Rockwell Is Not in a Hard Place
We understand that any corporation going through a transformation accompanied by difficult earnings performance may be the subject of criticism. However, before the readers of the Los Angeles Times draw any conclusions about Rockwell’s outlook, we believe that it’s important to provide a fuller and more accurate picture about the company than what was presented in “Not Tempeted by Apple, and Is Rockwell in a Hard Place?” [Stock Exchange, July 28].
Market leadership: Your readers should know that Rockwell’s $5-billion automation and $2-billion avionics businesses are world-class organizations. In automation, Rockwell, with our leading Allen-Bradley and Reliance Electric brands, continues to be the leading supplier in North America, a position we have held for the last several decades. In avionics, Rockwell Collins is one of the top two firms in this global industry and has always been the most profitable company in this market.
Operating performance: Yes, we have experienced selected performance issues in our automation business, notably in the motors segment and in certain markets affected by the current Asian financial crisis. This is a short-term anomaly, which is being corrected as we speak, and even with these issues, margins are still a very healthy 12.9%, near the top of the industry. At Collins, during the last quarter we wrote off a U.S. government contract loss and we changed the accounting methodology. These were one-time events as this business is growing at nearly a 20% annual growth rate and is not hurting as you suggested.
Strategy: Rockwell has a clear focus on being the best electronics controls and communications company in the world. We believe implementation of our strategies to spin off our Semiconductor Systems business and the restructuring we announced on June 29 to reduce costs are important steps in achieving that plan.
As we have told our investors, we believe that Rockwell’s earnings per share from continuing operations (before restructuring and other special charges) will be about $2.30 in fiscal 1998 and in 1999, earnings will improve significantly to at least $2.90 per share. In addition, we are confident that Rockwell’s Semiconductor business, which will be spun off in December, will be a successful stand-alone company.
When all is said and done, what matters is how Rockwell performs, and I am committed to delivering the results our shareowners have come to expect from our great company.
DON H. DAVIS Jr.
Chairman of the Board
and Chief Executive
Rockwell International Corp.
