Corporations: An Appetite for the Future

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Dead Reckoning. While collecting a spate of companies and a crack managing team, Thornton and Ash (Jamieson left in 1958 to found his own elec tronics company) have made surprisingly few mistakes. Nowadays Litton gets an average of ten merger offers a week and turns most of them down.

But once it does acquire a company, it usually lets the old management function freely. Ingalls Boss Fred Mayo had the shipyard in the black within 90 days after Litton took over and untied his hands to make necessary changes. Fred R. Sullivan runs Monroe Calculating as if it were his own company.

Despite numerous acquisitions, more than half of Litton's sales growth has been generated from inside by a scramble for new business and new products. The growth has been so fast that profits have not kept up; Litton's after-tax profit on sales is only 4% . "That is hardly a terrific achievement," says Thornton, "but we hope to do better." He believes strongly in plowing back profits into the company to finance growth, and Litton has never paid a cash dividend, though it has paid five stock dividends.

Perhaps Thornton's greatest contribution to the company is his superb sense of timing—an intuitive dead reckoning that tells him when to move with a product and when to hold back. While other defense companies were vying for contracts to produce whole missile systems, Litton backed off and concentrated on providing the highly complex components for the space vehicles. This gave the company more customers to sell to and the opportunity to get financing for invaluable research in a wide range of products. When transistors were industry's glamour product, Thornton held back and saved Litton the agony of the shake-out period that transistor makers are now going through.

Other firms rushed into making in-ertial-guidance systems for missiles, but Litton devised lightweight models for airplanes—correctly guessing that planes would need more machine guidance as speeds went farther over the sound barrier. Litton now has more than 90% of this market. Rather than join other computer makers in challenging IBM with big models, Thornton went after small models; recently Monroe introduced the Monrobot XI, which is the smallest business computer on the market (price: $25,000).