Rockwell sells Reliance, focus on computers/software

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IBG - SA Instrumentation & Control Buyers' Guide

January 2007 News

Jim Pinto

My predictions that Rockwell Automation was ailing and would be acquired have long since proved wrong. Under chairman and CEO Keith Nosbusch, the company is moving ahead strongly. Revenues for fiscal year ending September 2006 were up 11% at $5,5 billion, and operating earnings were $1 billion, up 19%.

Rockwell has experienced significant growth in Asia and China. A new global headquarters in Singapore will include manufacturing, sales and support for low-end products.

At Rockwell's annual Automation Fair, Keith Nosbusch seemed well in control, very different from his predecessor Don Davies who has since exited. The stock has doubled since he departed.

Keith Nosbusch speaks with the confidence and conviction of an engineer who understands the markets, "Information will drive the next wave. The utilisation and deployment of information will provide a quantum leap in competitive advantage." Clearly Rockwell is focusing on high-tech control products and software.

The clear sign of this shift is that Rockwell recently sold off its Reliance power systems division to Baldor Electric for $1,75 billion in cash and about $50 million in stock. The sale, which is expected to close by April, came after much speculation. The price was higher than many had predicted.

Reliance Electric and Dodge brand names include electric motors, bearings and gears, century old businesses. The business was profitable in recent years, but vulnerable to economic downturns.

Reliance employs 4300 people, with $1 billion revenue, 20% of Rockwell's total. After the sale, Rockwell will still employ about 18 000 people worldwide.

Rockwell has said previously that it would use some of the proceeds for dividends or share buybacks, but also wanted to raise capital to fuel growth in its other businesses. After the announcement, Rockwell shares closed at $63,20, up 3% - indicating that the move is seen as positive.

Jim Pinto is a technology futurist, angel investor, speaker, writer, industrial automation commentator, analyst and consultant. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership about two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant to technology trends.

For more information contact Jim Pinto, [email protected]

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