26600 S.W. Parkway
Wilsonville, Oregon 97070-1000
Telephone: (503) 627-7111
Fax: (503) 685-4017
Incorporated: 1946 as Tekrad, Inc.
Sales: $1.3 billion
Stock Exchanges: New York Pacific
SICs: 3825 Instruments to Measure Electricity; 3577 Computer Peripheral Equipment, Nec
Tektronix, Inc., founded in 1946, is the world's leading manufacturer of oscilloscopes--instruments used to measure and display electrical signals; it held approximately 57 percent of the market in 1992. The Oregon-based company was also the second-largest supplier of all other electronic testing and measuring devices, with more than 1,500 products, and a leading maker of computer display terminals and color printers for computers.
Tektronix was founded by three U.S. Coast Guard veterans and an electronics expert from the U.S. Army Signal Corps. Portland native Melvin Jack Murdock spent World War II as a Coast Guardsman, maintaining radio equipment for the Navy and planning for a career once the war ended. By 1945, he had convinced two friends, Glenn Leland and Miles Tippery, that the three of them should start their own business, although none had an idea exactly what that business should be. They also decided to bring in Charles Howard Vollum, a graduate of Portland's Reed University with a degree in physics who had operated a radio-repair business in the back room of an appliance store Murdock had owned before the war. Vollum was then designing radar sighting devices for the Signal Corps.
In December of 1945 the four servicemen met in Portland to draft articles of incorporation for a broadly defined company that would manufacture, sell, install, repair, "and otherwise handle and dispose of" electronic equipment. They called their company Tekrad, which was incorporated on January 2, 1946. Vollum was president and Murdock vice president. The name was changed to Tektronix, Inc., a month later when they learned about a California company that had registered a similar name, Techrad.
Although Tektronix was still without a specific product or purpose, Vollum decided to build an oscilloscope from spare electronics parts being stockpiled by his partners from post-war government surplus sales. At the time, the Du Mont Company was the leading manufacturer of oscilloscopes, which were indispensable to the rapidly growing electronics industry. Vollum, who had built his first oscilloscope while in college, believed he could design one that was better and would sell for less than half what Du Mont charged. Vollum later told Forbes that Du Mont "wanted to fool around with big-time television. They were complacent about their scope."
Vollum completed his oscilloscope in the spring of 1946. It was far more accurate than anything then on the market. Unfortunately, it also was so large that it covered Vollum's entire workbench. He immediately began working on a more compact model, and Murdock brought in another buddy from the Coast Guard, a machinist named Milt Bave, to help with the design. The redesign took 12 months, but in May of 1947 Tektronix sold the first "portable" oscilloscope to the University of Oregon Medical School. The model 511, which became known as the Vollumscope, weighed 50 pounds.
In 1947 Tektronix had sales of $27,000. The next year, sales increased almost tenfold, to $257,000, and the customer list included most of the major electronics research firms in the United States, including Hewlett-Packard, Philco Radio Corporation, RCA Laboratories Division, Westinghouse Electric Company, and AT&T Bell Laboratories. In 1948 Tektronix also sold its first oscilloscope overseas, to the L. M. Ericcson Telephone Company of Sweden. By 1950, Tektronix was manufacturing its seventh generation of oscilloscopes, the model 517. Orders were backlogged six months to a year, and annual sales had exceeded $1 million.
By the early 1950s, Murdock was already beginning to lose interest in managing Tektronix. He took up flying and started an aircraft sales company on the side. Vollum, however, continued to be a driving force within the company. Under his direction, Tektronix began manufacturing its own cathode-ray tubes when it could not get the quality Vollum wanted for his oscilloscopes. Vollum also conceived the idea of a basic oscilloscope that could be adapted with "plug-in" devices, rather than special oscilloscopes for different applications. The plug-in oscilloscopes, introduced in 1954, were an instant success. By 1955, the 530 Series accounted for half the oscilloscopes sold by Tektronix. In 1956 Tektronix passed Du Mont for leadership in the market. Riding the crest of solid-state electronics, Tektronix's revenues grew an astonishing 4,000 percent in the 1950s, to $43 million in sales in 1960.
It was also during the 1950s that "Tek culture" began to take shape. Even before the company was founded, Murdock had insisted that future employees would be treated with respect, everyone would be on a first-name basis, and there would be no perks for executives. Murdock even talked about the ideal size for a company to maintain a casual, family atmosphere--no more than a few dozen people. Although Tektronix paid lower wages than other manufacturers in the Portland area, the company provided medical coverage, profit sharing, and other benefits. There were few unbreakable rules, and engineers were encouraged to pursue their individual interests. Tek culture was praised by management consultants, and Tektronix was cited in the book The 100 Best Companies to Work for in America. However, Tek culture was later blamed for some of the company's inability to adjust to competitive changes in the 1980s.
As Tektronix was getting ready to enter the 1960s, which included work on a new 300-acre headquarters campus in Beaverton, Oregon, Vollum convinced the board of directors to appoint Bob Davis as executive vice president. As vice president for manufacturing from 1954 until 1958, Davis had begun to bring some order to the rapidly growing, unstructured Tektronix organization. Restructuring was a necessity, but Vollum had neither the experience nor the inclination to give the business of management the attention it needed. Davis would report to Vollum, but he would have sole responsibility for the day-to-day operation of the company. Initially the appointment of the energetic Davis was greeted as a positive step. But inevitably, "the old scope warriors," as Marshall M. Lee called long-time employees in his book Winning with People: The First 40 Years of Tektronix, came to resent the changes.
Despite significant growth under Davis and the formation of the company's first foreign subsidiaries, by 1962, Vollum was persuaded to re-assume control. At the time, Tektronix's future seemed secure. The company went public in 1963, and was listed on the New York Stock Exchange in 1964. The company continued to bring out more advanced testing equipment, and by 1969, Tektronix controlled 75 percent of the world's market for oscilloscopes. Sales had reached $148 million, and Vollum told Forbes: "[There] is an ever-expanding market [for oscilloscopes]. Wherever electronics go, the oscilloscope goes."
However, despite its stellar performance and Vollum's optimism, in the late 1960s Tektronix was not a favorite among financial experts. There were growing indications that Tektronix's dependence on basically one product was a dangerous strategy, especially with the growth of computers with internal testing programs that no longer required oscilloscopes. Equally troubling was that Tektronix had little marketing experience, since its principal product, the oscilloscope, had practically sold itself for 25 years by being better and cheaper than the competition. Many analysts felt that an early attempt to diversify into programmable calculators had failed because of a lack of market savvy. There was also the lingering need to bring the entire, free-flowing Tektronix organization under better control.
Earnings fell for the first time in fiscal 1971, by a devastating 34.7 percent. Early in the year employees took unpaid time off to avoid layoffs, but it did not help. That autumn, Tektronix announced the first layoffs in its fast-paced history. Adding to the pain that year was the death of Murdock, who drowned when his seaplane flipped during takeoff on the Columbia River. Murdock had not been active in daily management of the company for many years, but he had stayed on as chairman of the board and was generally regarded as the person who gave Tektronix its strategic vision. Less than two weeks after Murdock's death, Vollum suffered a heart attack. Vollum recovered, but he resigned as president in 1972.
At the same time, Tektronix was beginning to have some success with graphic display terminals, which would become the company's second-largest revenue producer. In 1964 Tektronix developed a way to retain an image on a cathode ray tube (CRT) for up to 15 minutes, instead of the split second that images normally lasted before they needed to be regenerated. This was a tremendous advance for oscilloscopes, and for several years Tektronix used its discovery only in its own products. But the new technology was also valuable for displaying maps, charts, and other graphics on computer terminals, and in 1969 the company decided to sell CRT terminals for other applications.
Unfortunately, the first terminals, introduced in 1970, were over-engineered and costly. Earl Wantland, then executive vice president who would later succeed Vollum as president, organized an Information Display Group to concentrate on redesigning the terminals to reduce the final cost. For perhaps the first time since Vollum built his 511 oscilloscope, Tektronix was designing a product for a competitive market, rather than creating the most sophisticated gadget with the blind faith that engineers somewhere would buy it. When the terminals reappeared a year later, the price had been cut by 60 percent, from $10,000 to $4,000.
From a marketing perspective, the timing was also better, with the emergence of computer-aiding design in several industries being a perfect fit for the new graphics terminals. By 1975, Tektronix controlled 50 percent of the market, and the $50 million a year in terminal sales represented about 15 percent of the company's total business. Tektronix had rebounded from a dismal start to the 1970s by joining the Fortune 500 in 1975. It had $336.6 million in sales, which placed it 457th on the list of the largest industrial companies in the United States.
Tektronix also took a successful step into diversification in 1974 when it acquired the Grass Valley Group, a California company that made electronic systems to provide special effects for television. By 1978, Forbes was able to report that Tektronix "has finally begun to alter its image as a one-product company whose basic technology, the cathode ray tube, was about to be obsoleted by the digital revolution." Although the bulk of its business still centered on oscilloscopes, Tektronix was then selling more than 700 products customized to various market segments, including government, education, broadcast television, and computer industries, in addition to the electronics and electrical equipment markets.
Once again, the future looked bright for Tektronix. The company passed the $1 billion mark in sales in 1981. But once again, the marketplace, and this time, the advance of technology, caught the engineering-driven company off guard. Tektronix was slow to switch from making analog test equipment to digital equipment. And when it made the switch, Tektronix found that low-cost Japanese competitors had beaten it to the portable oscilloscope marketplace. The company also was three years late entering the market for color display terminals, which slashed its share of the market for graphics terminals in half, from a high of 51 percent in 1979 to 26 percent in 1983.
Between 1979 and 1984 earnings fell more than 40 percent. The company suffered through more layoffs, and several top executives and engineers left to form competitors such as Mentor Graphics, Graphics Systems Software, and Northwest Instruments. In 1984 Business Week reported: "Now Tek must come from behind again, in what is likely to be the most critical recoup in its 38-year history," as the company belatedly entered the market for computer-aided engineering (CAE) work stations. It was a marketplace battle that Tektronix would eventually lose.
In 1982 competitors had begun offering fully integrated CAE work stations, which threatened the market for Tektronix's stand-alone graphics terminals and electronic testing equipment. Heretofore, Tektronix had been content to be a supplier to the computer industry and reportedly had passed on several opportunities to purchase small computer manufacturers, including an upstart Digital Equipment Corporation. In fact, Tektronix engineers had designed a technical work station in the 1970s, but the company never brought it to market. Then in 1984 Tektronix attempted to counter the attack on its core businesses by forming a systems development division. Charles Humble, then a columnist for the Portland Oregonian, wrote of Tektronix's 1984 annual report: "It is about a company that is torn between restructuring and testing the waters of the future, and a company that can't give up the security of past successes."
Early in 1985 Tektronix acquired CAE Systems Inc. In April of that year it introduced its first CAE work station. The product line, however, was short-lived. Four months later, the company announced that instead of producing work stations, it would develop software for other manufacturers. That, too, faltered. In 1988 Tektronix sold its CAE operations for $5 million to Mentor Graphics. Estimates of Tektronix's losses in the abortive effort to enter the CAE market ranged from $150 million to $225 million.
Despite annual revenues that had almost doubled in ten years to $1.4 billion, Tektronix also reported its first-ever loss of $16.7 million for fiscal 1988. David Friedley, a marketing-oriented Tektronix division manager, succeeded Wantland as president in November of 1987. He later told Forbes, "The first thing we did was stop the bleeding." In addition to getting out of unprofitable business, Friedley eliminated 2,500 jobs at Tektronix over the next two years.
Business Week later reported that Friedley "cut through ... bureaucracy like a logger through the nearby Oregon timber." But it was not enough. Tektronix returned to modest profitability in 1989, due to stringent cost-cutting and a new line of color printers. But its financial troubles were far from over. By early 1990, the company was again posting losses, and there were rumors that Friedley would be fired, especially since Tektronix stock had fallen in value from $31 a share in 1987 to a 14-year low of $12.75 a share. A financial analyst for Prudential-Bache Securities, Inc., told Business Week that meetings with Tektronix "were like watching the grass grow." The anticipated shake-up came in March of 1990, with the company headed toward a $92.5 million loss (largely due to restructuring) for the fiscal year. Robert Lundeen, a former Dow Chemical Co. executive and Tektronix's chairman of the board, and William Walker, another board member, ousted Friedley and took over operational control of the company.
Citing the need to reverse the financial losses, Lundeen told Portland's Business Journal, "I don't think management realized how urgent it was that we get there quickly." Lundeen told Forbes, "I'd like the new Tektronix style to be more cosmopolitan," and he complained, "We're still doing things the Beaverton way." Lundeen initiated another 1,300 layoffs. In a blow to its corporate image, Tektronix also transferred more than 1,200 workers from Vancouver, Washington, to Oregon, leaving vacant a 488,000 square foot manufacturing facility in Jack Murdock Park, an industrial center named for the company's co-founder. For years, Tektronix had been the largest employer in Oregon, with a high of more than 24,000 employees in 1981. But by the end of 1991, the company had a work force of about 12,000.
Lundeen ran Tektronix as interim president for six months, until October of 1990 when the company hired Jerome J. Meyer, a former senior executive with Sperry Univac and Honeywell, Inc. Meyer took over a company with stagnant sales, a lack of market focus, and badly in need of restructuring. Tektronix rebounded from a dismal 1990 to post a modest $45 million profit in 1991. Meyer was rewarded by being named chairman of the board as well as president. But when Meyer reported on the results of his first full year at Tektronix, for fiscal 1992, the company was again in a slump. Sales had hit a nine year low, with earnings of about $27 million.
Just prior to Meyer joining the company, Tektronix's market value was falling from about $1.3 billion in 1987 to less than $400 million in 1990, and the company was seen by many analysts as a potential take-over target. In September of 1990 the board of directors adopted an anti-takeover "poison pill," which entitled existing shareholders to purchase stock at half price if an investor acquired more than 20 percent of the company's stock. At the time, Jean Vollum, the widow of co-founder Howard Vollum, who had died in 1986, was the largest single shareholder with about 8.1 percent of the outstanding shares.
In 1992 a group headed by George Soros began buying Tektronix stock. By the fall of 1992, the Soros Group owned about 13.9 percent of the company, and was demanding three seats on the board of directors. In November three new members were added to the board of directors, including Tektronix's president, Delbert W. Yocam. At that time, the Soros Group agreed not to acquire more than 14.9 percent of the company. That agreement was to run through March 15, 1994.
P. C. Chatterjee, a New York financier who represented the Soros Group in dealings with Tektronix, also was openly critical of Meyer, including his decision to move corporate headquarters from the Beaverton campus to Wilsonville, Oregon. In what was viewed by many as another move to satisfy the Soros Group, Tektronix had brought in Yocam, a former Apple Computer executive, to assume the duties of president just days before the 1992 annual meeting. Meyer remained chief executive officer and chairman of the board.
According to a company spokesperson, Yocam's role was to execute strategies shaped by Meyer and to align Tektronix's product portfolio with growth markets. In one of his first moves, Yocam reorganized Tektronix into five business divisions: test and measurement products, television products, television production/distribution products and systems (the Grass Valley Group being responsible for this), graphics printing and imaging products, and network displays and display products. Essentially, each division was structured as its own independent business with full profit and loss responsibility. The idea behind this move was to enable divisions to make timely decisions relative to customer issues, and to put more emphasis on developing new products to meet the customers' needs. In addition, support groups would be better equipped to provide world-class service.
In 1992 and 1993 Tektronix continued to strengthen its management team, recruiting aggressive individuals with proven track records from successful, fast-growing companies. Carl Neun, formerly senior vice president of administration and CFO of Conner Peripherals, joined Tektronix as vice president and CFO. John Karalis, vice president of corporate development, was previously general counsel with Apple Computer and the Sperry Corporation. Daniel Terpack, formerly general manager with Hewlett-Packard, became vice president of test and measurement. And Deborah Coleman, vice president of materials operations, held several vice president positions with Apple Computer before joining Tektronix.
In the fourth quarter of fiscal year 1993, Tektronix took a pretax charge of $150 million for a restructuring that was to accelerate the strategic changes Meyer had mapped out in 1990. As a result, the company reported a net loss for the year of $55 million ($1.83 per share). Without the restructuring charges, net earnings for fiscal year 1993 were $39 million, or $1.30 per share, up 29 percent from 1992. New sales were up for the first time in four years, $1.302 billion compared to $1.297 billion in 1992. The restructuring is viewed by Tektronix management as an investment in the future and is expected to speed up improvements in profitability and allow the company to focus its resources on growth. Under the restructuring, Tektronix will exit non-strategic businesses, consolidate facilities, discontinue older products, and cut employment by eight percent (about 800 jobs) through attrition and layoffs.
Also in 1993 Tektronix reduced administrative costs by $30 million, received a $31 million dividend from Sony/Tektronix, its joint venture company in Japan, and refinanced its debt structure. Regarded by some as long overdue decisions, the latest actions taken by Tektronix have resulted in renewed belief by some analysts that the company is moving in the right direction. Even in the sluggish economy of the early 1990s, the company's performance has been improving.
Principal Subsidiaries: Colorado Data Systems, Inc.; The Grass Valley Group, Inc.; Tektronix Development Company.
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