While the rest of the developed world has been devoting itself to the finer things of life over the recent holiday period, automation industry anoraks -- remember, these are people who actually post on Jim Pinto's weblogs on Christmas Day -- will have been unpacking and digesting their own particular Christmas treat, the Control Automation Vendors Top 50, prepared for their delectation by those master chefs, ARC's Larry O'Brien and Control's Walt Boyes.
Last year INSIDER got itself into a certain amount of hot water with the two authors by, in their view, seeming to criticize their efforts on the grounds of their selection of what to leave in and what to leave out and of their reliance on two-year-old data. Those problems have not gone away, but our intention then, as now, was not to blame O'Brien and Boyes for the unavoidable constraints imposed upon them -- calendar 2008 is simply the most recent period for which full financial results are available -- but rather to emphasize that the results must be viewed in the light of those reservations.
In or Out?
Industry watchers can, and almost certainly do, argue all day over whether, for example, supply chain management software, fire and security systems or low-voltage switch gear should be included in measuring the overall performance of automation vendors. These arguments can only intensify as vendors such as Honeywell, Siemens, ABB and Invensys seek to emphasize such offerings as examples of the 'one-stop shop' capability which, they claim, is being sought by their customers.
As O'Brien emphasized when we sought explanations for some seeming anomalies in this year's results, this is essentially a work in progress. Those particular anomalies, and O'Brien's comments on them, we'll deal with as we look at the results in more detail. In the meantime, let's acknowledge the hard work. As Larry told us, "I really put a lot of extra time in the list this year to get everything exactly right." We're sure you both did and it shows.
As in previous years, O'Brien and Boyes have produced rankings for both North American and global vendors and, as again on previous occasions, INSIDER has used those to derive a 'Rest of the World' ranking which, given the current rapid shifts in both economic and geopolitical power, may have at least as much significance as either of the other two.
At first sight, and with one or two notable exceptions, all three listings show little change on the previous year. And, one might ask, why should they? Up until its fourth quarter, 2008 was shaping up to be almost as good a year for the automation industry as 2007. Even in that fourth quarter, when the most immediate concern was whether the banking system would even be able to allow companies to pay their people at the end of the month, automation vendors in general and process automation vendors in particular were still arguing that their sector would be largely immune from recession. In fact, of course, some of the signs were already there for anyone who wished to see them and can be discerned in the Top 50 figures. It's certainly true that we will have to wait for the 2010 and even the 2011 listings to see how deep an impact recession has had, but the 2009 results, based as they are on 2008 data, give a clear indication of the state of health of the leading vendors as they entered the maelstrom and, thus, their likely condition when they emerge.
Off the Boil
That the automation world, even without the imminent threat of economic disaster, was going slightly off the boil in 2008 is suggested by a slowing of growth in the total automation revenues of the top 50 vendors worldwide. At $87.7 billion they grew just under 16% in 2008, compared with 17% the previous year, while the figure for North America grew 4.6% to $22.9 billion compared with 5% in 2007.
There was no change in the top three vendors in the North American market with Emerson once again leading the pack with revenues of $3.4 billion, up 9.6% on the previous year, and extending its market share from 14 to approaching 15%. Second place Rockwell grew even faster at nearly 11% to achieve revenues of $2.9 billion and an increased market share of 12.5%. Less spectacular was the sub 3% growth which raised ABB's North American automation revenues to nearly $2 billion, but resulted in a slight fall in market share to 8.5%. That was still sufficient to retain third place, but again raises the question of whether ABB is focusing not just attention, but a higher proportion of resource on other sectors of its business.
Moving up one place to fourth in the North American market was Siemens with revenues up more than 3.5% at $1.4 billion, while Danaher also moved up a place to fifth with revenues up an impressive 10% at $1.3 billion. Neither significantly improved market share, however, and their improved positions must be attributed more to the apparent spectacular decline in Honeywell's performance, with revenues according to the listings down by a quarter at $1.2 billion. In fact, all is not what it seems, however, because, as O'Brien explained to INSIDER, the change is more the result of having had to adjust Honeywell's figures to account for non-automation related revenues. Indeed, as he points out, Honeywell itself reported Process Solutions world wide revenues up 8% in 2008. Nevertheless, a rating of sixth in its home market cannot be regarded as anything other than disappointing.
The Schneider Anomaly
Following Honeywell in seventh place in the North American rankings comes another, indeed the major, anomaly of this year's Top 50, Schneider. Readers may recall that last year Schneider dropped right out of the top 10, finishing up in 17th place. "Last year we attempted to narrow down Schneider's revenues to only include automation products and services that were in our Control Top 50 scope," explained O'Brien. "Unfortunately we did not include the full scope of these businesses last year and had to revisit the number again this year, so the number you see in this year's Top 50 is the result of a lot more research and fine tuning to arrive at a "real" automation number that does not include all the switchgear and electrical products. Basically, we did not give them enough credit last year and tried to rectify the situation this year." The result is a figure for the year of $1.03 billion, but comparisons with previous years are of course invalid.
Positions eight, nine and ten in the North American listings are filled respectively by GE, Cameron Valve and Ametek with revenues of respectively $1.00 billion, $0.8 billion and $0.7 billion. All three achieved near double-digit growth when compared with last year's Control data but no significant change in market share. Whither Invensys' North American business? Its fall out of the Top10 and seeming 26% reduction in revenues can, suggests O''Brien, be attributed at least in part to the disposal of APV, though whether that is a sufficient explanation must be open to question.
E+H bigger than IOM?
On the wider global scene there's no significant change among the leading players other than the reinstatement of Schneider to the ranks of the elite for reasons already alluded to, with the result that the top six now read Siemens, ABB, Emerson, Rockwell, Schneider, Honeywell. Moving up into seventh place ahead of Yokogawa is Mitsubishi, while Omron, the only company in the top 10 to show negative growth, slips two places to ninth with Danaher in 10th. Out goes Invensys down to 14th place with a seeming 10% reduction in revenues, again no doubt attributable in part to the loss of APV. That actually puts it one place behind Endress+Hauser, which saw its global revenues grow 8.5% to $1.8 billion.
It's when North American revenues are removed from the equation to produce a "Rest of the World",Top 10 that the true significance of these figures comes in to sharper focus, however. True the market shares of the leaders have declined a little, arguably reducing the differential between them, but Siemens is still 1.5 times bigger than its nearest rival, ABB, which in turn is more than twice as big as any of the next -- Mitsubishi, Emerson and Schneider -- all of whom are effectively level pegging. With Yokogawa apparently faltering, are we seeing the makings of a future global premier league of automation vendors with revenues in excess of $3 billion outside North America? And would that suggest that the only strategy which would enable a first-division side to get on terms is merger or acquisition? 2010 may well give us the answers.