4Q 2012/4Q 2011
Revenue: $11 billion/$10.5 billion
Net income: $604 million/$830 million
Net profit per share: $0.26/$0.36
Reading the few signs that global power-and-automation firm ABB Group releases about its ABB Robotics unit, Robotics seems strong, riding the ongoing industry resurgence nicely. But that unit also seems over-focused on large industrial arms designed for heavy manufacturing, which while strategically important and profitable, do not have the growth potential of innovative new designs and new industries.
ABB Robotics has installed more than 200,000 industrial robots around the world, yet it’s better protected from market analysis than its independent, publicly held competitors. It’s a unit within the Discrete Automation and Motion division of Swiss-based ABB Group (formally known as Asea Brown Boverie Ltd.) The firm, with roots dating back to the 1800s, publicly reports down to the division level, but no further.
ABB Group does allow that Robotics is healthy, stating in its 2012 annual report that the unit’s revenue “continued to grow at a double-digit rate” even through an unspecified restructuring that year in Discrete Automation’s U.S. operations, where ABB Robotics is based.
While order growth across Discrete Automation was flat because of the global industrial slowdown, according to ABB Group in its report, Robotics enjoyed “strong” growth “due to improving demand in automotive and general industry sectors.”
Along with robots, Discrete Automation makes motors, drives, generators, converters, inverters and programmable logic controllers, so it’s hard to gauge the impact Robotics has within the firm. The division generated revenues of $9.4 billion in 2012, or 22% of all corporate revenue. That was up from $8.8 billion the year before. It’s not known what Robotics itself contributed.
Last year, Discrete Automation recorded a higher margin, as a percent, before interest and taxes — 15.6% — than all other divisions. The Low-Voltage Products division was second with 12.9%, according to the annual report.
A 7% year-over-year order backlog increase for the division in 2012 was attributed, in part, to ABB Robotics, which saw an unspecified increase in large orders for products or services — those valued at more than $15 million. The execution time for large deals, particularly for Robotics transactions, is comparatively longer and contributes to backlogs, according to ABB Group.
The overall number of large orders that Robotics nets is small. Only about 16% of ABB Group’s contracts last year were valued at $15 million or more, according to the company. And roughly 85% of those large orders came from the Power Systems and Process Automation divisions. ABB’s Power Products and Discrete Automation divisions split the rest.
Mergers & acquisitions
The last major acquisition by ABB Group with a significant impact on its robotics unit was the $4.2 billion all-cash purchase of Baldor Electric in January 2011. Baldor’s motors and drives can be used in robots and other applications within the Discrete Automation division. ABB Group reports that it spent more than $10 billion to acquire 28 firms, mostly small, from 2010 to 2012. Almost like clockwork, it bought nine businesses in 2012, 10 in 2011 and nine in 2010.
That metronomic pace probably is coincidental. But then again, maybe not.
Witness ABB Group CEO Joe Hogan straining during a Feb. 14, 2013 fourth-quarter earnings call with market researchers to impress his audience with how unlikely he is to rush his merger-and-acquisition (M&A) strategy. Hogan specifically mentions his buyout last year of low-voltage products maker Thomas & Betts Corp.:
“I’m still shy right now because we executed on Thomas & Betts, and that takes a lot of organizational capacity to make sure that we deliver on those integrations. But…for the last four years, five years, when we say disciplined M&A, we really mean it. It’s disciplined from a price standpoint. It’s disciplined by not having too much…to integrate with, and not being able to follow up on it. And it’s also disciplined in the sense of making sure that we balance our cash properly, too.”
Product development: more sustaining than disruptive
Likewise, ABB Robotics’ product line has grown iteratively and with few revolutions. There have been some recent product surprises, but they’ve been few and slow to deploy.
First, a look at ABB Robotics’ core: large, articulated arms with supporting hardware and software. They range from the massive IRB 7600, which hefts up to 630 kilograms, to the comparatively Lilliputian IRB 120, which works with up to four kilograms.
The products are well-known and respected globally, capable of several industrial roles including painting, welding, gluing, positioning and pressing.
Indeed, BMW Group, which has a lengthy relationship with ABB, ordered 2,400 more robots from the company in February.
Also this year, ABB and welding-technology maker Fronius International agreed to build fully equipped welding systems and to support each other’s customers with new technologies.
And the Tube Press and Weld system that Robotics installed last year at a Ford Motor Co. axle plant in Michigan, earned the carmaker’s 2012 Global Powertrain Technical Maturity Model Excellence Award. The system also won Ford’s 2012 People’s Choice Award.
That robot, with new machine vision, works on two axle sizes and can switch between each version in 43 seconds or less. Previously, there was a robot for each axle size, according to ABB Robotics, a setup that could cause bunching and stretching in assembly lines.
In 2011, Ford similarly honored an ABB Robotic Torque Converter Assembly system.
All of this is good news, but the trend toward automated precision packaging and electronics manufacturing is well under way, and ABB remains under-represented among new-tech assemblers.
It’s unknown if ABB can remain ahead, for example, when many electronics manufacturers, such as Taiwan’s Foxconn Technology Group (who began using ABB robots in 2000 and, later, ABB’s RobotStudio software), are now making their own robots.
Reading new trends
A bigger unknown is, will ABB get into mobile robotics. The company is silent on that too. Service robotics is likely to grow at a faster pace in the near term. What tugs and movers lack in die-forged machismo they will make up for in versatility and, most likely, ubiquity.
The closest that ABB comes to mobile — or another new trend, co-roboting — today is FRIDA, a two-arm concept robot that can be lugged around like an early PC. The most interesting aspect of FRIDA is not really its tabletop — or even two-armed — nature, but its potential to address human-robot interaction, called co-roboting (or, cloyingly, coboting).
Co-roboting takes systems out of the cage and puts them safely along side a person, building a team. It’s going to be as important a trend in the robotics industry as has been personal and mobile computing in information technology. But two years after FRIDA was introduced, it’s still only a demonstration project.
That might be all ABB plans for the system. The staid parent isn’t above publicity plays. It has worked with robotics designer Andy Flessas to create six-axis arm-and-display systems called RoboScreens for the pop band Bon Jovi’s 2010 show tour. Band members were able to walk on moving platforms that doubled as digital displays.
ABB Robotics has teamed up as well with Ibis Hotels to create a small arm that translates guests’ movements as they sleep in a special bed. The arm creates a painting based on their shifting slumber.
It might seem cutting to include in a profile such a frothy publicity stunt, but this stands out all the more because ABB takes so few chances in robotics. Younger but no less mature technology companies find success in their core as well as along the sidelines.
ABB Group knows its knitting, but it is holding Robotics back from advanced tech and new markets during what might be the industry’s next big inflection point. Rock-solid stability is commendable unless it becomes inertia.