Although economic uncertainty persists throughout most of the world's developed countries, publicly owned vendors of plant automation and enterprise software products enjoyed surprisingly strong financial results in their recently concluded reporting periods.
The manufacturing industry's key technology vendors are not out of the stagnant economic waters yet, however. Many, in fact, predict slower growth in the second half of 2008 and into 2009 as some manufacturers are expected to defer technology purchases until the current economic downturn eases.
Vendors of plant automation software and services, such as Rockwell Automation, Honeywell, ABB, Schneider Electric, and Emerson Electric all benefited from soaring demand from customers in developing economies, particularly in Asia, as well as a growing need among manufacturers to become more energy-efficient.
Rockwell, for example, reported a 15% rise in revenue during its third fiscal quarter, ended June 30. The company said it was able to defy the slowing economy in North America by leveraging strong growth in Asia and Latin America, where many customers are building out manufacturing infrastructure. Rockwell also saw strong demand from the booming oil and gas vertical market.
At the same time, Rockwell saw project and spending delays from pharmaceutical, life sciences, and automotive manufacturers in North America during the most recent quarter.
"We are operating in a bifurcated world economy," said Rockwell CEO Keith Nosbusch, explaining the strong results despite the slowing U.S. economy. "Buoyant growth in emerging markets coincides with sluggish growth in developed countries."
Other automation vendors saw similar dynamics. Swiss automation and engineering giant ABB said that in its second fiscal quarter, ended June 30, the company for the first time saw orders from emerging markets, such as China, India, and the Middle East, exceed those from mature market countries. Riding that wave, ABB reported a 27% jump in revenue for the quarter, with revenue from automation products growing 28%.
Emerson Electric, likewise, saw sales, calculated in constant currencies, rise 16% in Asia, 15% in the Middle East, and 16% in Latin America during its third quarter, ended June 30. Constant currency sales, meanwhile, were up just 4% in the United States and 3% in Europe.
"All of the big automation companies are seeing incredibly strong growth, particularly outside of the U.S. as developing countries rush to get their infrastructures and supply chains up and running," said Alison Smith, an analyst at AMR Research. "At some point, this growth is likely to level off, but probably not for another five years or so."
Enterprise software vendors, meanwhile, took a somewhat different path to defying the economic slowdown, benefiting from acquisitions as well as strong growth in developing markets. During its fourth fiscal quarter, ended May 31, for example, Oracle reported a 24% rise in overall revenue, aided by stronger-than-expected revenue of $93 million from its acquisition of BEA Systems.