Recently, I read an interesting piece in Bloomberg about Eaton’s potential for a partial breakup in the near future. Specifically, the author surmises about the industrial giant’s eventual sale or spinoff of its vehicle division, which some analysts see as too cyclical of a market—and a bit of a drag on the company’s more robust business areas.
But what really caught my eye was the author’s comment that Eaton’s hydraulics business might be another candidate to be jettisoned.
Eaton has a long history in the fluid power business, although today, hydraulics only represents about 11% of the company’s total revenue. The company manufacturers a plethora of fluid power components, including pumps, motors, hydraulic power units, valves, cylinders, hydraulic hose, fittings, and filtration systems. The company’s 1999 acquisition of hydraulics powerhouse Vickers is still something you will hear people reminiscing about at trade shows.
From my perspective, Eaton seems to be investing heavily in hydraulics and the related technology that has been helping to keep the fluid power industry competitive and productive, even as electrics have made competitive movements. Recently, we’ve written about the company’s new circuit design software that allows engineers to design complex manifold designs. And over the past year, the company has introduced everything from a “drive in drive” motor technology to proportional solenoid cartridge valves to a special seal that offers extreme protection to hydraulic motor operation. Hardly the activity of a floundering technology or market.
Eaton’s leadership has noted in the past that it really can’t spin off anything or sell major units until five years after the relocation of its corporate headquarters from Cleveland to Ireland—at least not without encountering some major tax consequences. That move happened in late 2012.
No matter what happens in the near future, Eaton’s hydraulic business is not going away—it’s simply too large. Some may speculate that a divestiture may happen later this year, if only based on the closing of this five-year “quiet” window. Whatever happens, we’ll be watching for developments, be they big picture corporate movements or niche product technology.