Corporations: According to Plan

Diversification has come to have a magical sound. But it takes doing. A company may wind up with an unwieldy assortment of unrelated products and a top management spread too thin. Three years ago, competitors predicted as much for Los Angeles' Litton Industries, an electronics firm that, largely through whirlwind acquisitions, had soared to annual sales of $83 million in only five years of existence. Instead, Litton has just reported a 30% increase in sales (to $245 million) from last year, and after-tax earnings of more than $10 million. And last week, in another manifestation of corporate coming of age, Litton got itself a new president. Slow-spoken Charles B. ("Tex") Thornton, 48, chairman and president of Litton since its founding, cut himself back to one title: chairman. He turned over the presidency to articulate, computer-quick Roy Ash, 42, who from the beginning has been Thornton's alter ego.

The Goal: Leadership. Thornton and Ash only seem to be fanning out in all directions. Their success in building a clutch of purchased companies into a single sound corporation rests, they say, on a detailed master plan that they drew up when they started Litton and are still following. "Our goal," explains Thornton coolly, "is leadership in the electronics industry."

In pursuit of that goal, Litton has been highly selective in its corporate acquisitions. "We have never bought a company just to be getting another company," says Thornton. "We have bought time—time that otherwise would be lost to us forever. We have bought a product, a market, a research team, a management or a plant—things that would have taken us years to build from scratch." Currently, Litton gets an average of 80 feelers a month from firms that would like to be taken over. From this bunch, Thornton and Ash winnow out three or four a year.

Out of the Lode. Thornton and Ash both came out of a peculiar lode of executive talent: the U.S. Air Force's World War II statistical control service. After the war, Thornton led out to Ford Motor Co. ten young officers who later became famed as "the Whiz Kids."* Meantime, Ash went off to get an M.B.A. at Harvard Business School. (Since his family was too poor to send him to college, Ash has no B.A.—a fact that, he grins, "I hate to admit because someone's liable to take my master's away.")

When Thornton left Ford in 1948 to become operating chief at Hughes Aircraft, he recruited Ash as assistant controller. Five years later, the two decided to go into business on their own. Thornton persuaded Wall Street's Lehman Bros, to sponsor a novel financing deal: each investor had to buy at least one package of stocks and bonds priced at $29,200. Today each original $29,200 package has a market value of about $4,200,000.