Changing hands: How acquisitions (really) affect embedded computing companies
Amidst news of Google selling Motorola Mobility for a fraction of its 2011 purchase price, other transactions involving the former tech giant are impacting embedded computing as well. Last August, private investment firm Platinum Equity purchased a 51 percent share in the Embedded Computing business of Emerson Network Power (ECNP) – which housed vestiges of the Motorola Computer Group – and the now-rebranded Artesyn Embedded Technologies () is still headquartered in Carlsbad, CA, still emphasizing competencies in power and computing.
Outside of how soon we can expect the “Goodbye Moto” jingles, the real question is what, if anything, is different at Artesyn? Stephen Dow, President of Artesyn Embedded Technologies and former President of ECNP, attributes minimal change to financial misalignment under Emerson and growth potential realized by Platinum Equity. As Artesyn, the company is now equipped to address business opportunities it neglected in the past, he says.
“Emerson is basically a financial holdings company – it had about 76 different businesses, and as a company Emerson was extremely successful – $25 billion in revenue, 20 percent Operating Profit (OP), 56 years of consecutive increases to their stock dividends. And in their portfolio of companies they stack everybody up against each other and look to continue to add to that kind of result,” Dow explains. “Well, in our market segments both for power and computing, the market doesn’t allow us to make 20 percent OP because the market dictates what you’re going to pay, and we build ‘stuff.’ So when we looked at it, [Emerson] kept forcing our businesses to find places to sell that would aggregate to the overall Emerson [objective], and as a result we kept narrowing the focus of the market segments we could go after because there were fewer and fewer that would support the kind of gross margin opportunities that [Emerson] required from us. In the end we came back and said, ‘You’re going to destroy some really good businesses that are large – we’re market leaders, we’re profitable, we generate cash, but we don’t fit your model – but at as a standalone, this is a really good business.’ That’s what Platinum [Equity] recognized. They felt if we weren’t to have those same kind of restrictions, we would be able to go back after some of the business we had to leave as Emerson and be a little bit more aggressive in some of the market segments we’re going after to continue to grow the business as opposed to just maintain a gross margin.”
With its own IT and factories, ECNP operated more or less as an independent entity, and outside of financial governance Artesyn has essentially maintained the same organizational structure. This includes the company’s focus on standards-based technology, which will continue a prominent role in Artesyn’s development schemes despite customer tendencies toward application-ready solutions, Dow continues.
“[Standards] will continue to be an important part of how we provide a broad range of products to as many different types of applications as possible,” Dow says. “But even that is starting to blur a little bit in that the use of open standards like VME or AdvancedTCA (ATCA) isn’t as big a deal as it used to be because more and more people are looking for a solution set, and in some cases they don’t really care what’s under the covers as long as it’s repeatable and supportable and is cost effective. So while we’ll continue to use standards as a way of leveraging our engineering resources and being able to spin things quickly and have some discipline around what we design and build, I think the outside world will care less about how those things get done if they solve the application problem.
“Over the last three/four years, we’re starting to see ATCA fit into other applications [outside of central office, big box-type scenarios], so while the term ATCA is kind of a misnomer for those applications, what it brings to the party is it’s an open standard, it’s plug compatible, you have High Availability (HA), and you can mix architectures in it as far as microprocessors,” Dow continues. “So in things like military/aerospace opportunities we’re seeing ATCA, we’re seeing ATCA systems fit on the edge of communications where maybe it’s a two-slot or six-slot ATCA platform. And it’s not because it’s ATCA, it’s because it’s an open standard bladed architecture that brings a lot of availability and a lot of reliability to the application. So we’ll continue pushing how we can take the bladed architecture from ATCA and its management and HA and see where else we can put that into applications, especially where we can differentiate the use of those platforms.”
Investment advances business as usual
Acquisitions also affected other PICMG members in 2013, with Equita Holding KGaA acquiring a majority interest in MEN Micro Elektronik GmbH ( ) out of Nuremburg, Germany last fall. Barbara Schmitz, CMO, MEN Micro, says that Equita will strengthen existing subsidiaries by providing financial support to establish new sales channels in Asia and South America, fund new production and test facilities in the U.S., and potentially aid in the purchase of other embedded companies. However, Equita will not be involved from a strategic product standpoint, and it will be business as usual for MEN Micro in their key verticals of transportation, civil avionics, and industrial control. The company is expecting to release a series of Safety Integrity Level (SIL) 4 and CompactPCI Serial-based system solutions over the next two years.