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VDC: MECC-Emerson merger to boost embedded industry

Posted: 10 Oct 2007     Print Version  Bookmark and Share

Keywords:MECC acquisition  embedded systems  embedded computing 

The recent acquisition by Emerson Electric Co. of the Motorola Embedded Communications Computing (MECC) business from Motorola Corp. will be a good deal, not only for the two companies involved in the deal but for the embedded systems market at large, particularly the xTCA segment, said market research group Venture Development Corp. (VDC).

Dubbed to be one of the biggest deals in the sector, the acquisition is said to create a new giant in the embedded computing segment, as MECC becomes integrated into the Embedded Computing Division of Emerson's Network Power Unit. This will realign MECC's direction to become more focused on delivering its core offerings, under its new parent, and thus increase its revenue, share and margin in the arena, said VDC.

New focus
While MECC has a major focus and solid presence in the communications industry, its participation is not highly related to the rest of the Motorola business, which has its core rooted in mobile devices and differentiated core components of high-performance mobile solutions. VDC explained that MECC itself had recently completed a number of significant strategic and operational realignments. That work created a more efficient, focused MECC, operating at a high level in the growth segments of the embedded hardware and systems markets. That work created an attractive business—to run or sell.

Motorola is also benefiting on the move, said VDC, as the company will be able to focus on its core competencies and address the challenges in its core business. Over the last five years, Motorola has been restructuring, shedding businesses considered non-core, and investing in mobile device, software and related services.

There were a number of strategy shifts in the embedded computing business of Motorola, which included violent changes in direction, said VDC. One is buying one of its largest peers—FORCE Computers—only to exit FORCE's main business, VME, two years later. The second is championing PowerPC for embedded applications for over a decade and migrating to Intel platforms across its business lines.

VDC also noted two immediate and significant challenges in its core business of mobile solutions:

• It's mobile device business accounts for 66 percent of sales in 2006. Sales are uneven and profits elusive. Over the past few years, the company's share, momentum and margin have been persistently uneven.

• Motorola invested billions acquiring Symbol Technologies a year ago. The deal expanded Motorola's footprint in mobile solutions for businesses on a number of dimensions and also brought new challenges for Motorola.

Stronger portfolio
With the deal, Emerson is betting big that a new set of standards in the embedded and high-availability computing markets—ATCA, MicroTCA and AMC, collectively called xTCA—will grow rapidly and profitably.

Last year, Emerson acquired Rs. 4,044.83 ($100 million) worth of embedded computer boards when it bought Artesyn. Artesyn became the centerpiece of Emerson Network Power's Embedded Computing Business, with Rs. 4,044.83 ($100 million) in revenues, and an attractive xTCA product development pipeline. MECC brings a complimentary Rs. 21,033.11 ($520 million) in revenues to that business—including more business and opportunity in xTCA via its top share position in xTCA globally.

The businesses are largely complementary, said VDC.

MECC is largely a systems business, with equal emphasis placed on hardware components, systems integration and software to enable the next generation of platform, shelf and system management. Emerson Network Power Embedded Computing is largely a hardware component business, with the lion's share of revenue being derived from board-level products.

MECC touts also an enviable pipeline of customers and partners in communications and defense, with budding positions in medical and instrumentation. Emerson Network Power's business is largely automation and infrastructure. Emerson's vision of converged networks is all-encompassing—while most of its peers talk convergence, they cite voice, data, video, multimedia. Emerson, eyes that convergence as a fact of every industry reliant on power beginning with, but not limited to, communications applications.

Combined, Artesyn and MECC bring Emerson Network Power to a position of prominence in the embedded computing business overall, and specifically in the emerging market for xTCA solutions, noted VDC.

The xTCA sector, dubbed to be a conservative market, will grow to become a multibillion market by 2010, VDC forecasted.




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