Emerson Electric bets on smart data centers

NEW YORK (Reuters) – Emerson Electric Co , which in the last decade transformed itself from an old-line maker of motors to a high-tech supplier of power and cooling systems for corporate computer centers, wants to follow its customers into the information economy.

The U.S. conglomerate — whose products range from factory efficiency systems, to air conditioning compressors and valves — plans to introduce later this year a new technology it calls ”Trellis.”

Trellis will allow companies to cut their energy bills, infrastructure spending and better allocate staff at the giant server farms that manage everything from bank transactions to corporate payrolls.

“We’ve questioned the viability of being a pure component manufacturer in the 21st Century,” Charlie Peters, Emerson’s senior executive vice president, said in an interview. “We’re 10 years down the road of thinking, how do we transform our company to where we have a broader portfolio?”

Emerson’s Network Power business already makes hardware for data centers such as uninterruptible power supply and cooling systems. It is looking to move from simply making the equipment to producing more advanced systems to manage the gear in part to fight off competition from lower-priced rivals.

When the St. Louis-based company reported worse-than-expected quarterly results last month, it lay part of the blame on price competition in China within the Network Power business.

Trellis is a way of making that hardware smarter, for example allowing managers to be alerted before a broken connection or data loss, enabling data centers to spend less on energy and components, and to re-allocate staff.

In other parts of Emerson, similar ideas were adopted earlier. In the climate technology business, “Intelligent Store” cuts grocery stores’ operating costs by up to a quarter. Emerson’s process management unit has tripled in size over a decade amid demand for PlantWeb, a system of managing production information in locations like refineries.

Peters, in charge of long-term strategy for St. Louis-based Emerson, calls PlantWeb “a nice analogy to Trellis.”

It took years before those technologies were widely adopted. Trellis will catch on sooner, Peters forecast, because data center managers more quickly adapt new technology.

Emerson has not set sales forecasts for Trellis, which it calls a platform as opposed to a discrete product. It estimates data centers spend hundreds of billions of dollars a year on infrastructure, energy and labor, so saving even 10 percent of that cost adds up to “a multibillion-dollar opportunity.”



Emerson has forecast its Network Power business, with $5.8 billion in 2010 sales, should grow core sales by 8 percent to 10 percent a year, on average, faster than the company’s overall core sales growth of 5 percent to 7 percent.

The business, whose rivals include Eaton Corpand France’s Schneider Electric, is the leading maker of equipment to cool large banks of computer servers. Emerson argues that adding layers of information will support its physical products, allowing its industrial businesses to stay relevant longer while potentially gaining market share.

Some components risk becoming commoditized, vulnerable to competition from lower-priced rivals.

Data center infrastructure management is a relatively new market. But by 2014, DCIM tools and processes will grow from 1 percent penetration in data centers to 60 percent, according to technology research firm Gartner.

The 2009 acquisition of Avocent, a maker of access and control systems, for $1.2 billion provided the technology Emerson needed to develop Trellis.

“They had (mastered) this world of reaching down into IT devices and pulling information out and giving people ability to take action on that information,” Peters said.

The sales pitch resonates with Emerson investors.

“There’s all kinds of data to be collected and to be optimized,” said Michael Sansoterra, lead manager of the RidgeWorth Large Cap Growth Fund, a $500 million mutual fund where Emerson is a top holding.

“This is a sustainable way to play the cyclical recovery,” Sansoterra said. “A less-expensive Chinese manufacturer isn’t going to have any ability to come in and do this kind of data analysis in the short-term.”