Will record instrumentation industry profits spawn new technologies?

08/17/2006


Instrumentation suppliers’ revenues and operating incomes increased at a record pace in 2005, although total R&D expenses declined in 2005 and over the last five years, according to a report released by the Measurement, Control & Automation Association (MCAA). In a presentation to the MCAA membership, Edward J. Curry, partner for consultants Curry & Hurd, revealed that public companies in their industry saw 2005 revenue increase 11.7% over 2004 and operating income increase 20.3% over the same time period. This was the best year-over-year performance MCAA has seen since they began keeping records.

R&D spending was harder to characterize industry-wide. Large companies that tend to grow by acquisition cut their R&D budgets the most. Conversely, two of the three smaller industry groups increased R&D every year and, in 2005, by 10-15%. This 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.”

Tim Studt, editor in chief of R&D Magazine, characterizes 2006 as a difficult year in that spending is down in private and government sponsored efforts. As spending follows its cycles, usually one is up when the other is down, but in 2006 both trended negative.

The 2006 Operating Benchmark Report covers 2001-2005 for 36 member companies in the measurement control and automation industry. Each year, the association collects information on the operating performance of its members: North American manufacturers and distributors of instrumentation, systems, and software used in industrial process control and factory automation.

Going forward, the report sees continuation of present trends, including growth by acquisition and profit improvements in larger companies along side continued recovery by smaller players. Development efforts and investments can influence future product offerings.

For more on this MCAA study from Control Engineering , click here .

—Control Engineering Daily News Desk

Peter Welander , process industries editor





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