Benchmarks: industry gains R&D spending

Measurement, Control & Automation Association (MCAA) reports that 2005 “was a good year for everyone,” after collecting information on the operating performance of its 36 member companies—North American manufacturers and distributors of instrumentation, systems and software used in industrial process control and factory automation.

09/01/2006


Measurement, Control & Automation Association (MCAA) reports that 2005 “was a good year for everyone,” after collecting information on the operating performance of its 36 member companies—North American manufacturers and distributors of instrumentation, systems and software used in industrial process control and factory automation. As reported to the MCAA membership in May by Edward J. Curry, partner in the consulting firm of Curry & Hurd, the association continues to see large companies perform differently than smaller ones.

Among report highlights, MCAA reported the best one-year growth in its records: “In reviewing the performance of public companies from publicly available data, the report showed '05 revenues increased 11.7% over '04 revenues. 2005 operating income increased 20.3% over '04 operating income. And '05 operating income as a percent of revenues increased to 11.6% from 10.7% in '04…. This was the best year-over-year performance that MCAA has seen.”

However, R&D expense decreased by 1.8 points over the five years, MCAA noted. While the larger public companies were reducing R&D over the five year period, two of the three smaller groups increased research efforts almost every year and, in 2005, by 10-15%. This increase bucks a downward trend in U.S. industry overall. Curry puts the situation in perspective saying, “bigger companies can increase their product offerings by internal development or acquisition and they do both. When an acquisition generates operating leverage, they get the best of both worlds: increased revenue with decreased R&D as a percentage of revenues. Smaller companies must incur the increased R&D expenditures in advance of the increased revenues, thereby increasing their R&D percentage.”

The report sees continuation of present trends, including growth by acquisition and profit improvements in larger companies along side continued recovery by smaller players. www.measure.org





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