GE embedded computing business bought by Veritas Capital
BlogSeptember 23, 2015
Rumors were flying last week, but the official announcement that GE was selling its embedded computing business – which falls under GE Energy Management’s Intelligent Platforms subdivision – to venture capital firm Veritas Capital in New York City didn't hit the wires till yesterday.
The transaction is expected to close in the fourth quarter of this year, according to the Veritas release. Upon closing, the business – which has about 700 employees worldwide – will be renamed and operate as an independent company at its current headquarters in Huntsville. The current General Manager of GE Intelligent Platforms, Bernie Anger, will lead the new company for Veritas. GE embedded has five facilities globally, including three in North America and two in Europe. Included in Europe would be the Towcester, United Kingdom location, formerly Radstone Technology. GE officials declined to disclose financial terms of the transaction.
Market perspective
It’s been a while since a big acquisition was made in the military embedded computing space. GE’s embedded business – formerly part of GE Fanuc and rebranded in 2007 as GE Intelligent Platforms – was formed through aggressive acquisition, with the company gobbling up VMIC in 2001, Ramix in 2004. Then in 2006 they swept up Radstone, SBS Technologies, and Condor Engineering. At the time they seemed to be in an acquisition race for military embedded computing firms with Curtiss-Wright Defense Solutions and Kontron.
We in the media used to joke that the three companies were using industry trade publications as a shopping list, since they were buying up all our advertisers.
Now the GE embedded group has been snatched up, but I’m not really surprised. Aside from the rumors I heard last week in London at the Defense and Security Equipment International (DSEI) show, there has been scuttlebutt for years that the group never really fit into GE and was going to be grabbed by a defense prime, a competitor like Kontron, or a venture capital (VC) firm, which ended up being the real deal.
GE embedded would also not be the first military embedded computing company to get swept up by a VC or private equity firm. Emerson sold their Embedded Computing and Power business in Carlsbad, California to Platinum Equity in Los Angeles, California in 2013, later renaming it Artesyn.
“Veritas is a holding company, which means they typically buy companies, clean them up, then sell them for a profit,” says Ray Alderman, Chairman of the Board for the VITA Standards Organization, of which GE Intelligent Platforms is a member. “Therefore they will likely clean up GE, get it more efficient, and then keep it as cash cow or put lipstick on it and sell it. Artesyn operates this way now under their holding company,” he continues. “Pentair does same thing with Schroff. Both have been cleaned up to be cash cows.
“It will take about 18 months for Veritas to figure it out – four months to figure what they bought, six months to clean it up, six months to get it working efficiently, and then six months to sell it if they wish,” he adds.
“I compare this GE situation to what happened with the Motorola Computer Group years ago,” he adds. “Motorola never seemed to see where it fit and shuffled it around to different divisions, finally selling it off. GE is now doing the same thing with their embedded military/aerospace business.”
Artesyn, when it was Emerson, bought the Motorola Computing Group in 2008.
Industrial over military
While GE has a military footprint with GE Aviation, they are more focused on the industrial world, Alderman claims. “I think GE really fell out of love with the military market after their deal to buy Honeywell fell through due to monopolization concerns from the European Union. After that, it was only a matter of time before the GE embedded group got sold. GE CEO Jeffrey Immelt has been selling off any GE group or division not focused on industrial markets. If it’s not industrial, GE doesn’t want it – whether its pension management, appliances, or military embedded computing.”
What about GE embedded employees and customers?
Based on chats I’ve had with others in our industry, many think that losing the cachet of the GE name will hinder the new company’s long-term potential, but I disagree. While lost in the global behemoth of GE, the GE embedded operation will no longer be subjected to what seemed like yearly re-organizations or be held back by GE internal processes, allocation costs, and media restraints.
Folks at smaller firms in this space such as Aitech, X-ES, Mercury Systems, etc., often claimed they benefitted every time GE, Curtiss-Wright, or Kontron bought one of their competitors. While the larger acquiring companies went through the growing pains of assimilating a company, the smaller competitors believed they filled a vacuum by providing more intimate customer service. True or not, it is a perception often shared by the end customer. Now, the new business to be formed under Veritas should regain some of that nimbleness and flexibility they had in years past as Radstone or VMIC. I also expect it to be mostly focused on the military market, as their key technology areas – radar, electronic warfare, and sonar for intelligence, surveillance, and reconnaissance (ISR) – will be growth areas over the next few years.
GE corporate could be a drag on GE embedded when they competed against faster, smaller companies, Alderman says. “It is not the way our marketplace works. I think it will be good for the mil/aero market that they will now be out from under the GE restrictions.”
I expect the change will also be positive for most GE embedded employees. Many former Radstone or SBS personnel told me they found GE to be a bit stiff and formal and that they missed the personality and flair their previous companies had before they were acquired.
Alderman agrees with me. “There are two ways to do things – the wrong way and the GE way” and that was not a fit for everyone who got acquired over the years, he says.
The trick for the GE embedded folks will be nailing their branding down once they re-name and re-structure their operation and then ensuring their military end customer that there will be no blips in service or quality. Be assured their competitors will right there to step in if they don’t, and Veritas might do as Alderman says and resell them in two years or less.
For now, it is good news for GE embedded employees and hopefully for the market as well.
For more on the Veritas, click here. For more on the GE Intelligent Platforms embedded operation, click here.
