Rockwell comes in from the cold (war).

Author:Donlon, J.P.
Position:Interview with Rockwell International CEO Don Beall - Cover Story - Interview

Long associated with Apollo missions and B-1 bombers, Rockwell has put away its lab coat in favor of electronics, automation systems, and vehicle parts. With $4 billion In cash In the corporate coffers, CEO Don Beall doesn't rule out an acquisition or two to achieve his long-term goal of remaking the company.

Don Beall, 57, wants you to know that Rockwell International isn't a space and defense company anymore. Perhaps best known for its link with the Apollo missions, the space shuttle, and the B-1B bomber, the Seal Beach, CA-based company isn't playing in that sandbox anymore. The sale last August of its space and defense businesses - valued at $3.2 billion - to Boeing marks the culmination of a strategy Beall introduced when he became CEO in 1988. During the late 1980s, while other aerospace and defense companies such as Lockheed, Martin Marietta, and Loral consolidated or diversified, Rockwell held tight. The company used its strong cash flows to acquire and develop four diverse commercial business divisions centering on electronice and telecommunications. In 1985, Rockwell picked-up Allen-Bradley Co., a Milwaukee factory automation company, to which it added Sprecher and Schuh (1993) and Reliance Electric (1995) to reinforce its competencies in control systems and power products.

The combination now comprises a formidable $4 billion business. Rockwell's $1 billion-plus semiconductor systems division dominates world markets for facsimiles and data modems and now aims to grab a piece of international wireless communications and PC multimedia markets. The company holds a S3 billion automotive and light-vehicle systems business, for which analysts report strong growth potential through the end of the decade, although some on Wall Street speculate it may ultimately be sold off.

The new Rockwell, with fiscal 1996 revenues of $10.4 billion and net income of $676 million, more closely resembles companies such as General Electric, ABB, Allied-Signal, Emerson Electric, Eaton, and Hewlett-Packard. Beall intends to play in the major leagues of technology-driven conglomerates. He also hopes investors reward the company with a price-earnings multiple in keeping with its new peer group.

Beall's challenge is remaking the new Rockwell into a growth company. Now that Rockwell is debt-free, he anticipates increasing returns on equity from its present 14 percent to at least 20 percent and reaching an average internal revenue growth of 6 percent to 8 percent. Total turnover for 2000 is targeted at $18 billion. But can he deliver? After all, the new Rockwell is seven times smaller than GE and up against - by Beall's own reckoning - "cutthroat global competition of a level never experienced before." Still, the Boeing deal does provide $4 billion in what Beall describes as "financial firepower" to expand.

During his rise to the top, Beall earned a reputation for focusing on Rockwell's technical and operations side. He also is credited with building its industrial automation business with the help of Don Davis, president and COO. Beall, a lean, square-jawed California-born metallurgical engineer, id described by associates as being tough but fair and processing an acute memory for detail. A former Ford executive remembers Beall as having a quick mind - "not what you expect from a bean counter" - when he headed the budget department of what became Ford Aerospace. He left Ford to join Rockwell in 1968 and soon became an executive VP of its electronics group, then president of the company's Collins Radio Co. in 1974, and, in 1976, corporate VP. Beall served as president and COO from 1979 to 1988 and was heir apparent to...

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