3M has recently stepped up its acquisitions of smaller international companies. This increased investment will keep the company growing despite some struggles with its domestic market. On September 5, 2009 CEO George Buckley said the company would be stepping up its acquisitions of small and medium-sized companies over the next year to bolster its product offering. Buckley is making these moves at a time where 3M is able to acquire companies at bargain prices, and lead to greater cash flows in the future. The company is also stepping up investments in R&D, particularly in renewable energy and healthcare, and the acquisitions of smaller companies will help the company stay very competitive in this arena.
3M settled with Illinois Tool Works on a lawsuit filed by 3M in 2006 regarding its patents for paint preparation system products. Illinois Tool Works (ITW) agreed to recognize 3M's patents and license them.
Since the stock market bottomed in March 2009, 3M's shares have underperformed its sector and the broader market, driving its P/E ratio down to 16.6 compared to an industry average of more than 18. There is no inherent reason why 3M should be underperforming, since the largest risk in the industrials sector is that nascent recovery turns into a slowdown in the second half of 2010 in the US. But 3M generates almost two-thirds of its sales in foreign markets (30% in emerging markets), so it is insulated from such a slowdown.
3M's overseas penetration has been boosted by local product development and a high R&D budget (5.7% of sales, double the industry average).
Traditionally conceived as a simple office supply company, 3M is transforming its image to become a more high-tech company, which should drive revenues and expansion in coming years. In March 2009, the company announced it would be the exclusive distributor of fiber optic products for Clearfield, Inc. in Canada. In addition, the company is developing a material to make lithium-ion batteries to power cell phones and laptop computers. In the fall of 2008, 3M released a hand-held mobile projection device, which can project presentations, videos, graphs, and charts on-the-go.
3M CEO George Buckley, a scientist in background, has put more money into R&D. 3M spent $1.4 billion on research and development in 2008. The company's previous CEO, James McNerney, was known more for driving raw profit numbers.
