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Automation is likely to become ABB`s top earner

01 March, 2000

ABB`s chief executive Göran Lindahl expects the company`s automation division to be its most profitable manufacturing operation within three years.

Speaking at ABB`s annual results presentation in Zurich, Lindahl predicted that by 2003, margins in the automation division will be around 14-15% - well ahead of the company`s five other divisions.

Following its acquisition of Elsag Bailey, the automation division generated sales of $8,152m last year, providing 30% of ABB`s income. However, the division`s operating margins fell to just 6%.

The figures were hit by the cost of integrating Elsag Bailey and because the division had to bear the brunt of ABB`s $150m bill for tackling the "millennium bug". However, Lindahl expects both revenues and earnings to increase this year and forecasts that the automation division will grow by an average of 6% a year over the coming three years.

Part of this growth will come through e-commerce, but strategic alliances will also play a role, as will the development of a single open software platform for most of the company`s products.

Lindahl reported that Elsag Bailey is "well on the way to being integrated". The process has involved the loss of nearly 5,000 jobs - a reduction in the automation workforce of more than 8%.

ABB is continuing to invest heavily in research and development and last year spent $2.5bn on r&d - equivalent to 8.4% of its income. This is reflected in the fact that 85% of ABB`s factory automation products are less than five years old.

"Technology is the core of what ABB does," Lindahl stated. Two-thirds of ABB`s research budget is now devoted to information technology work and the company employs 25,000 software engineers. "We are expanding into businesses where we can be leaders, and leaving those where we cannot," Lindahl said.




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