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Rockwell restructures to simplify operations and boost growth

29 July, 2020

Rockwell Automation is restructuring its business to simplify its operations and accelerate profitable growth. Announcing this as part of the company’s third-quarter results – which revealed a 16.3% drop in sales compared to 2019 – chairman and CEO Blake Moret said that the new structure “better aligns us with the evolving needs of our customers”.

From the start of the next fiscal year, Rockwell will have three operating segments: Intelligent Devices; Software & Control; and Lifecycle Services. “These new segments will simplify our structure around essential offerings,” Moret explained, “leverage our sharpened industry focus, and add software talent, which will play a larger role in our future value.

“We are confident that this model will enable us to provide even more value,” he added. “Nobody is better positioned to bring information technology (IT) and industrial operational technology (OT) together than Rockwell and our partners.

“This change builds on our success and accelerates our progress to bring the Connected Enterprise to life,” Moret continued. “It’s the right time to make these changes, as we strengthen the resilience of our business model. Our growth framework remains gaining share in our core, growing double digits in information solutions and connected services, and adding a point or more of growth through inorganic investments.”

• The Intelligent Devices business will be led by Fran Wlodarczyk, currently the senior vice-president of Architecture & Software, and will include drives, motion, safety, sensing, industrial components, and configured-to-order products.

• The Software and Control business will be led on an interim basis by Chris Nardecchia, currently senior vice-president of Information Technology and chief information officer, while an external search is made for a new senior vp. The business will include control and visualisation software and hardware, information software, and network and security infrastructure.

• The Lifecycle Services business will be led by Frank Kulaszewicz, currently senior vice-president of Control Products & Solutions, and will include consulting, professional services, connected services, and maintenance services, as well as the Sensia joint venture with Schlumberger.

Currently, Rockwell is split into its Control Products & Solutions business, with 2019 sales of $3.7bn, and Architecture & Software with sales of $3bn. It expects the new Intelligent Devices business to account for about half of future sales (worth around $3.3bn), with Software & Control generating sales worth $1.8bn and Lifecycle Services producing $1.6bn. About two thirds (67%) of Rockwell’s 2019 sales came from products, with 22% from solutions and 11% from services.

Blake Moret: the new structure will simplify Rockwell's operations around essential offerings

Commenting on Rockwell Automation’s third quarter results and the current business climate, CEO Moret, reported that “conditions remain difficult, but our employees have responded extraordinarily well, and we remain focused on keeping them safe. Our earnings were higher than expected for the quarter, primarily driven by better organic sales."

Fiscal 2020 third-quarter sales were $1,394m, down 16.3% from 2019. Organic sales declined 17.6%, currency translation decreased sales by 1.9%, and acquisitions increased sales by 3.2%. Rockwell’s pre-tax margin was 24% in the third quarter of fiscal 2020 compared to 19.3% in the same period last year.

Moret reported that while Rockwell is “managing well” in the Covid-19 environment, “we are highly sensitive to the toll this is taking on our employees during this time. Beyond the fear of a loved one getting sick, racial injustice is on our minds as we develop actions as a company and as individuals that will help put a permanent end to the denial of fundamental human rights.

“Thousands of employees continue to work under very difficult conditions, including the temporary pay cuts we implemented in May,” Moret added. “These actions were necessary to better align our costs to current business conditions while preserving jobs, and we intend to reverse them by the end of December, hopefully sooner.

“Additionally, we are making another recognition payment to our manufacturing associates worldwide, who are on the front lines of maintaining our essential operations,” Moret concluded.

The changing shape of Rockwell Automation: old (left) and new. The PAM figures show the available market.

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