Just at the time that the Swiss engineering firm ABB was rebuffing investor calls to split up its business, Microsoft announced Tuesday that it was expanding its strategic partnership with the company.
With a slew of headlines from the multinational corporation which operates in robotics, and power and automation technologies, it was a busy day in Zurich for ABB. The client of ABB would be able to access Microsoft’s cloud technology after the strategic partnership with the U.S. tech giant.
ABB has lofty aims to “develop one of the world’s largest industrial cloud platforms” with the strategic partnership with Microsoft and further expand its client base which now boats of 70 million connected devices installed and more than 70,000 digital control systems.
“Together with ABB, we are providing industrial customers with the digital technology and cloud platform to empower every person, team and business system within an organization to glean new insights and drive faster decision making to seize new growth and opportunities,” said Satya Nadella, CEO of Microsoft, in a press release on Tuesday morning.
But that was not the end of the announcements. ABB said it would launch a new share buyback program and step up cost savings. The company has also assured that despite grumblings from activist investors, it would keep its power grids division.
Since the board decided it was the best option to create value for shareholders, the company would keep the unit, Ulrich Spiesshofer, CEO of ABB, told CNBC. Spiesshofer was quick to highlight that the power grid unit was still a profit leader in the industry even as there are accusations that center on the low profitability of the unit.
“We have listened to all the expressed views, very, very carefully. We have listened to our customers. We have listened to the market. We have worked out a great transformation program to create a substantial value creation story for our shareholders going forward,” he said.
Regret at ABB’s decision not separate and reduce the complexity of the conglomerate was expressed on Tuesday by International investment firm Cevian Capital, which has 10 billion euros ($11.2 billion) in assets under management.
“ABB is a collection of top-quality businesses whose performance has been hindered for many years by the company’s conglomerate structure. The potential is 35 Swiss francs ($35.7) per share in today’s terms” Lars Förberg, a managing partner and co-founder of Cevian Capital, said in a statement.
“The board has decided to keep the conglomerate structure. We think this is an unfortunate decision. The board and management team will be held accountable for realizing 35 Swiss francs. The time horizon is now. ABB has under delivered during a long time period. Therefore, we are already in ‘the long term’,” he added.
(Adapted from CNBC)