JimPinto.com - Connections for Growth & Success
No. 102 : October 29, 2002
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
- More on Chinacosm & Indiacosm
- GE-Fanuc buys Intellution
- ABB woes erupt in a major fiasco
- HighTech's future is in the toy-chest
- ISA Exhibition Chicago & Morley's Last Retort
- Doing business with the Chinese
- Downfall of acquired companies
- Stem-cells already being used for anti-aging
More on Chinacosm & Indiacosm
I had a lot of comments on "Chinacosm" - the rise of Chinese
leadership in manufacturing and hi-tech. Some protested that
they had "heard this many times in past decades" - as if that
itself was a reason why it could not happen now. (There are
always lots of similar non-arguments about robotics.)
The rising tide of Chinacosm (George Gilder expression) and Indiacosm
(Jim Pinto extension) is undeniable. Already a significant share of
manufactured goods is sourced in China; and similarly, there is a
significant market for outsourced software from India. In the last
issue of eNews, few missed the link with the items that followed -
Honeywell bragging about software development in India and
manufacturing in China; and the Rockwell moving to do the same.
According to the Wall Street Journal, China already makes more
than 50% of the cameras sold worldwide, 30% of the air conditioners
and televisions, 25% of the washing machines, and nearly 20% of the
refrigerators. A private Chinese company now accounts for 40% of all
microwave ovens sold in Europe. The city of Wenzhou, in eastern
China, sells 70% of the world's metal cigarette lighters.
High Tech in China : A few years ago, the idea of a Chinese Silicon
Valley would have been laughable. China was a place to make toys and
sneakers, not semiconductors. But today, the specter of Chinese hitech
looms. Over the next decade, China will become "a ferociously
formidable competitor for companies that run the entire length
of the technology food chain," predicts a premier silicon-valley
Consider some of China's recent high-tech milestones:
Is China a threat to Silicon Valley?
- Chinese universities granted 465,000 science and engineering
degrees last year - approaching the US total.
- China will become the world's second-largest chip producer by 2004.
- The Beijing Genomics Institute was among the first to decode the
rice genome, landing on the cover of Science journal.
- 2 Chinese vendors of network switches have opened US and European
offices and snatched contracts from Cisco and Nortel.
- China has been launching satellites for years and will begin manned
space missions in 2003.
The Hot Zone: South China
You know, the other day I got some excellent technical support from
Dell Computers. When we were done, I complimented the technician, and
(having noticed a hint of an accent) I asked where he was from. Not
only was he from India, he was actually located in India! It turns out
that Dell (and others) have thousands of support staff located there!
Software development in India has been booming in recent years.
India now sells $5b software annually to the US, with 60% annual
growth projected over the next decade. The stock of two software
companies from Bangalore (where I was born), India trade in US stock
markets with significant market caps. Infosys, with annual revenue
of $600m, profit 28%, growth 26%, trades on Nasdaq with a market-cap
of $9.2b. Wipro, with annual revenue of $800m, growth 25%, profit 23%,
trades on the NY stock exchange with a market-cap $6.5b. Wipro
software mogul Azim Premji is already one of the world's richest men.
By mid-century, India will surpass China as the world's most populous
country (China's population growth is under control; India's is not).
Already the world's largest democracy, India has the advantage of a
high-percentage of English-speaking scientists and engineers,
generating the Indiacosm of the new century.
India's high-tech hopes
Can HighTech transform India's economy?
GE-Fanuc buys Intellution
This past week GE-Fanuc acquired Intellution (the leading US
automation software company) from Emerson. I had a lottt of email
from JimPinto.com aficionados - "why didn't you tell us about this?"
Apparently, I am expected to be the first to know. Actually, I knew,
but a confidentiality agreement prevented eNews disclosure.
Wonderware and Intellution are automation software leaders, both
founded in the late 80's on opposite coasts of the US; Intellution started
a couple of years before Wonderware. I knew both founders personally
and almost invested in Wonderware - I wish I had!
Dennis Morrin, the bright, entrepreneurial founder of Wonderware
in California, sold the company to Invensys, then Siebe, for a hefty
price and exited shortly after. Invensys paid too much, because
Wonderware never lived up to its potential; after all these years,
annual sales are still south of $100m. The market niche as a whole
has been shrinking. Invensys lumped it in with Simsci and other
software pieces, but organic growth never resulted.
Around the same time that Wonderware started, Steve Rubin founded
Intellution near Foxboro, MA. and the company grew to become
Wonderware's primary competitor. To generate growth with global
muscle, Steve Rubin sold his company to Emerson and stayed to develop
When the market for Intellution's products flattened in the past few
years, the entrepreneurial Steve Rubin still tried to push things
forward in the same way he had in the past: new products, OEM
relationships, new market niches, etc. Unfortunately that did not help
the declining bottom line and rising red ink. So, always well-managed
Emerson brought in Bob Yeager to run the business with one clear goal
in mind: clean up Intellution and sell it.
Bob Yeager is a disciplined manager. He quickly narrowed the focus and
made the hard cuts - people, products, and new programs. As the market
continued to decline, Yeager continued to make the cuts needed to
become profitable. Yet again, this showed the difference between a
short-term cutter (Yeager) and a long-term builder (Rubin). The cutter
generates fast results; the builder inspires a culture of growth and
innovation which takes a lot longer. Now that Yeager has accomplished
his task, he will likely get another management "cutter" job
The acquisition of Intellution evidently fits the GE-Fanuc strategy
of market consolidation. After their Honeywell acquisition plans were
thwarted, GE has been buying a lot of solid, smaller ($ 50-100m)
companies like Druck, Panelmetrics, Bentley Nevada - this acquisition
strategy will continue. Through these acquisitions, the GE presence
at the recent ISA show in Chicago was evident. Not one of the other
"majors" was present.
Questions about the future of Intellution as part of GE:
Kevin Roach, the GE-Fanuc VP who is now responsible for Intellution
(already has Cimplicity) came to Ge-Fanuc through their acquisition
of Total Control Products, which in turn had just acquired his tiny
I/O company. Kevin is a smart guy, or at least he used to be before
he ascended the corporate maze of GE. He will no doubt try to respond
quickly. However, most of the questions are muddied by conflicting
interests. The ensuing puzzle will indeed be difficult to unravel.
- What does this mean to GE Cimplicity and Intellution customers?
- Will GE will eventually dump one, or perhaps combine the two?
- What happens to Intellution's partners like Mountain Systems?
- What about Intellution distributors - where do they sit now?
GE Fanuc Automation to Acquire Intellution from Emerson
- PLCs and associated products are commodities in a steep price and
unit decline. GE is "dressing up" their PLC business which has been a
perennial poor performer. And Cimplicity software alone has not really
provided enough oomph.
- GE is betting on a "sole survivor" strategy, which can be very
profitable but devoid of growth. Perhaps they are looking at this
conglomeration of miscellany as feed stock for their service business,
and they don't really care about synergy or relevance to other parts.
- Why is GE doing buying all of these small, secondary suppliers in
the measurement, automation and control business? GE has been in the
industrial controls business many times before, and they screwed it
up every time. Maybe it is arrogance that makes them believe they can
do it, when others cannot. GE has bet on their ability to achieve
this business transformation by paying as much as 2X sales, or
10-20X profit for some of their recent acquisitions.
- This seems to be an obvious defocus of GE after Jack Welch's
departure. It is not clear who is running GE right now - CEO Jeff
Immelt or a committee? These are serious question to employees,
customers and investors alike. The precipitous decline in the GE
stock price is one result of this uncertainty.
GE INDUSTRIAL Press Release
Why is GE-Fanuc buying Intellution - FAQ
ABB woes erupt in a major fiasco
Once again, Jürgen Dormann, ABB's third chief executive in five years,
is finding himself having to slash and burn. Dormann, who has been
called "a boardroom Rambo", is trying to salvage ABB with radical
surgery: $800 million in cuts, a whole division to be sold, the rest
of the company to be shuffled and about 18-20,000 more jobs to be
eliminated. This is on top of recent efforts to cut $500 million and
ABB, which once hoped for $50 billion in sales this year, may wind
up with only $18 billion. The company faces two severe threats to
its ability to ride out this slump: rising debts (reached $5.5b
in Sept. 02), and a flood of lawsuits over asbestos liability,
literally 110,000 suits so far. Estimated costs to settle asbestos
related claims have now exceeded the value of Combustion Engineering
assets. So, ABB will seek protection under Chapter 11, believing they
can isolate CE from the rest of ABB.
On Oct 21 02, a UK Financial Times article proclaimed: "ABB nears
collapse as shares hit record low." On Oct. 22, ABB share price
fell over 50%, ending the day 62% down.
Highlights from a recent analysts conference :
Revenues down 7% for the quarter and 2% YTD. Sales down 13% for
the quarter and 7% YTD. Orders for Utilities down 47%, Oil, Gas
and Petrochemical down 43%. Process Industries segment showing
recovery with orders up 2% for the quarter, but down 9% YTD.
JimPinto.com has already covered ABB in several previous issues of
eNews over the past few years. You might like to read these items
together in a combined review.
The ABB Blahs (summary of past 2 years):
- The ABB position is a fiasco. Combustion Engineering (with Taylor
and other pieces in tow) was bought with all liabilities - including
the asbestos liability. ABB is trying to protect their European assets
by forcing the US company to file bankruptcy. This will cause serious
pain to many employees, ex-employees and customers who suffer from a
disease called asbestosis. This will likely cause the US government
- It should be noted that ABB results are really bad, even without
the CE fiasco included. The rest of the ABB US business is in a
complete shambles and ABB is not investing anything to save it. The
consequence to US customers is huge. ABB was already not supporting
their legacy products; now this cannot be rectified as their cash
- Key mistake: To save costs, ABB will move from direct-sales to Reps
& Distributors ("channel partners"). This means they will lose touch
with customers; and the Sales Reps will remain wary as they harvest
business rather than aggressively pursue new business. The savvy
Sales Reps know full well that they are in a dying business which
cannot support their costs in an increasingly more competitive market.
Log your comments in the **NEW** ABB weblog
ABB axes costs and plans energy sale to cut debts
Swiss Union Fears 18,000-20,000 Job Cuts At ABB
High Tech future is in the toy chest
It is interesting that, instead of coming directly from main-stream
applications, many new advances are generated as toys. Perhaps the
requirement to be at once effective and inexpensive generates
practicality and avoids bloated budgets.
Toymakers are pushing the boundaries in artificial intelligence,
wireless communications, and virtual reality. And the benefits are
flowing to other industries as well. Today's cutting-edge technology
toys are blurring the boundaries between the living and the
mechanical; toymakers have pushed the limits of artificial
intelligence, speech synthesis, wireless communications and
networked virtual reality.
DarkCon, a virtual-reality video game is being developed by the
US Army-backed Institute for Creative Technologies (ICT) at the
University of Southern California (USC). This aims to create
total-immersion military training tools. Why did the Army back this
eclectic group of video game makers, tech PhDs, and Hollywood
producers to develop the next generation of military training tools?
Because they realized that the cutting edge for such technology exists
not in the labs of Silicon Valley but in the electronic games and toys
strewn about the rooms of 10-year-olds everywhere. This is driving
technology development into the future.
Indeed, toy inventors are pushing the boundaries of artificial
intelligence, speech synthesis, wireless communications, and networked
virtual reality. What's more, they are figuring out how to cram huge
chunks of realistic graphics, dialogue, and sensory cues onto tiny,
inexpensive computer chips.
Business Week - High Tech's Future Is in the Toy Chest
Toddling towards high-tech
ISA Chicago exhibition - Dick Morley's Last Retort
Last week (Wednesday, 23 Oct. 02) a special event took place at the
ISA show in Chigaco. "Dick Morley's Last Retort" attracted a
significant audience. An estimated 600 people attended this 2-hour
session and voted it a big hit, asking for more of the same next year.
Most people recognize that ISA shows are somewhat sleepy & boring.
With a broad business decline, attendance at this years show was down,
attended by few customers and populated mostly by vendors viewing each
others wares. None of the major companies was present - they
considered the ISA show a "bad investment".
Dick Morley, the visionary, seminal thinker and famed "father of the
PLC" accepted a challenge to moderate a special event which would
liven up the show.
The advance advertising asked:
"What should you expect from industry leaders like ABB,
Emerson, Honeywell, Invensys, Rockwell, Siemens or Yokogawa?
How do the economies of their decisions affect you?
With his sharp wit, eclectic mind and iron-fist, Dick Morley was a
superb and motivating moderator. Ken Crater of Control.com represented
the analysts and consultants, leaving yours truly to serve as the
"If you're tried of the same old stuff, then join this
forum and get real answers to real questions. This ensemble
panel of consultants, analysts and protagonists will probe
the latest developments in our corporate community.
What are the mergers and acquisitions doing to our industry?
Where will the next big moves be made?"
I had personally invited Jack Bolick, the new President of Honeywell
Industry Solutions to be there - he didn't respond. With Rockwell
having "the largest layoff in its history", I had looked forward to
talking with Steve Eisenbrown, Senior VP of Rockwell, who had agreed
to be on the panel. He cancelled. From Invensys, Sasan Goodarzi (who?)
President of IMAPS (what?) had agreed to be there. He didn't show.
We tried hard, but couldn't find anyone to represent Siemens or ABB.
Representing the major companies were John Berra, President of Emerson
Process, and Shuzo Kaihori, President of Yokogawa N. America. Both
agreed that the event was effective, and that their attendance was
very beneficial to their companies, and to the industry as a whole.
Fred McClintock [email@example.com] President of RDS Global, wrote:
"I read your Chinacosm article with a great deal of interest. I visit
China regularly for clients, 2 to 3 times a quarter. Mr. Gilder is
right in his perception of China manufacturing. What is not reflected
in his commentary is the fact that Chinese manufacturers pay less for
imported components than anyone else in the world. Negotiation in
China actually begins after a hard fought general agreement. In the
"after" agreement negotiations, the Chinese continually work on
pricing issues. They are very astute at accomplishing further
reductions based on volume, promises, component problems, etc.
An observer in a large company wrote regarding the seemingly
inevitable fate of smaller acquisitions:
"China is indeed an interesting place to do business. They learn
fast and are in the process of gaining global acceptance for their
products. You'll hear much more about the Chinese in the future.
Much the same as when Japanese products took hold."
"I would just like to tell you that your article 'downfall of acquired
companies' is an extremely accurate description of what is so often
happening nowadays in large companies. My congratulations for this
On the subject of aging, an expert who is engaged in the field
of anti-aging wrote :
"Short term high profit based strategies often result in 'valued
customers' being considered as an unavoidable pain. The extreme
combativeness of most big-company managers to develop their own
career, surely does not create any value for shareholders. All big
companies, from many different industry sectors, are stuck in the
same 'vicious circle'. This non-sensical spiral will be somewhere,
sometime be opened by some revolutionary or evolutionary threshold.
"Let me predict (I also love predictions) that we are at the end of
this nonsense (I think at a distance less than 6 sigma). After all,
aren't we in a new millennium?"
"I work in a little known part of healthcare - hyperbaric medicine.
Embryonic stem cell injections are being given today at $25,000 per
shot, 10,000 cells per shot, in the subcutaneous fat of the abdomen.
Neurogenic or liver stem cells are utilized, depending on if you want
anti-aging effects or relief from neurologic conditions such as stroke
or traumatic brain injury. No guarantees are offered, either. Many
Hollywood types have participated. I know 2 people (elderly) who have
had the liver shot and see remarkable improvement for them.
"Early work has shown that stem cells harvested from adults can be
grown, but they do not grow as quickly nor to the large volume as
those of cord, pediatric or young adult stem cells. The same work
has shown adult stem cells to proliferate at the rate of cord and
pediatric stem cells if exposed to a regime of hyperbaric oxygen.
Harvest and grow ones own stem cells & not need immune suppressing
drugs. This is the best way to NOT use a fetus-farm, nor require
immune suppressing drugs, and cause life extension in the best
health possible. I would not be surprised to find that a famous
paralyzed actor has not also had this injection."
JimPinto.com eNews - on the web
If you've missed a couple of issues of eNews, or wish to refer to earlier items,
please note : You can see ALL past issues online at :
Index of ALL past JimPinto.com eNews
eSpeak to me
If smell something fishy in your pond, please e-let me know and I'll check it out.
Please send your tips and alerts, your news, views and stews. I'd like to e-hear from you.
If you have comments or suggestions for Growth & Success News, please contact me directly at :
Subscribe or Unsubscribe
If you got this eNews through someone else, you might like to subscribe for a regular free copy,
direct to your own email. Just click your mouse on :
Or, if you're lazy (you may miss some privileges) simply send a blank email message to :
with subject line :
"sign me up for JimPinto.com E-mail news".
To be removed send a blank email message to
eRemove@JimPinto.com with subject line "Remove".
Stay in e-touch!