JimPinto.com - Connections for Growth & Success
No. 104 : November 25, 2002
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
- Uneasy thanksgiving in a precarious world
- The ABB blues
- Invensys slips & slides
- Nanotechnology & Moore's Law
- Tech toys, gadgets & trends
- Warning to manufacturers who move to systems & services
- Chinacosm - what about software protection?
- Root causes of the dismal success rate of acquisitions
Uneasy Thanksgiving in a precarious world
This week in the USA we celebrate Thanksgiving, our annual tradition
to give thanks for the bounty with which we are blessed. And yet this
year, Thanksgiving brings queasy feelings, even before we feast.
More than ever before we realize that our bounty is tinged and
tainted in an uneasy world.
We are poised on a narrow ledge of uncertainty in a global village
that considers the bounty of the wealthy western world greedy,
isolationist and selfish. We live in a land of plenty, surrounded
by hordes of helpless and hungry hangers-on, and an angry element
that is bent on the destruction of our society.
The new century has brought into focus the stark reality of our
vulnerability in a supposedly free world. We are suddenly nervous
and jittery about terrorists infiltrating our neighborhoods, anthrax
in our mail, pedophiles among the clergy, greedy corporate CEOs,
a sinking stock-market, and a hundred other horrible happenings
that bombard the news. We are subjected to a constant cacophony
of bad news, and vociferous videos with a half-hour refresh time.
As we approach Thanksgiving, perhaps the most important thing going
on in the world today is the impending war with Iraq. This war will
be different from what nearly everyone expects. It will not be another
Desert Storm, nor a repeat of the Afghan war. No one can predict
whether this will fizzle out, or flare up into a larger conflagration.
The potential for horrifying escalation in the flash pan of the Middle
East is horrifying!
Richard A. Muller who writes regularly for MIT-Tech Review suggests in
their Nov. 15 issue that war with Iraq is really like a game of Chess.
Even if we know the rules and the strengths of the players, there are
two sides. Early choices made by the opponents can drastically affect
the course of moves as well as the outcome. He describes one plausible
scenario. Read it, to broaden your own view of the possibilities.
Let us give thanks this year, as indeed we must, for our bountiful
lives and the blessings of our free society. And too, while we give
thanks, let us think about solutions for the problems we face. Let
us work on the things that will make us thankful in the years to come,
the different thoughts we must think, the different things we must do
to help make this world a better place. For us, and for the future.
Uneasy Thanksgiving in a precarious world
Finding a softer approach for a new century
MIT Review - War with Iraq As Predictable as Chess
The ABB blues
A major advertisement in InTech Magazine shows the logos of several
companies blended against a process background: Fischer & Porter,
Hartmann & Braun, Taylor, Bailey, Sensycon, Kent. And the headline
proclaims : "The experience of many, makes us stronger as ONE."
In a declining market, trying to pull this plurality of process
controls companies into one bag has gotten ABB into trouble. Juergen
Dormann, the 62-year old German manager who has taken on the tough
task of turning around the ailing giant was back in front of investors
last week, trying to win back their damaged confidence with brutal
With nicknames of "Boardroom Rambo" and "Magic Dormann", Dormann
insisted on keeping ABB's ambitious profit target for 2002 (4-5% of
sales). But this became a little shaky and he dropped his projections
to 1.5%, which hit ABB shares. He told investors there was a long
road ahead, perhaps 2 years.
Dormann said that ABB should be concentrating on just one business,
with re-alignment by 2005. ABB has already placed several businesses
for sale - oil, gas, petrochemicals, building technology. When asked
whether he would sell off the process automation business, Dormann
said that was possible, depending on the circumstances.
Jurgen Dormann must be admired for his guts, to jump in when
others have failed. One can only hope that he does not get pushed
into the catch-22 dilemma that is troubling Invensys: Selling off
good businesses to raise cash to pay down debt, and keeping the
poor performers with the conviction that good management can
do a turn-around. Good luck, Rambo!
Dormann tries to regain trust in ailing ABB
Read the ABB Weblog & provide your own comments
Invensys slips & slides
After reporting a 7% fall in first-half profits and predicting a
flat second-half at best, Invensys shares dropped drastically to
around 45p (ending the week at about 51p). While reporting results,
Rick Haythornthwaite tried bravely to put on a positive spin, but
was clearly rattled. Invensys' membership of the FTSE 100 index
is now in jeopardy.
Analysts and investors are worried about working capital and free
cash flow. Invensys is seeking to improve operating margins in the
production and energy management divisions by March 2004, and about
1,000 more jobs will be cut to help achieve the target. The banks
are still driving the disposal program, which is ahead of the target.
With most of the restructuring and cuts in the USA, Europe is dragging
Invensys down by keeping all the costs there; perhaps this is Chairman
Lord Marshall's xenophobic influence. One wonders what Haythornthwaite
will do when the divestitures are all done, and the supposedly core
businesses aren't improving enough to get premium performance.
UK Independent - Invensys dives on fresh profits alert
The new Foxboro Archestra gives Invensys some positive PR and
self-gratification, though it doesn't appear to have much real meat,
or benefits for the customer. They are still spinning the same old
"plant floor to board room" song - which no one really wants or needs.
Rick Haythornthwaite's recent stock options 3-4 months ago (over 2
million shares at an exercise price of 100.35p), are way under water.
It will be interesting to see if these options are re-issued at a
lower price, to keep Slick Rick.
Read the Invensys weblog & provide your own comments
Nanotechnology & Moore's Law
Discussions at the recent Intel developers forum indicated clearly
that Moore's Law (doubling of computer power every year or two) will
get a new lease on life through this decade because of nanotechnology.
New materials and chip structures possible with nanotech will continue
the doubling of transistor count on die, keeping Moore's Law going for
longer than its previously predicted demise by 2020.
Some features of computer chips are already pushing past the 100-
nanometer mark, into the nanotech realm. Pentium 4 processors with
90 nm transistors are already in production. A nanotech project at
Intel is developing a tri-gate 3-D-like cell that could lead to
terahertz transistors (1 trillion cycles per second). The race is
on to build computer circuits from molecules, so that more and more
components can be crammed into less and less space, using less and
Another promising approach is carbon nanotubes, which can now be
grown on silicon wafers, brining the possibility of combining
nanoscale circuits with conventional chip manufacturing.
The huge markets involved have inspired many teams of researchers
to explore nanometer-scale structures, looking for new ways to
manufacture circuits from single molecules.
Nanotechnology expected to extend Moore's Law
You will enjoy this new book by Douglas Mulhall (Pub. July 2002)
which predicts breath-taking changes ahead. Mulhall think that
every home will have a desktop fabricator, able to create any
3-D object desired; he envisions being able to change the color
of a car, or clothes; he believes that nanotechnology will bring
technological advances that will change every aspect of our world,
including our own species. Good book - read it!
Our Molecular Future: How Nanotech, Robotics, Genetics
& Artificial Intelligence will transform our World
Tech toys, gadgets & trends
The year end and holiday season is fast approaching and I have a
serious problem. I don't know what I want for Christmas. Actually
I do know - about 100 different robots, toys and gadgets....
The latest issue of Newsweek (Nov. 25, 2002) has a special report
on the latest popular tech-trends - Internet community games
(cover-story - The Sims), robots for the home, cars of the future,
technology which allows anyone to make good movies, digital
entertainment systems, e-paper, smart-name-tags - the list goes on.
Newsweek special report: @home & @play
The latest issue of Time magazine offered a complete list of the best
of the best inventions of 2002, arranged in categories such as Transit
& Talk, Home & Safety, Robots & Tech, Toys & Sports, Clothing, Medical
etc. Check them out.
Time : Best inventions of 2002
Interestingly, Captain Kirk of Star Trek (also known as William
Shatner of Priceline.com) has come out with a new book that reviews
how close the tech-world of today is to the visions of the creators
of Star Trek. It turns out that things are surprisingly close.
CNN : How close is the world today like Star-Trek?
Daniel Greenberg [firstname.lastname@example.org] read my recent article on the
subject of products companies becoming services companies or "total
solutions providers". He provides insightful feedback:
"Lured by attractive economics, many manufacturing firms have
attempted to establish complementary services businesses only to
find themselves trapped far short of the profitable growth that they
originally imagined. Recent analysis at the IBM Institute for Business
Value suggests that services success depends on a firm's positioning
itself as an indispensable part of its customer's value-creation
process - not simply by providing a valued service, but by helping
the customer create more value overall.
Daniel Greenberg's paper on IBM.com on this topic
"Our research showed that the transformation is possible, but it's
hard. And the penalty for not making it is worse than failure - it's
a purgatory of having to continue to provide all of the services that
customers have come to expect without making a good return on all the
Regarding the prospect (or specter) of Chinacosm & Indiacosm,
Alex Pavloff [email@example.com] wrote:
"China has a much looser idea of Intellectual Property than the West.
I suppose that happens if you're told for 50 years that everything
belongs to the people. A direct effect of this is that the Chinese
have a very high software piracy rate and are much more disposed
to free/open source software than western countries that have
become accustomed to paying for software.
Mike Marullo [firstname.lastname@example.org] of cfar International Ltd. agreed with
Steve Cuff's assertion that the record of successful acquisitions is
dismal. He comments on some of the root causes of failure:
"So, if manufacturing moves in large droves to China, what software
will be running on the machines there? What happens to Wonderware,
et al , when they can't sell their software because its pirated or
because the cheap software development houses in India have written
custom software for the factories in China?"
"It is rarely the executive greed factor that kills acquisitions,
although it is often the crowning blow that finally does them in.
"Failures are most often the result of unrealistic expectations,
fed by misguided strategies, followed by poor execution. Acquiring
companies are prone to making acquisitions on an purely financial
basis. They rely exclusively on EBIT, book value and earnings
analysis. They overlook other critical success factors like corporate
culture, present/future market value, business synergies and lots of
other non-financial parameters.
"These problems are pervasive, regardless of company size. Typical
acquisition policies and procedures are terribly outdated, especially
for technology-centric deals.
"Successful "caretaker" companies with a stable business base and
consistent results are almost always a poor match for entrepreneurial
driven companies that are far more comfortable with risk and
ambiguity. The risk-taker always thinks that the caretaker will use
its strength and position to invest and nurture. But that almost never
happens. Instead, the caretaker looks for immediate returns by
applying its own business model. This can be anathema for a growing
business on the fast track.
"The 'executive greed factor' usually starts creeping in only after
it becomes apparent that the original goals and objectives will not
be met. At that point, the people brought in by the acquiring company
start looking to feather their own beds, since they almost never have
any 'personal skin' in the acquired company anyway. Once they realize
that they're at the helm of a sinking ship, survival instinct takes
over. Desperation has an amazing ability to make the end seem to
justify the means.
"Bottom line: If you want a successful acquisition, look beyond the
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