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ABB to Acquire Tropos

Zacks Equity Research

ABB Ltd. (ABB) intends to acquire Tropos, a Silicon Valley-based company engaged in development and distribution of wireless technologies and products for distribution area communication networks. The acquisition will strengthen ABB’s distribution automation business while expanding its scope in sectors like transportation, oil and gas, and mining. Tropos products will get more customers globally.  The acquisition is expected to close in the third quarter of 2012.

Tropos’ technology and products for wireless IP (Internet Protocol) broadband networks are efficient for grids and important outdoor industrial applications. ABB will retain 55 employees of Tropos after the acquisition. Tropos’s main business is in North America and has its customers in more than 50 countries worldwide. Tropos acquisition is strategically sound for ABB as it allows it to attain its goal to develop the distribution automation business.

The acquisition will allow ABB to enhance its skills in communication technologies and also develop new technologies. Further, ABB’s portfolio of fixed-wire and radio communication solutions will be enhanced through the addition of Tropos’ dependable, safe and scalable solutions for wireless communications.

Moving ahead, the emerging markets will be a significant growth driver for ABB. Demand in mature markets is also expected to improve. Customer capital expenditures have increased with the rise in commodity prices. Increased capacity in some later-cycle infrastructure-related businesses continue to exist.  In many sectors, price stability has been attained and ABB has increased its prices to offset increasing raw material costs.

However, ABB Ltd's results are likely to be adversely impacted by macroeconomic weakness as more than 80% of the company's orders are derived from outside the US. A major competitor of ABB Ltd. is Siemens AG (SI).

ABB Ltd. is a Zurich (Switzerland) based power and automation technology company. The company operates in approximately 100 countries, structuring its global organization into five regions: Europe, Americas, Asia, the Middle East and Africa. A major competitor of ABB Ltd. is Siemens AG (SI).

Currently, we maintain a Zacks #3 Rank (short-term Hold recommendation) on ABB Ltd.

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