Top floor to shop floor didn't cut it

When Victoria Scarth joined the London headquarters of Invensys plc four years ago, the multinational company was fragmented into 24 divisions and a meltdown was coming. The economy was crashing, its debt was crippling, and profit warnings were looming.

Happily, Scarth, a senior VP, saw the situation change.

"It is possible that Invensys is turning the corner after a very troubled period," observes Peter Riley, a London-based equities analyst with Deutsche Bank. The slimmed-down Invensys has six divisions in software, controls, and manufacturing. It has pared its debt and slashed corporate costs.

Invensys made the turnaround by selling off businesses in the last three years; reorganizing twice; and, in the end, realizing it hadn't listened to customers. The misadventure with ERP vendor Baan is illustrative.

Invensys believed the "next big thing" following the merger and acquisition craze of the 1990s (one in which it participated to the tune of adding $2.02 billion in debt) would be a single computing platform, or at least a single vendor source, that covered everything from process control to supply chain management.

Invensys bought Baan for $700 million in 2000, just as the ERP market tanked, explains Scarth. What Invensys didn't realize was that customers wanted integration, but were not willing to tear out the systems they had to get it. The proposed Baan-Marcam-Wonderware manufacturing suite strategy failed and Baan was disposed of last year for a mere $135 million.

At $431 million in sales, the process systems division is the largest within Invensys, with constituent manufacturing software companies including Foxboro, IMServ, SimSci-Esscor, Triconex, and Wonderware.

Simon Pilkington of London brokerage Cazenove says the division should soon return more to the bottom line, citing a 2-percent rise in orders last year. Margin growth could come from a 70-week improvement plan under way at automation vendor Foxboro—realigning it with customers, not geography—says Scarth.