Taking Invensys seriously!

Great minds think alike! –

It isn’t often that two leading commentators in the world of Automation agree on things but Automation World’s Gary Mintchel and Control’s Walt Boyes have come out in their blogs on the same day about Invensys.
Invensys poised for new life!Things are coming together at Invensys….” starts Gary while Walt leads with: “Bhattacharya Resurrects Invensys…

Gary commented to Walt (on twitter where else?) after they had coincidentally posted their blogs, “Uh, oh, Walt, not sure it’s a good thing when we agree on something 😉 …”

Both seem to agree that Invensys is “poised for a renaissance.”

And who are we to disagree?

Talking about Invensys and the background to the above, Andrew Bond in the June issue of his Industrial Automation Insider gives lots of food for thought and background:

Henriksson confirms Sudipta Bhattacharya as President and CEO of the new Invensys Operations Management
Andrew Bond
Four months after originally announcing his interim appointment as Chief Operating Officer of what were then being referred to as “the IA business groups” – Invensys Process Systems (IPS), Eurotherm and Wonderware (INSIDER, February 2009, page 1), Invensys CEO Ulf Henriksson has confirmed Sudipta Bhattacharya as CEO and Business President of a new division to be known as Invensys Operations Management or IOM and comprising . . . well, IPS, Eurotherm and Wonderware.

The creation of IOM had already been announced at the same time as the presentation of Invensys’ provisional full year results in mid-May and it’s difficult to see why it should have taken the best part of a month to finalise who was actually going to be in charge. At the time of writing none of the other significant appointments within IOM have been announced with the result that the Invensys rumour mill has continued to operate in hyper drive. Nor are actual or potential customers likely to be any the wiser as there appears to be no mention of the changes on the IPS, Wonderware or Eurotherm web sites which continue under their separate iden- tities. It’s also not clear whether Eurotherm and Wonderware are to disappear entirely into the new organisation or to retain their identity as brands alongside Foxboro, Triconex, SimSci Esscor, Avantis and InFusion or indeed whether the less than overwhelming new Invensys corporate identity is to be extended to the new division. All questions one might have expected to be resolved before the original announcement.

IA transformation
The creation of IOM is the culmination of the “IA transformation project” initiated by Henriksson and headed up by former Eurotherm president Jeff Greene following the still unexplained departure of IPS president and CEO Paulett Eberhart in early January (INSIDER, January 2009, page 1). Henriksson’s explanation of the move focussed on the “growth opportuni ties” and “cost synergies” created by the integration of the three businesses which suggests the possibility of the elimination of duplicated roles across the new organisation. In response to a question from Deutsche Bank analyst Martin Wilkie, he argued that significant cost savings could be achieved by enabling the former IPS sales force to work across the other businesses and, conversely, by giving IPS access to the Eurotherm and Wonderware sales channels. IPS/IOM was also, he claimed, “migrating to a different way of doing business” which involved “selling capability.”

Sweet spot
That, he argued, differentiated IPS/IOM for its competitors who, he claimed, were experiencing a decline in orders, in part because of their reliance on selling prod- ucts. Although, as he conceded, products would still represent 25% of the new grouping’s business, IPS had “broken the link between services and optimisation and control.” As a result, he said, “We don’t necessarily have to sell the control solution,” although he hastily added that “We do believe our control solution is capable.” IPS/IOM, he argued, is at “the sweet spot between optimisation and con trol.”

Until the rest of the appointments are announced, revealing who’s up, who’s down and who’s out, it’s difficult to assess whether the creation of IOM represents a genuine merger of IPS with the smaller Wonderware and Eurotherm or simply a Wonderware coup. Given that the decision to combine the three businesses was effectively signalled back in February within a week of the project being announced, presumably the major focus of Greene’s efforts has been on how to bring together the very different cultures – and personalities – involved in the three organisations. Previous attempts at developing cooperation and realizing synergies across the separate divisions have been notable largely for the degree of acrimony and resentment that they have triggered. The fact that the new leader comes from Wonderware and, moreover, has been there less than two years, is unlikely to improve the morale of former middle and higher ranking IPS executives or to enhance their own assessment of their career prospects.

Software & services
For the those outside the organisation, however, the reorganisation, and the confirmation of a former SAP alumnus as CEO of the combined business must signal a further step along the road to the creation of a business whose focus is primarily on software and services and which views products and systems as useful but not essential adjuncts to its primary portfolio. They might also find themselves pondering two further ques tions, however. First, if the integration of IPS, Wonderware and Eurotherm makes such sense now, why didn’t it do so back in 1998 when they were first acquired and, second, which, in the long run, will have proved to have taken the correct decision over its 1990s SCADA/ MES software acquisition – Emerson in its subsequent disposal of Intellution or Invensys in its integration of Wonderware with its process automation division?

  • There’s no denying that those Invensys results were, as Ulf Henriksson put it, “very strong”. Orders rose 38% in the year to March 31st last, revenue was up 8% to £2.2bn although it fell 4% in constant exchange rate terms and operating profit fell 4% to £244bn. Most significant, perhaps, for the financial community was the payment of a dividend of 1.5p per share, the first if not within living memory then certainly since pre-Haythornthwaite days. IPS, in its pre-IOM configuration in which its figures include Wonderware but not Eurotherm, saw orders increase by 36% to £1.19bn, revenue increase 15% to £951m, but operating profit fall 8% to £108m with margin declining from 14.1 to 11.4% due to increased invest- ment in sales and marketing. All in all, figures which Keith Nosbusch or, indeed, Shuzo Kaihori would have happily given their eye teeth for.
  • Less cheery were the results at Eurotherm, announced separately and presumably for the last time. Orders were down 3% at £116m and, while revenue rose 3% to £118m, it was down 10% in constant ex- change rate terms and operating profit was more than halved to just £4m, as was operating margin at 3.4%.

    So, if the results were great, why is there a continuing suspicion that all may not be as it seems? On reason is perhaps that while the financial community seemed generally approving – the shares which were priced at around 180p in late April are now trading in the low to mid 230s having at one point been over 240p – the analysts attending the results seem to have been unaware or un- concerned by the potential implications of the changes at IPS/IOM or indeed by the departure of Paulett Eberhart and the fail- ure up to that point to confirm a successor. Added to that is the suspicion among some observers including, notably, Jim Pinto that a huge effort has been made to put the group in the best possible light ahead of an early sale or break up and Henriksson’s departure. Pinto even dubbed the results “Ulf’s last hurrah” and one contributor to his Invensys web log noted that Henriksson had recently sold nearly 50,000 Invensys shares, netting a handy £115,000.

    Debt free
    Certainly Henriksson himself told INSIDER as long ago as April 2006 that the group would be at its most vulnerable to a preda- tor when its then current financing ar- rangements, including the gaping hole in the pension fund, had ‘unwound’ over the following couple of years. Three years down the road, as departing CFO Steve Hare confirmed, Invensys is debt free, has depos- ts totalling £309m plus a £400m banking facility and the pension fund “is no longer a major issue.” Henriksson has told us to expect a period of organic growth and acquisitions but he still has to convince many, both internally and externally, that he’s going to stick around long enough to find out who’s doing the acquiring.
    Industrial Automation Insider - June 2009

  • One pointer to what a Bhattacharya led IOM might look like is the recent agree- ment between what, in mid-May, was still being called IPS and Pepperl+Fuchs to provide seamless integration of the lat- ter’s intrinsically safe I/O interface prod- uct lines with the former’s I/A Series DCS. The integrated modules, incorporating built-in barriers and field terminations, are claimed by both companies to offer the lowest-cost, smallest footprint and easi- est-to-maintain solution for I/O in haz- ardous locations. Suitable for Zone 1 and 2, they can be set up and configured entirely transparently using standard I/A Series tools including the FDT-based field Device Manager. Not much point in mak- ing your own, then.
  • Industrial Automation Insider June 2009

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    4 Responses to Taking Invensys seriously!

    1. instsignpost says:

      The latest on Jim Pinto’s Invensyslog gives other viewpoints on this.

    2. instsignpost says:

      Today Jim Pinto’s newsletter continues! Ulf hides while Invensys slides.

    3. […] what Walt Boyes has identified as the “coming together” of Invensys in July’09, a report on the re-organisation of this giant in the automation world after a traumatic […]

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