar drop in Q3. So, it appears that IS is one of only a couple of Honeywell businesses that own any bragging rights for increased performance.

John Bolick indicated that the subject of IS being rumored for sale again raised its ugly head with Cote. The response, loosely phrased, was interpreted to mean: "It was being considered for sale a year ago, but not today."

It is clear that Siemens really wants Industry Solutions, and has been in hot pursuit for the last three years. However, based on improving conditions at IS, and a slump in other sectors, it seems that a Siemens acquisition is unlikely in the near future. But, if things don't keep improving, stay tuned for the next Cote cut.

Click Honeywell weblog

Click Honeywell Profit Plunges

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Invensys & Schneider
Reports of sales increases usually cause a company's stock to increase. With Invensys, news of the sale of any of its companies brings an upward tick in the stock price. The recent sale of Baan (at a significant loss), and then Teccor for $44 M, caused some upward movement. And then, speculation about a £1.6 B offer (probably by Schneider) for the 3 businesses that make up the Energy Division caused the stock to surge to 28p.

Analysts estimate that a complete Invensys break-up will bring 30p per share, and this seems to be the limit. And this with a stock that was 110p when Haythornthwaite received his last options (July 2002), and above 300p when Yurko spurned an acquisition by Emerson to merge with BTR instead.

A recent weblog summarized:

    "The strategy of selling the 10+% return-on-sales companies while keeping the 2-3% businesses does not make sense. Business is not improving and, with the exception of the Rail Operation, nearly all are cash negative. Since when is selling off profitable operations a good reason for the share price to go up?! And that to reduce debt, when debt is the cheapest it has been for 40 years."
JimPinto.com has already insisted that all "not-for-sale" Invensys businesses are "for sale". The latest news, reported on the Invensys weblogs, is that Schneider is sniffing around Foxboro and Wonderware. In fact, senior VPs at Wonderware were invited to a dinner-for-9 in Newport Beach, this week (Monday, 21 July 03). Stay tuned to the weblog for the latest news and developments.

Click Guardian UK - Sale gossip boosts Invensys

Click Invensys weblog

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Whither Rockwell?
Rockwell Q3 revenue was up just 0.5%, while profits increased 42% (more than half the profit came from a tax benefit). How the company will fare in future quarters remains uncertain. With the stock up at $26, it is approaching Don Davis' $30 target, and some sort of significant move is still a near-term possibility. However, there is no news yet on acquisition by Eaton, or anyone else.

Rockwell weblogs have nothing new to report about the acquisition possibilities. But there is continued discomfort at the matrix-management style which some employees think has destroyed leadership and accountability.

Click Rockwell income rises 42.2 percent

Click Rockwell weblogs

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AspenTech - VC funding to bridge the gap
JimPinto.com has reported previously (26 August 2002) that Aspen Technology was for sale. This was not rumor - I had seen the prospectus that was circulated by investment banker JP Morgan to all major prospects.

It seems that none of the big fish would bite. It appears that no one wanted to acquire AspenTech, due in large part to the risk that they may be forced to divest, or hold separate, the Hyprotech acquisition that closed in May 2002 for about $100M. AspenTech then had investment banker CSFB run a process through which they could have the option of either selling the company, or "just" raising capital. It is interesting to note that an 8K was filed, seemingly to dispel the "rumor" that the company was for sale.

Now AspenTech has arranged for $100M venture financing, from Advent International, which clearly drove a very hard bargain. The recapitaliztion, with stock and warrants, creates major dilution for existing shareholders.

Click AspenTech Strengthens Balance Sheet with Proposed Financing

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America's financial overstretch

Just the other day, my son (age 29) got a letter from Social Security, warning him that Social Security may not be funded to pay more than 73% of his scheduled benefits by the time he retires in 2042. Knowing that, he is still legally obliged to continue his contributions.

In just about 5 years, 77 million "baby boomers" will start collecting Social Security; in 8 years they will eligible for Medicare benefits. By 2030, when they are all retired, the elderly population in the US will have doubled, but the number of workers able to pay for benefits will increase by only 18%.

The US is moving steadily into towards serious financial overstretch. When the present value of all the revenue the government can expect to collect in future is compared with the present value of all its future expenditure commitments, including debt service, the shortfall is a staggering $44 trillion ($44,000 billion). This in comparison with the current GDP of $11 trillion, with current Federal debt of $6.5 trillion.

Perhaps this is why the cost of Iraqi occupation ($1 billion a week) seems like chump change. Congress is just beginning to wake up. Newsweek (July 21, 2003) has quoted Republican Senator Richard Lugar, Chairman of the foreign relations committee as saying after a recent visit to Iraq: "The administration line is rubbish! We’re going to be in Iraq a long time!" Sen. Lugar says that he keeps demanding, "Where is the money coming from?" and gets no answers.

The Newsweek article says that the $1 billion a week is just the beginning. It doesn't include the cost of running Iraq's government and rebuilding it, which could be an additional billion a month. Then there is the matter of Iraq's enormous debts, which run over $100 billion. Who will fund the reconstruction? The American taxpayer.

This comes at a time when the US economy is in the doldrums, when budget deficits are ballooning, and when tax cuts are touted as the way to getting business churning again. Frankly, I'd like to get your feedback on this serious situation.

Click The fiscal overstretch that will undermine an empire

Click Newsweek (July 21, 2003)- $ 1 billion a week

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Sensor networks counter terror threats

One of my primary interests is to track key technologies that I believe will have a revolutionary impact on the future. MEMS and Nanotechnolgy will yield tiny, low cost, low power sensors. Tiny is important because they can be scattered around to measure just about everything that you can imagine. Low-power, because they won't need to carry a battery and may be solar-powered. Low-cost because the numbers required will be enormous.

Once the sensor technology is available, the measurements are communicated and coordinated through peer-to-peer wireless links. And the technology moves to whole new arenas: pattern-recognition, heuristic analysis, self-organizing systems, and complexity science.

The funding required to generate this significant new technology synthesis is becoming available. Against the backdrop of the war on terrorism, work is progressing on a nationwide sensor network that someday could provide a real-time early-warning system for a wide array of chemical, biological and nuclear threats across the US.

With a $1 billion budget in 2004, the US Department of Homeland Security is doing a significant amount of new development, plus coordinating the efforts of key scientists at national labs. The core technology relates to materials, sensors, networks and chips. Field trials of prototype networks are already starting.

MEMS and Nanotech will be used to create several low-cost, highly accurate biological and chemical sensors. On the networking front, peer-to-peer networks with multilevel security and quality-of-service guarantees will span wireless, wired and satellite links.

Within a few years, these technology developments will impact commercial markets, bringing huge new opportunities in other areas.

Click US sensor network targets terror threats

Click Smalltimes - News about MEMS, Nanotechnology & Microsystems

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Never lost - with WOZ electronic ID tags

Steve Wozniak, co-founder of Apple Computer, has received the National Medal of Technology and was inducted into the Inventors Hall of Fame in 2000.

Woz's new company, Wheels of Zeus (WOZ), has been operating in stealth mode, and is just getting ready to announce new wireless location monitoring technology - electronic tags to help people keep track of their animals, children or property.

Woz says his latest idea started with lost dogs, but is being a bit secretive beyond that. Products will be marketed by well-known companies (he can't even say their names) and product specifics will be their domain.

Several key new people have joined Woz at WOZ - Frank Canova from Palm heads product development, marketing director Gina Clark was formerly at PalmSource, and COO Rich Rifredi was founder of Pixo (recently acquired by Sun). The Silicon Valley "blue-blood" investors are: Mobius Venture Capital, Draper Fisher Jurvetson and Palo Alto Investors.

Click Woz spins Wheels of Zeus

Click Apple Co-Founder Creates Electronic ID Tags

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Like me, Michael Tsoukias [zibbo@ev1.net] is concerned about our problems and paradoxes:
    "You have pinpointed another sore spot in our body politic: double standards. 4 years ago, this country was dragged through a disgraceful episode of presidential impeachment, supposedly because Bill Clinton lied about an extramarital affair. This matter affected only the Clinton marriage and should have never reached a national forum.

    "The new President and his administration have spent the last year telling us layers upon layers of lies on matters of life and death. These have lead to the invasion and occupation of two countries, and prepared the ground for open ended invasion of any number of others. Even worse than the forgeries is the fact that they were so easily exposed, pointing to a thuggish, frightening incompetence at the top levels of our policy making.

    "Their apologists in the national media get hysterical against anyone who raises this subject. At first, the administration officials themselves could not even be bothered to refute the exposition of their lies. And now they are on a rampage, denouncing anyone who criticizes their conduct. This more than anything else distinguishes the extreme right wing currently in office: any hint of opinion, let alone criticism or - heaven forbid - opposition is shouted down and run off any public forum, if not treated as treasonous.

    "Until just recently, there has not been much noise from Congress about investigation, let alone impeachment. Only one of the entire Congress membership has a son in active service, so why should they care? Two years after 9/11, what has happened to the investigations? Contrast this with the Pearl Harbor aftermath: Congress had a commission up and running 20 minutes after the news. And the same day, the Admiral in charge of the Fleet and the General in charge of the garrison were fired for failing on the job. Dozens of others were demoted or retired.

    "As for those in charge of our security, who so spectacularly failed at their jobs on Sept 11, 2001 - not one has had the professionalism to resign at once, not one was fired. Instead, they were given vastly greater powers, which they use for spying, and to generally trample on 200 years of Constitutional progress.

    "The true blame lies with the American voter, and the non voter, who has allowed this to get from bad to worse!"

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Richard C. Wargo [rwargo@specllc.com] confirmed the proliferation of the "well curve":
    "Yep, that is definitely a pattern. It was first observed when manufacturers noticed that most product failure rates followed the same pattern, early "infant mortality" failure, followed by a relatively long life of low failure rates, with rising failure rates towards the end, or "elderly mortality". It's been described in the literature as a "bathtub curve". Industrial statisticians use either a two-term or a three-term Weibull distribution to model the effect. I ran into it when I was developing an online statistical process control system for an unnamed company back in the early-80s.

    "In fact, political economists view the separation between the highest and lowest wealth in a country as a harbinger of the future. Societies tend to collapse (usually violently in the form of revolutions) when the gap between the richest and the poorest becomes extreme, and there is no middle class to moderate the effect (no hope for the poor to improve their lot). It seems to me that we are moving in that direction, which doesn't bode well.

    "In further fact, the bell curve arises when the underlying population distribution is uniform or near uniform. With a different underlying population distribution, the form of the distribution of sample means the sampling distribution would NOT be Gaussian or bell-shaped, but would be skewed."

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Andrew Seldon [andrewseldon@yahoo.co.uk] feels that ever-present information access is indeed addictive:
    "As an IT journalist in the middle of the dotcom boom, we spent so much time being "connected" and "wired" and "available" that we actually struggled to do any real work.

    "Now that I'm running my own business, I still find that when I remain online permanently I'm always swapping tasks to do "things" - few of which are relevant and actually contribute to earning money. It's like trying to work while watching TV - everything takes triple the time.

    "Now I go online only when I have a definite need to. It's amazing how many friends and customers have rediscovered the joys and speed of the telephone, now that I'm no longer permanently on Yahoo's Instant Messenger. Simply unplug, and productivity soars!"

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