The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Karen Kwok

LONDON, April 17 (Reuters Breakingviews) - A seemingly humdrum Swiss corporate-finance exercise may hold lessons for technology titans like Tesla's TSLA.O Elon Musk and Nvidia NVDA.O CEO Jensen Huang. Industrial conglomerate ABB ABBN.S on Thursday said it plans to spin off a business that sells robots that do everything from packing chocolates to painting and assembling cars. It makes sense given the unit's subpar operating margin relative to the rest of the $95 billion company. But the move jars with all the automaton hype coming from Silicon Valley and beyond.

There's no particular reason for ABB CEO Morten Wierod to keep the robotics business, which he admits has no obvious overlap with the rest of the industrial group's operations. Its top-line has struggled in recent years partly because of historic over-ordering from carmaker customers, who are heavy user of massive industrial arms on factory lines. And the timing looks good for handing the unit to shareholders, potentially allowing them to benefit from a nascent investor fervour for the sector. Huang and Musk have predicted a surge in demand for robots. Shares of $9 billion Hong Kong-listed Horizon Robots 9660.HK are up 50% year-to-date, while Microsoft-backed startup Figure AI is seeking a valuation of $40 billion even with no 2024 revenue, the Wall Street Journal reported.

The business stands out from the wider robot crowd given that it is generating free cash flow. But in other ways it has struggled. The unit needs more research and development spending to keep up with fierce competition from Japanese and Chinese players, as well as the startup crowd. The wider corporate division that houses ABB's robotics business consistently reports a low-double-digit operating margin, using the group's adjusted definition of the term, compared with closer to 20% for the wider company. RBC analysts value the soon-to-be-separated unit with a so-so 13 times multiple of operating profit, implying a modest $3.5 billion enterprise value. Persistent tariff wars might call for a further discount.

However the shares trade when they list, probably early next year, the business serves as a reminder that selling robots to industrial clients is not necessarily a hugely lucrative business. The investment requirements are steep, and operating margins can be low. ABB's robot spinoff will be good for the company, but possibly bad for general robot hype.

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CONTEXT NEWS

Swiss industrial group ABB on April 17 announced plans to spin off its robotics division.

The business is the world’s second-biggest industrial robot maker after Japan’s FANUC Corp.

It generated sales of $2.3 billion in 2024, equivalent to 7% of ABB’s total, but has struggled in recent quarters as the automotive sector – a big buyer of robots – has seen subdued demand.

ABB intends for the business to start trading as a separately listed entity in the second quarter of 2026, with shares in the new company distributed to ABB investors as a dividend.

The plan was supported by Investor AB, ABB’s biggest shareholder with a 14.3% stake.

CEO Morten Wierod said he saw limited overlap between the robotics business and the rest of ABB.

ABB’s Swiss-listed shares rose 1.1% to 42.06 Swiss francs as of 0933 GMT on April 17.

(Editing by Liam Proud, Streisand Neto and Oliver Taslic)

((For previous columns by the author, Reuters customers can click on KWOK/karen.kwok@thomsonreuters.com))