Author Archives: Mary Samuelson

Who Should We Believe?

There are a huge number of contradictory predictions out there right now concerning the stock market, the price of oil, the world economy, the internet of things, and just about everything else you can imagine. If you look hard enough, you could probably find conflicting predictions on whether Little Johnny will jump over the fence to chase the cow.

Since the control automation industry is so closely linked with oil production, let’s take a look at oil price predictions. Chris DeHaemer, the founder of Crisis & Opportunity and Managing Director of Wealth Daily posted on April 7 that he expects oil to hit $87 by Christmas.  He bases this prediction on past history, which shows that when the market for a specific industry’s stock crashes at the beginning of the year, it typically rebounds and prospers for the remainder of the year.  He cites the crash of 2003 and the banking industry crash of 2009 as examples.

Is he correct? Maybe in the short term. Brent Crude has shown a fairly steady increase from its January low of $28.55 to today’s price of $44.73, and the outlook for additional increase is favorable based on Saudi Arabia and Russia agreeing to freeze production, but it is still down over $70 a barrel from its 2014 high.  Will the increase continue in the long term? There are other factors to be considered.

Some analysts are touting that petroleum/crude oil is being replaced by lithium (aka metal oil) and that the demand for oil will begin to decrease in the near future as more and more companies move toward electric power using lithium ion batteries, which Tesla has supposedly now figured out a way to enhance and produce cheaply.  For example, on April 12, Laurence Knight, a business reporter for BBC News Magazine wrote that, “Lithium, a key ingredient in lightweight batteries, is already powering the modern world, and could be key to getting the world to reduce its reliance on fossil fuels.”

We are already seeing improvement in both the price and range of electric cars.  For example, the 2017 Chevrolet Bolt EV is priced at around $30k and has a range of over 200 miles.  Tesla announced on April 9 that it has already accepted 350,000 orders for its Model 3, a sleek vehicle priced at $35k, which also has a range of over 200 miles, and which won’t even be released for another two years. Because burning fossil fuels is detrimental to the ecosystem, and there is a push on several fronts to reduce their use, the production of a vehicle with extended range and an affordable price could well be attractive to a growing number of consumers, which would drive oil demand down considerably.

Who’s right?  I think I’d rather bet on whether or not little Johnny will jump the fence.

The Current Industry Situation-What’s causing the increase in stock prices?

There has been a 7% increase in the Health Watch Index for the industrial automation and process control industry over the past month, but what is leading to that increase? After much investigation it appears that the increase is directly related to the increase (15%) in crude oil prices that occurred between Feb 25 and March 7. It is our belief that the increase crude oil prices had a halo effect on the industry, bringing with it the hope that oil prices will continue to increase, allowing many of the mining and other oil related endeavors that are currently shut down to reopen and/or expand, thus improving the revenue stream for the products our industry produces. It is our hope, but not our belief, that this will indeed be the case. The industry wide increase and the issues surrounding it are discussed in the March issue of the INSIDER magazine.

Shouldn’t We Be A Bit More Concerned? How Do You Feel About The Internet Of Things?

On A Personal Level

The IoT (Internet of Things) and the use of Cloud storage is all the rage. Products which utilize the IoT, like Google’s Nest devices, learn from your actions and make changes accordingly. With the Nest thermostat, you simply adjust it a few times for the temperature you prefer, and the device “learns”and takes over from there. Nest cameras allow you to view the interior or exterior of your home while you are away. Other Nest products provide monitoring of other home related issues such as CO levels. But what are products such as these actually learning and moreover, what are they storing and sharing?

Let’s look at the thermostat first. It learns when you turn your heat/AC up or down, it learns the temperatures you prefer, and it stores that data in the Cloud. While there is no implied consent to share this data when the thermostat is purchased, imagine how valuable that information could be. The Nest thermostat collects and stores information on whether or not it is being installed in a home or business, the location address and zip code, when you come and go, and occupancy and movement within a room. Imagine if that information were available to a tech savvy thief. They would no longer have to case your home or business before a robbery. The thermostat does that for them.

Want to add a Nest cam? Well! That makes life even easier for a would-be home-invasion professional to meet his daily quota. The Nest cam links to other Nest devices Via Nest Works and stores streaming video, as well as a location identifier. You or others whom you give permission, (e.g. a developer with Works) can access the following information at will:

  • View camera or mic status
  • View or change streaming status (turn camera streaming on/off)
  • Device name
  • Where identifier
  • Last online status change
  • Subscription status (enrolled/not enrolled)
  • Links to live camera feed in the Nest app (iOS, Android) or on the web
  • Content related to the last event that triggered a notification, such as sound or motion detected, event start stop times, and links to image and gif files

According to additional information provided on, if you have multiple Nest Products interfacing with one another, the products will share information with each other. Sharing can occur locally among connected devices (both Nest and third-party devices), between Nest Products and your mobile devices or applications, or among Nest’s servers. So, if the system is hacked, not only does a tech savvy thief know where you live and when you’re home, there is the potential for them to peruse your home via video cam to locate and ID the possessions in your home that they would like to steal.

Nest freely admits that they will share your information (with your permission) when you choose to connect to third-party products and services through Works. They will also share it with partners, such as insurance companies. Following the “with your permission” statement, however, comes an additional statement that causes me concern. “We may also receive information from our partners and other sources and combine that with the information in your Nest account. For example, in order to offer rewards programs, we might receive information (such as which of our partners offers services where you live) to determine eligibility and efficacy of our programs.” The implication here is that permission is not needed to share information in this instance.

So, now Nest has stored (among other things) your address, your occupancy information, your Wi-Fi network information, your email address, and video of your home, on the Cloud. Nest shares your information (with your consent) if you sign up for programs offered by Nest partners which include energy and insurance companies, as well as with vendors, service providers and technicians who assist with Nest processing and storage. With all that sharing, how secure is the information? Even putting aside the possibility of Cloud hacking, the replication and transmission of the types of personal information Nest collects and stores provide a plethora of chances for information to be purposely or accidentally misused.

Is the previously outlined home theft scenario a potential reality or just a remote possibility? The threat is very real. Otherwise, Nest would have no need to post its “responsible disclosure policy.” The policy asks security researchers who believe they have identified a security vulnerability to contact Nest immediately, and give the company a reasonable amount of time to respond to the information before making the information public. It also asks that the person who discovers the vulnerability not access or modify user data without permission of the Nest customer. If the researcher acts in good faith and does not degrade the performance of Nest services, Nest promises not to take legal action against the person. Now I ask you, how many hackers or cyber thieves are going to notify Google Nest that they have found a way to hack the system? Sure, Google provides a reward for submitting this type of information, but how does that reward compare in value to the ability to case and burgle a multitude of homes with so little effort?

The Bigger (and Scarier) Concern                                                    

While home safety is important, there are larger concerns associated with the IoT. Have you ever heard of Stuxnet? It was the world’s first digital weapon, developed to cause centrifuges to malfunction, delaying the production of enriched uranium (and nuclear weapons) in Iran. Over a five month period it was responsible for the loss of almost a thousand centrifuges, significantly reducing the enriched uranium production at the plant. If you’re interested, the following url ( will take you to a report about Stuxnet and its results. The simple explanation is that using USB hard drives and targeting computers at five outside companies that were linked to the uranium plant, Stuxnet insinuated itself into the plant’s computers and wreaked havoc until it was finally discovered. In this instance, the US and Israel worked together to target Iran. What happens if the target is us?

Is targeting the US a possibility? According to The Global Risks Report 2016, 11th Edition, released in February of this year, cyber attacks are the greatest risk North America faces this year, followed by data theft. The report notes that everything from personal finance to national infrastructure (anything managed via some form of computer network) is vulnerable to attack, and the IoT is making those attacks easier than ever to initiate because of the linkages it promotes. The report points out that as The IoT continues to grow it brings with it some definite benefits, but it also opens the door for issues such as “economic espionage, cybercrime, and even state-sponsored exploits – that are increasingly perpetrated against businesses.”

Not only is cyber attack a possibility, it is a harsh and expensive reality, costing US businesses billions of dollars. In the past year alone we have heard about successful cyber attacks against the OEM, which is responsible, for among other things, maintaining files containing personal information on US government employees who applied for top-secret security clearances (it appears that these were the files targeted), Sony, Anthem and Premera Blue Cross, US natural gas systems, and several other large US corporations and government offices. Fingers have been pointed at both China and North Korea, but one of the issues with cyber attack is that it can be extremely difficult, if not impossible to prove who is responsible for the attack.

One of the latest Cyber attacks to come to light is an attack on a New York Dam by hackers in Iran. The White House is expected to release information concerning this attack in the next few days. According to a March 10, 2016 article by John Bonazzo, a writer for the Observer, the hack of the Bowman Avenue dam occurred in 2013, while the U.S. and Iran were negotiating the recent nuclear deal. The malicious software used, only provided access to back office systems and not the operational services of the dam. We lucked out.

Bonazzo talked with Leo Taddeo, former Special Agent in Charge of the Special Ops/cyber Division of the FBI in NY and current CSO of Cryptzone, concerning the attack. Taddeo told the Observer that “the continuing automation of infrastructure by the Internet of Things was cause for concern in this case” because “the more things are interconnected, the more chances an attacker has to get access to things we care about, including the equipment and infrastructure that keeps us safe,” He continued by saying, “Even though this attack wasn’t successful, it shows we need to be vigilant.”

Smart sensors already exist that among other things, control industrial plant systems and link to each other and to a central hub to provide information that allows companies to monitor and identify potential issues with manufacturing equipment, correcting problems before shut-down is necessary. Several companies are now in the process of developing and introducing products like GE’s Predix, a cloud based industrial internet platform that takes the information these smart sensors and other similar products produce, aggregates it, and stores it via the Cloud. According to the product brief, Predix “is machine-centric, supports heterogeneous data acquisition, storage, management, integration, and access, provides advanced predictive analytics, guides personnel with intuitive user experience, and is delivered securely? [emphasis mine] in the cloud.” It basically takes Big Data and allows it to be used in a meaningful way.


But what happens when the system is hacked? I can’t help but believe that if anyone understands the dangers associated with our current path toward total integration of anything and everything on the IoT, it would be Leo Taddeo, and he is definitely concerned. Shouldn’t we be, as well?

I would like to hear your opinions as well as concerns and rebuttals against the inherent dangers presented by the IoT.

The Bitter and the Sweet – Siemens: 2,500 Jobs Lost, 25,000 Additional Jobs Pledged

We predicted almost a year ago that if the slump in the oil and gas industry continued, restructuring, changing focus, and diversification would be necessary to regain/maintain the fiscal health of our industry. Oil and gas shows no indication of a rebound any time soon, and Siemens is adapting and reorganizing; pulling resources away from the oil and gas and metals and mining sectors to focus instead on becoming a “digital industrial company.”


The Bitter

With this transition, Siemens announced in a press release dated March 9 that twenty-five hundred industrial division jobs will be slashed, approximately two thousand of which are in Germany (primarily Bavaria), but five hundred additional positions worldwide will be cut as well. “Plunging demand in raw materials markets has led to a significant intensification of competition, particularly in Asia,” said Juergen Brandes, CEO of Siemens’ Process Industries and Drives Division. “To guarantee our competitiveness, we’ve got to adapt to these conditions.”


The Sweet

Siemens pledged to make 25,000 new hires worldwide “in each of the coming years” for its other divisions as it dedicates itself to becoming a digital industrial company. The press release indicates that with an increase of more than €1 billion in investment in research and development, productivity and global sales, Siemens will keep the number of new hires at a continuously high level in the years ahead. In particular, the company expects to add at least 25,000 new employees worldwide each year for the next several years – around 3,000 of them in Germany.

This scenario reminds me of a scene in a Star Trek movie, The Wrath of Khan, where Spock gives his life to save the Enterprise. As he dies from radiation poisoning after saving the ship, he comments, “The need of the many outweighs the need of the few.” That comment is certainly apt here. Siemens employs over 300,000 world-wide. To keep the company healthy, some sacrifices are inevitable. Just as Spock lost his life to ensure that the Enterprise survived, in the short term some Siemens employees will loose their jobs to ensure that Siemens survives. We must accept that this is necessary for our industry as a whole to “ Live long and prosper!”

Danaher Gets Kudos From Noted CFA

While digging through current industry information in preparation for The Industrial Automation and Process Control INSIDER HealthWatch, February edition, I ran across an article on Danaher that closely mirrors our own assessment of the company. I have included the URL for the article below, if you would like to review it in total. In a nutshell, Stephen Simpson, CFA, points out that while some investors might steer clear of Danaher because of recent decisions like the high multiples Danaher paid for Nobel Biocare and Pall, because the company is still, “a strong competitor with ample non-cyclical exposure, it’s not the worst place to wait out this industrial recession.”

Seeking Alpha: Danaher Remaking Itself Once Again

Original Article Posted by Stephen Simpson, CFA, February 16, 2016

What IS All This Talk About Emotion?

Over the past couple of months I have seen several posts and articles that have designated or referred to 2016 as “The Year of Emotion.” As a marketing researcher with over 20 years experience in customer service, customer experience, and brand development and maintenance, I am astounded that emotion is just now receiving the focus it has deserved since marketing began. Why is emotion important? There are several answers out there, but to me, none seems complete. Here is why.

On December 15 of last year, Bruce Tempkin, whom I admire tremendously and follow on social media consistently, coined the phrase and declared 2016 as “The Year of Emotion”. He stated one of the reasons that emotion is important is that, “research shows that emotion is the component of customer experience that has the largest impact on loyalty” and continues with, “but it is also the area where companies are least adept and often seemingly ignore.” He certainly won’t get any argument from me there. I’ve been preaching that for years.

He also noted that “over the past few years, neuroscience and behavioral science research has begun to fuel new techniques for affecting human emotions.” I began that work many years ago as a graduate student, conducting studies on “interestingness” and its effect on memory, using the work of D. Berlyne and S. Hidi as the basis for my research. Based on my research findings, I realized then that emotion has a strong impact on what we remember and that interestingness is simply an umbrella term for ‘emotion evoking.’ Taking that one step further, I learned that if a company can tap into emotion strongly enough, the brand becomes the product; for example, Klennex rather than tissue, or in the South, Coke, which is used in many areas as synonymous for any cold drink. When that occurs, the brand takes on a persona of its own; it develops its own personality.

Now let’s move forward a bit. What is loyalty? It is an emotion. But what must a company do to provoke and promote it? The answer lies in a quantitative research finding that I discovered years ago. When a customer has an issue and that issue is resolved successfully, the person is more likely to remain a loyal customer, even over and above those who never experienced an issue. Why? Because of EMOTION, darn it! It’s all about delighting a customer and evoking EMOTION! That emotion gets linked to the brand and that is what causes a brand to become more than just the place where you make a deposit or buy your groceries. You LIKE the brand, just as you like certain people, because of its ‘personality.’ Just as we are loyal to those we care about, we are loyal to the brands we care about. Why? Because caring is an emotion.

So, knowing this, how do we use it? There are lots of methods, both qualitative and quantitative, out there for measuring and/or reporting on loyalty, and some that purport to measure emotion. I have yet to see one, however, that can pinpoint emotion to the degree needed to accurately develop concise messaging, branding, or customer service/experience emotions to the degree needed to truly be successful. The key to doing this is in combining the two research methods.

Using personalized interviews, in the past I have used qualitative research to uncover emotions and desires associated with a specific industry, brand or message, then developed quantitative testing based on those findings to pinpoint needed staff behavioral changes, messaging options, segments, etc. This methodology has allowed me great success in understanding customers’ needs, both emotional and rational, as well as who the primary target audience would be for specific actions and messages. Because I have spent so many years doing this work, I find it quite interesting that there is suddenly all this fuss about emotion. I guess I should have spent less time designing studies and digging into data sets, and spent more time seeing what others were up to.

So, to answer the question, “Why is emotion important?” It is important because emotion is in the Mind of the Customer™. It forms links in the mind to a specific brand or company and engenders loyalty, which in turn promotes larger share of wallet, referrals, higher customer experience ratings, and both organic and inorganic growth. It is important because of words like ‘caring, personality, and loyalty. It is important because from our earliest years, it is what drives us all.

Jumping on the HollySys Bandwagon

Others are also beginning to recognize HollySys’ smart business tactics. On February 17, Stephen Simpson, CFA, noted in an article for Seeking Alpha that HollySys is executing well; posting double-digit revenue growth due to rail sales. Simpson also cautions, however, that HollySys cannot continue to low-ball rail bids if it wants to maintain fiscal stability. In this economy a company has to do what a company has to do, and from the numbers HollySys is posting, it appears to be doing what it needs to do very well.

You Can’t Blame A Guy For Trying

Last year around this time, we gave ABB a bit of a hard time for posting a very positive title on a pretty dismal annual return. Revenues for our industry in general have been so flat this year, that we just didn’t have the heart to give them grief again. We do however, want to summarize their return and commend them on their “glass half full” philosophy and some changes they are making to overcome the slump caused by the current economy.

To review, earlier this month ABB posted the following headline for its 2015 results:

ABB: increased profitability in changing markets

In summary, operational revenues are up (less than 1%), but revenues are down 11%, and orders are down 12% in U.S. dollars, compared to FY2014. Cash flow is also up, in part due to a 3% overall reduction in staffing (approximately 4,500 positions). Not exactly the results the headline would lead us to expect.

The exciting news is that ABB is moving forward with some exciting new offerings in areas not impacted by oil and gas; areas that will potentially drive profitable growth. For example, at the United Nations Conference on Climate Change (COP21), ABB introduced a fast charging robot for public buses to enable sustainable, emission free public transportation. This solution removes the longstanding barrier typically associated with these systems, i.e., long charging times for short driving ranges, by incorporating an automated rooftop connection and a typical charge time of 4-6 minutes. The system is easily integrated into existing bus lines, and when combined with the new electric vehicle (EV) fast-charging services platform that ABB developed in partnership with Microsoft, it provides a sustainable transport solution and advanced management features. In addition, the ABB/Microsoft collaboration “will also take advantage of machine learning and predictive analytic capabilities to drive future innovations.”

Plans for profitability in FY 2016 are multifaceted. Part of ABB’s profitability initiative includes a “shift in the company’s center of gravity” which will realign its operating sectors into four groups, Power Grids, Electrification Products, Discrete Automation and Motion and Process Automation. There are also more job cuts on the horizon. ABB makes note of its white-collar productivity program which is “aimed at making the company leaner, faster and more customer focused. This program is focused on the three structural pillars: lean business functions, global shared services and market-oriented complexity reduction.”

We do offer one word of caution. It is difficult to save one’s way into a profit, and while trimming costs through payroll reduction and other operational efficiencies will increase cash flow, the only real way to increase profits in our industry is to provide fiscally healthy customers with innovative products and services that will meet their needs and help them perform more efficiently. ABB is definitely moving in that direction.

By George I Think They’ve Got It!

In the November 2015 edition of the Insider Magazine, we commented that Hollysys appeared to be on the right track to succeed in the current hailstorm that is today’s economy. Here is what we wrote:
Hollysys is, however a diversified player with a strong survival instinct. They are changing their focus, at least temporarily, away from mechanical and electrical solutions and more toward rail transport, which is a lucrative market for them.
The Industrial Automation segment, which makes up 40% of Hollysys’ revenue base, is highlighted for changes as well. In the quarterly report published November 12, [2015] the company relays the following information concerning its industrial automation segment:
In industrial automation business, during this quarter, we continuously insisted in executing our strategies to maintain the gross margin by penetrating the high-end industrial automation market and providing more highly customized solutions such as power, chemical, food & beverage, pharmaceutical and environmental protection related industries, while offering diversified value software packages to the end users for saving the cost and improving their efficiency.
Although Hollysys Automation shares have decreased 15% since the beginning of the year, they expect their full year revenue range to hit between $565 and $600 million. With targeted markets that steer safely away from the oil and gas industry, they might just make it.

And they did. In their Q2 2016 Earnings Call Transcript released today, it is apparent that Hollysys is sticking with the plan they put in place last year, and the plan is paying off. Here is the result of their strategy:

Comparing to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31, 2015 increased from $130.3 million to $152.8 million, representing an increase of 17.3%. Broken down by the revenue types, integrated contracts revenue increased by 12.7% to $134.2 million, product sales revenue increased by 49.4% to $15.4 million, and services revenue increased by 229.3% to $3.2 million.

By changing their offering portfolio and refocusing on industries that are not so heavily influenced by oil and gas, Hollysys is recovering its ‘pre-oil bust’ health. There’s a lesson to be learned here for those savvy enough to learn it. Congratulations Hollysys on your flexibility, your success, and your latest financial report!