Automation to Be Focus as Rockwell Spins Off Avionics

Rockwell International Corp. said Friday it will spin off its Rockwell Collins avionics and communications unit as a separate, publicly traded company in a move to focus on its automation systems business.

The Milwaukee company, which also reiterated earnings guidance for 2001, said the independent Rockwell Collins would have annual revenue of about $3.1 billion and be based in Cedar Rapids, Iowa.

After the spinoff, Rockwell primarily will produce automation and control devices for industrial production and power transmission with about $4.5 billion in annual revenue.

Under the plan, shareholders will receive one share of Rockwell Collins for each Rockwell share held. Rockwell said it expects to complete the spinoff in the second quarter of 2001.

“We believe this action will clearly create two strong public companies that can develop strategies, allocate resources that are appropriate for their unique businesses,” Chairman and Chief Executive Don Davis told analysts and investors in a conference call.

Davis also said Rockwell’s chief financial officer, W. Michael Barnes, would retire after the Collins spinoff and would be succeeded by Michael Bless, vice president of finance for Rockwell Automation.

Rockwell had been the focus of takeover speculation after General Electric Co. announced plans to buy Honeywell International Inc., but the company denied it was seeking to be bought.

UBS Warburg industry analyst John Baliotti said last month that Rockwell would be more attractive to a suitor if it could spin off its aerospace business.

Rockwell also forecast earnings in line with Wall Street’s current targets. The company expects to post a profit of 65 cents to 70 cents a share for its fiscal first quarter ending Dec. 31, versus 81 cents a year earlier.

For the full year, Rockwell sees earnings of $3.10 to $3.20 per share, compared with $3.35 reported last year. Analysts peg the company at earning 68 cents per share for the first quarter and $3.11 for the year, according to First Call/Thomson Financial.

Rockwell shares rose on the news, gaining $2.69 to $44.25 on the New York Stock Exchange. The stock price has ranged from $27.69 to $54.50 this year, but is still off a high of $63.88 hit in 1999.