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Emerson Electric quietly ups its profit

ST. LOUIS - David Farr isn't the only chief executive officer who gets giddy when he talks about his company's venture into new wireless products.

ST. LOUIS - David Farr isn't the only chief executive officer who gets giddy when he talks about his company's venture into new wireless products.

But Emerson Electric Co. is not selling the kind of wireless technology that lets you download songs while sipping a latte. It is selling the kind of wireless products that keep oil refineries from exploding and killing hundreds of people.

"In this industry - you make a mistake and things do go boom," Farr said in a recent interview.

Emerson's foray - wireless sensors that monitor liquid levels and pressure in the vast maze of pipes that run through oil refineries - symbolizes the company's business strategy. It is profitable, it is growing, and virtually no one outside a specific niche industry has ever heard of it.

With $22.6 billion in annual revenue and a rank of 115th on the Fortune 500 list last year, St. Louis-based Emerson has a global footprint of manufacturing and design facilities in more than 150 countries. But the company operates largely behind the scenes, making almost nothing that is sold directly to consumers.

While it may not have a flashy public image, Emerson's low-key strategy is getting a lot of notice on Wall Street. The company's stock is trading at an all-time high after Emerson reported a strong profit this fall and forecast profit growth for next year.

Emerson can be difficult for outsiders to analyze - it seems more like a colony of small companies than a single corporation. For decades, Emerson has turned a profit by purchasing smaller businesses and boosting their profit potential with new investment and management.

The result is a company that sells diverse and seemingly unrelated products, including ventilation systems, wireless sensors and industrial motors.

Farr insisted that Emerson was more than just a collection of its parts. He said he chose smaller firms to buy that fit into an overall strategic goal, one he developed in 2000 when he became CEO.

Farr said his guiding strategy had been investing overseas, but not the way most often associated with U.S. manufacturers. Emerson did not shift its factories to cheaper labor markets in developing countries.

Instead, Emerson started manufacturing and selling products that developing countries would need as they started developing modern infrastructure such as oil refineries, roads and office buildings. The decision has boosted overseas sales from 10 percent of Emerson's annual revenue to 52 percent, Farr said.

"It seems to me that every 10 or 15 years you have the opportunity to reset the fundamentals of the company," Farr said.

Emerson's development of wireless sensors reflects the company's overall strategy to develop new products, Farr said.

Then Emerson bought smaller companies selling the products, poured in investment for research, and developed its own line of wireless sensors.

Selling the sensors was not easy - refineries already had level and pressure sensors connected by a network of data cables. Retrofitting them with wireless versions would not be cheap. But Farr said the technology saved money in the long run, cutting down on the cost of cables, and in some cases the cost of paying someone to check sensors manually.

ABI Research senior analyst Sam Lucero supports that claim. He said some companies could install three times as many sensor nodes using wireless technology because of the cost difference.

The long-term advantage of wireless systems, Lucero said, is "more monitoring, less cost, more data and getting that data in real time."

The oil, refining and chemical industries, which were once wary of the relatively new technology, are now driving its growth because of a renewed focus on safety and energy efficiency.