Tuesday, December 20, 2005
Johnson Controls plus York
My last post lists a couple of numbers and statements regarding these 2 companies before the aquisition. From there, we can tell the margin in conventional HVAC market is much lower than building automation and controls market. Even the later one is getting lower and lower every year. But, despite all of these, as publicly held companies, JCI and York have to grow, to make more money. And that's why they went together.
My first impression of this acquisition is like Logitech (a computer peripheral device manufacturer), instead of HP, buying Compaq (a former giant PC manufacturer). But now, I more and more feel this like the merge between AOL and Time Warner in HVAC industry. But ..., I did not mean that this acquisition will repeat the same bad consequence. JCI's current business is much more solid and robust than that of AOL at 2001.
In their presentation to investors (Aug. 25), JCI defined a 200B Building Enviroments market, in which, HVAC controls is 12% of the pie and mechanical equipment is 17%. In fact, it is just a combination of all the neighbour markets that new JCI participates. And personally, I don't see it as a new market unless there are unique products for it, New gargets are somthing I really want to see from this kind of acquisition, as I mentioned in Carrier+AL case. However, both JCI and York are companies over 100 years and in stable markets, technology is often not the priority in business decisions. They are not Google. The math here is 1+1=2.
Where I found 1+1>2 is the oportunities JCI and York penetrate each other's existing customers to sell new controls/mechanical equipment, and more importantly, new combined service. Yes, service is likely the last paradise in this highly competed market. Everybody knows this but how to cook it well is interesting and more difficult. Good luck.
Over all, I am exited to see this combination and looking forward to see more fresh changes in HVAC world.
My first impression of this acquisition is like Logitech (a computer peripheral device manufacturer), instead of HP, buying Compaq (a former giant PC manufacturer). But now, I more and more feel this like the merge between AOL and Time Warner in HVAC industry. But ..., I did not mean that this acquisition will repeat the same bad consequence. JCI's current business is much more solid and robust than that of AOL at 2001.
In their presentation to investors (Aug. 25), JCI defined a 200B Building Enviroments market, in which, HVAC controls is 12% of the pie and mechanical equipment is 17%. In fact, it is just a combination of all the neighbour markets that new JCI participates. And personally, I don't see it as a new market unless there are unique products for it, New gargets are somthing I really want to see from this kind of acquisition, as I mentioned in Carrier+AL case. However, both JCI and York are companies over 100 years and in stable markets, technology is often not the priority in business decisions. They are not Google. The math here is 1+1=2.
Where I found 1+1>2 is the oportunities JCI and York penetrate each other's existing customers to sell new controls/mechanical equipment, and more importantly, new combined service. Yes, service is likely the last paradise in this highly competed market. Everybody knows this but how to cook it well is interesting and more difficult. Good luck.
Over all, I am exited to see this combination and looking forward to see more fresh changes in HVAC world.
# posted by comfortpoint @ 12:55 PM 
