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Honeywell preps smart home push with spin-out, Siemens’s roadmap wooes

While maintaining the Riot 50 database, which tracks the stock performance of 50 of the most notable public companies dealing in the IoT, Riot often spots interesting patterns that might normally go unnoticed. This week, both Honeywell and Siemens posted gains that outpaced their industrial rivals, as well as the comparison tracking indexes.

Compared to the rest of the Riot 50, they are among the best performers. Semiconductors generally had a flat week, with Silicon Labs declining after it announced plans for larger acquisitions, and Verizon has continued its steady growth through the period. Cloud and Platforms was buoyed by Alphabet’s performance, and while Aptiv posted a strong weekly gain, it’s still down on its price from six weeks ago.

But the Industrial IoT (IIoT) is one of the most promising sectors, perhaps after the cloud platforms and associated software. Through the last two months, Siemens has grown 3.6%, and Honeywell has achieved 8.27% growth, both above the levels of the indexes we follow – the FTSE 250 (up 0.45%), the Dow Jones Industrial Average (up 2.43%), and the Nikkei 225 (down 1.2%).

For Honeywell, the bump in share price comes from its most recent earnings announcement. In that announcement, Q2 2018 saw Honeywell achieve 5-6% organic sales growth, and boost its earnings per share (EPS) by $0.10 to $8.15. Free cash flow was also up by $300m to $6.2bn, meaning that the Honeywell stock got a lot more interesting for investors – especially those looking to get out of GE. Q2 net revenue rose 8.3% to $10.9bn, slightly beating the analyst expectation.

Honeywell’s largest division, its aerospace wing, grew 10% to hit $4.05bn in the quarter, but its safety and productivity division posted 13% growth. Away from the IIoT side of things, the home and building wing posted a 5% growth in sales through the quarter.

That division has also just launched the Honeywell Smart Home Security Starter Kit, a $450 package that is available in the US – through Lowe’s, Best Buy, Home Depot, and Amazon. The latter’s support is unsurprising, given that the kit is centered around a base station that house a 1080p video camera and an Amazon Alexa speaker, flanked by window and door sensors, and the decidedly un-sexy key fob – something of a relic of a pre-smartphone time, it feels. Motion sensors can also be added, as can the MotionViewer, a motion-triggered camera.

For a company of this size, Honeywell took a strange route to market for the home security package, launching it through Indiegogo back in November. That crowdfunding campaign raised $220k, around 248% of its target, and the turnaround seems to have been pretty fast – especially if the facial recognition is working as intended.

The system supports Alexa now, but plans to add HomeKit and Google Assistant support in 2018, according to its Indiegogo page at least. It has apparently ruled out compatibility with Samsung’s SmartThings platform though, but IFTTT integration means that you should be able to hook it up to most smart home devices out there. Everything in the ecosystem is controlled through Honeywell’s Lyric smartphone application.

In terms of hardware, the Camera Base Station (CBS) is based on an 8-core 2GHz Qualcomm Snapdragon SoC, with 802.11ac WiFi, Bluetooth 4.2, Z-Wave, and Honeywell’s own proprietary 915MHz protocol – which links the sensors to the CBS. Some 8GB of flash storage should be sufficient for most applications, but Honeywell might be skimping on the solitary gigabyte of RAM.

As for branding, Honeywell is planning to spin out its Honeywell Homes portfolio, under the new Resideo brand. Expected to be successfully separated by the end of the year, Resideo will be led by Mike Nefkens. Resideo will be licensing the brand from Honeywell.

Resideo will also benefit from Honeywell’s pretty extensive partner and installer network, which apparently includes 110,000 contractors, 3,000 distributors and 1,200 OEMs. Currently, there are 4.7m customers using connected devices in their homes, and Honeywell says that after the spin, Resideo will already have around 30m installed sensors. Resideo will also house the ADI brand, a distributor of low-power security systems that offers over 350,000 products to customers around the globe.

Spinning out Resideo should help Honeywell stay focused on its core industrial offerings, and because the Home division is so small, compared to the aerospace business, it shouldn’t damage Honeywell’s share price. Honeywell is now nearing its 52-week high, of $165, and comfortably above its year-low of $134.5.

However, it is perhaps a sign of the level of confidence that the company has in the smart home and smart building markets that it wants to distance itself from them in such a fashion. The personal opinion of the shareholders will decide on which interpretation to follow there.

Now for Siemens, which is up 3.6% in the period, reaching €120.36 this week. That’s not far from the year-high of €126, and again, a good cushion from the 52-week low of €99.78. As for triggers, a recent partnership with Alibaba in China to drive IIoT has helped bolster its share price. It is also on the eve of announcing Q2 results, which are expected to include a restructuring plan that would see it attempt to become more nimble.

This plan is called Vision 2020+, and broadly it will attempt to cut the number of its industrial divisions from 5 to 3. This will also cut some 1,200 jobs at its Munich HQ, as it shifts those duties to the divisions’ operational teams – an attempt to give them more independence than they have traditionally enjoyed in the company.

Currently, the Process Industries and Drives wing will be moved inside the Digital Factory business, while Energy Management is being split between the Building Technologies business and the Power and Gas division. While some have commented that this decentralization is preparing Siemens to pull moves like GE, namely selling off entire divisions, CEO Joe Kaeser says this is not the plan, and that Siemens wishes to retain ownership. Going forward, its main focuses are on industrial digital technologies, automation, and healthcare.

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