newswor thy
a decade after going public,
UPS has yet to deliver
Italian firm buys
Diamond Phoenix
IT WAS A DEFINING MOMENT IN WHAT NOW SEEMS LIKE ANCIENT HIStory. On Nov. 10, 1999, at the height of the dot.com mania, UPS Inc. ended nearly
seven decades as a private company and went public with what was, at the time, the
largest IPO in U.S. history.
The offering, which raised $5.5 billion, was an immediate hit. Initially priced at
$50 a share, UPS’s new “Class B” stock—which represented 10 percent of its shares
at the time—soared more than $17 by the close of the first day of trading.
In retrospect, it is easy to understand the IPO’s appeal. At the time, many newly
minted public companies had modest revenues, no profitability, and little experience managing through business cycles. By contrast, UPS was a 92-year-old business with a proven model and an established track record.
At the same time, UPS was seen as being in the sweet spot of the Internet boom.
With its massive shipping network and sophisticated information systems, UPS was
well-positioned to carry the avalanche of shipments that electronic commerce
would spawn, investors thought.
Much has changed since then. In its
first decade as a public company, UPS
learned several painful lessons. It found
it was a far different matter to communicate a message and strategy to a skeptical audience of outside investors and
money managers than to its employee
base. It discovered that public investors
had less patience than its employees for
large-scale investments that would not
show a return for some time. And it had
to embrace the notion that failure to hit
quarterly revenue or profit expectations—which in UPS’s privately held
days might have been greeted with
internal shrugs—would be met by
widespread share selling by investors
whose loyalty didn’t extend beyond
their stock certificates.
At UPS, the marker for success is, and has always been, the performance of its equity. Here, one statistic speaks volumes: Its stock price is at this writing only about $8 a
share above its IPO price in 1999. This has been a blow to a company where individual wealth has been generated by stock ownership instead of base compensation. For
long-time employees accustomed to like-clockwork annual returns of 15 percent or
more when UPS was private, the adjustment has been that much more painful.
U.S.
ground
parcel
U.S.
domestic
air
2000 2008
52.0%
41.6%
28.9%
19.2%
5.4%
17.3%
13.7%
21.9%
UPS total revenue by business line
U.S.
domestic
non-package
International
package
SOURCE: THE COLOGRAPHY GROUP
Buying spree
Members of UPS’s management committee, the 12-person group that runs the
company, were not available for comment. Interviewed by DC VELOCITY earlier this
year, Chairman and CEO Scott Davis said the IPO provided UPS with cap- p. 12
Diamond Phoenix, a material
handling technology supplier and
systems integrator, said it has
been acquired by Italian firm
System Logistics for an undisclosed sum.
The Lewiston, Maine-based
Diamond Phoenix will become
the North American arm of
System Logistics. The transaction
combines Diamond Phoenix’s
capabilities in automated order
picking and sortation with
System Logistics’ global reach
and expertise in providing integrated systems for pallet and
case picking operations, the companies said in a statement.
Diamond Phoenix said it will
immediately offer System Logistics’
Modula line of vertical lift modules
(VLMs) to its clients while continuing to offer its SMARTdepot multi-bay VLM systems.
“We are happy to now be a
part of a company with such
amazing capabilities. I really think
we are well positioned to bring
our customers material handling
systems unmatched in the industry,” said Tom Coyne, president
and CEO of Diamond Phoenix, in
the statement.
“The U.S. logistics market is an
important investment for System
Logistics. Diamond Phoenix and
System Logistics will now work
together to deliver a wide range
of solutions from single-bay vertical lift modules, picking with
carousels, voice picking, to huge
distribution centers utilizing
AS/RS and automated case picking,” said Mauro Pelliciari, general manager of System Logistics,
in the statement.
