ADT 1999 Annual Report Download - page 22

tional equity stakes this fiscal year.
Likewise, our push into electronics is a nat-
ural extension for Tyco. We
were already very familiar
with interconnect products
through our fire and securi-
ty, undersea fiber optic
cable, and printed circuit
board operations. By using
that as a platform to expand
our presence into electrical
connectors, we can capture
an exciting growth opportu-
nity—particularly in
telecommunications and automotive products—with
worldwide sales expected to rise 6–7 percent annu-
ally.
The electronic interconnect products
made by AMP, Raychem and Siemens are more
ubiquitous than computer chips, but carry less risk
of obsolescence. All three companies are set to
prosper from the introduction of new technologies.
You can find AMP components, for example, in a
majority of the world's cellular phones. The state of
Pennsylvania recently granted AMP a large contract
to build its emergency wireless communications
network, and many other states are looking at simi-
lar systems. Raychem, which makes
fiber optic wires, fiber management systems
and telecom closures, is also a major force in
telecommunications.
AMP, Raychem and Siemens are also in the
driver's seat in the automotive market. In a power-
ful global trend, mechanical automotive systems
are being replaced by electronics. As advanced
new electronically controlled seats, navigation sys-
tems, air bags and electronics to lower fuel con-
sumption proliferate, our electronics sales should
enjoy continued growth.
Execution
Given a choice between brilliant strategic vision and
top-flight execution, I would choose great execution
every time. For us, great execution means an
unflinching focus on manufacturing efficiency. Every
year, we challenge managers to make more and
better units for less money. We don't have a fancy
name for our continuous improvement program. It's
just a way of life.
And corporate headquarters doesn't tell
each business unit how to become more efficient.
We think our managers know much more about how
to promote efficiency within their business than we
do at the corporate level. Our role is to encourage
them to buy new equipment and develop new sys-
tems to improve productivity, and then evaluate per-
formance based on strict return-on-investment hur-
dles.
Cutting costs is not the same as cutting cor-
ners. When ADT Security makes acquisitions, it fre-
quently consolidates monitoring centers to save
money. As it happens, consolidating business at our
state-of-the-art monitoring centers actually
improves service.
We even seek efficiency in ways that seem-
ingly run counter to our corporate culture. Tyco is
extremely entrepreneurial and decentralized. We
believe that a large headquarters staff is unneces-
sary and that almost any function can be handled
better locally. But centralizing certain functions, like
tax, accounting and treasury services, does save
money, so we do it.
We believe the Company is extremely well
positioned. We are world leaders in our markets;
our business segments enjoy powerful, sustainable
tailwinds; abundant opportunities exist for organic
growth, strategic acquisitions and margin expan-
sion; and, with an estimated $7 billion in free cash
flow in the next two years, we think we can
continue to invest in Tyco's long-term success.
Tyco's sales, earnings and cash flow over
time have been, and will continue to be, the most
powerful proof of Tyco's fundamental strengths.
Telecommunications and Electronics
At Tyco's Telecommunications and Electronics
group, earnings rose 57 percent to $1.4 billion, up
from $894 million last year. Sales for the group
20