ELECTRONICS: The New Age

• Share

(9 of 9)

Faced with such competition, many small companies may find commercial electronics even more hazardous than working for the U.S. Government. Radio and TV producers are already learning the lesson. In 1950 there were 140 manufacturers of TV sets, 108 radiomakers; by last year the totals were down to 51 and 59 respectively. To compete and survive, small companies must tailor their products to a civilian-market demand, learn to produce at low cost as well as in high quality—and learn to market what they make.

Merger, Merger, Merger. Discoveries in electronics are coming so fast that obsolescence is already a major problem for big companies as well as small. To stay out ahead, more and more money must be spent on research, not only applied research aimed at specific products, but basic research to uncover electronic secrets that will lead to quantum jumps in the art. To date, most small companies plow between 6% and 10% of their profits back into research, yet their efforts are puny compared to General Electric's $246 million research budget for 1956, Westinghouse's $150 million, Bell Telephone Laboratories' $120 million. One way for small producers to solve their problems is by merging with bigger companies. Some small electronics makers have as many as 50 merger offers in their files. General Tire & Rubber, American Hard Rubber Co., Baldwin-Lima-Hamilton, even moviemaker Paramount—all have bought into electronics by taking over smaller companies.

The giants frequently pay far more than the electronics firm's stock (often selling at 40 to 50 times earnings) is worth by Wall Street's usual valuation. But to start out from scratch might cost twice as much, take time that no one in the fast-changing industry can afford to lose.

The Key. No one doubts that the electronics industry will solve its problems and push on toward tomorrow. When will tomorrow arrive? As society becomes increasingly complex, with more people to feed, clothe, house and entertain, companies like R-W are betting that it will be soon. "Everything is getting too big too fast," says Ramo. "Industry is getting too complicated, and anytime you have a situation in which the pace is beyond human capacity to keep up, you're heading for chaos." The solution in the eyes of men like Simon Ramo and Dean Wooldridge is to construct ever newer and more wondrous electronic gadgets to bring order out of chaos. To all industrial needs—and most human physical needs—the electronics magicians are sure they have the key.