Re: Why is the Automation market declining?
Sep 20, 2000 12:02 pm, by Jim Pinto
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Automation List : real-life, real-time example of the items covered in my article - Automation in Decline. Here is an extract from today's financial news on Rockwell (Allen-Bradley) : -------/ Rockwell (NYSE: ROK - news) is a stock to avoid until the sales outlook for the firm's automation business improves. Today Rockwell joined a growing number of U.S. companies by warning that earnings per share would be about $0.09 lower than expected at $3.55 for fiscal 2000, which ends September 30. The market responded by sending the stock price down 20% by midmorning. Rockwell also announced that it expects fiscal 2001 earnings per share to range between $3.10 and $3.20, substantially below the consensus estimate of $3.76. Accelerating weakness in its already soft U.S. automation business is to blame. Automation accounts for about 60% of sales, which were flat in 1998, fell 3% in 1999, and are expected to decline 5% in 2000. The primary cause for the shortfall was delays in capital spending by automotive manufacturers. These capital projects are typically for assembly lines and are big-ticket items. During its conference call this morning, Rockwell management stated that it doesn't expect any improvement over the next six months, and it could not forecast with confidence beyond that period. Parts shortages and a declining euro also hurting sales and earnings. Management stated that it does expect free cash flow to range between $450 million and $500 million in 2000, meeting or at least coming close to its previous guidance of $500 million. Nonetheless, until the sales outlook improves for automation, Rockwell is a stock to avoid. ------------------/ My next article - Pinto's Pointers in the October issue of Industrial Controls Intelligence and Plant Systems Report, will be on the subject : "Companies in trouble". Anyone who has news and views to share, please send ! Cheers: jim ----------/ Jim Pinto email : jim@jimpinto.com web: www.JimPinto.com San Diego, CA., USA ----------/
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• Re: Why is the Automation market declining?
  Sep 21, 2000 3:48 pm, by Michael Griffin
  At 09:24 18/09/00 -0700, Jim Pinto wrote: >Today Rockwell joined a growing number of U.S. companies by warning >that earnings per share would be about $0.09 lower than expected >Accelerating weakness in its already >soft U.S. automation business is to blame. Automation accounts for >about 60% of sales, which were flat in 1998, fell 3% in 1999, and are >expected to decline 5% in 2000. Aha! Finally! Some real hard genuine numbers! Something we can actually look at. Rockwell (i.e. Allen Bradley) has a sales problem. >The primary cause for the shortfall was delays in capital spending by >automotive manufacturers. These capital projects are typically for >assembly lines and are big-ticket items. So, we see that Rockwell (i.e. Allen Bradley) is very concentrated in the large automotive companies in the US (nothing we didn't already know there), and these companies have not been buying too much from them lately. Big assembly plants are a very cyclical market though. Changes tend to be tied to introductions of new platforms, and this is not a regular event. Furthermore, these companies have been putting more and more of their assembly work out to their suppliers, not all of whom buy Rockwell hardware. In this case though, Rockwell's loss may be someone else's gain. >During its conference call >this morning, Rockwell management stated that it doesn't expect any >improvement over the next six months, and it could not forecast with >confidence beyond that period. Parts shortages and a declining euro >also hurting sales and earnings. So what do we see here? One large company, (Rockwell) has a decline in sales because: 1) A few large customers have delayed purchases (a cyclical problem). 2) The sales slow down is apparently primarily in the US market (a local problem). 3) Part shortages (internal management problems). 4) A declining euro (currency movements). What we haven't seen yet is something which tells us that Rockwell's problems are those of the industry in general (world wide). It would be particularly interesting to know to what degree Rockwell's explanations of the reasons for their problems constitutes fact, and how much is just wishful thinking. I find it very interesting that Rockwell cites a declining euro as one of the causes for weak sales. Currency movements as a cause of an apparent sales "decline" for companies keeping their accounts in US dollars was one of the points I had mentioned earlier. A company which kept accounts in euros may see a corresponding "rise" in their American sales when translated from dollars to euros. The really interesting point though is the little statement at the beginning about "Today Rockwell joined a growing number of U.S. companies by warning that earnings per share would be about $0.09 lower than expected". In other words, this problem is not specific to Rockwell or to the industrial automation business either. This may rather be a sign of a general economic decline rather than just a problem in industrial automation (not that this would be of any help to Rockwell). >My next article - Pinto's Pointers in the October issue of >Industrial Controls Intelligence and Plant Systems Report, >will be on the subject : "Companies in trouble". We will look forward to this. What would be particularly useful is some figures for other companies similar to those you have included here. I don't know though if the big conglomerates like Siemens and ABB break out their industrial automation figures from the rest of their business. I believe that both of these companies are primarily in other lines of business. It would also be interesting to know if the problems are mainly with a few large companies, or across the industry in general (both large and small). A structural change in the industry could shake out quite a few big players. It is worth remembering that very few of the many large mini-computer manufacturers survived the transition to the workstation/server/PC market. This doesn't mean the computer industry disappeared or declined though - it just changed. ********************** Michael Griffin London, Ont. Canada mgriffin@odyssey.on.ca **********************
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• Re: Why is the Automation market declining?
  Sep 25, 2000 9:21 am, by Dave Ferguson
  Come on guys think about it. Last year sales were through the roof and automation was the big thing. (Everyone upgrading everything in partial fear of Y2K. And everyone else climbing on board, buy me an extra PC or two just in case....... This year sales down (Y2K) over, mad bosses because nothing major happened, money spent over budgets, beancounters go on rampage due to overbudget spending, automation losses.... No MBA needed to figure this one out. Dave Ferguson No Flames Needed, not trying to ruffle feathers but think about it.
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