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Henry Singleton 1979

Henry Singleton 1979

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of
thethreemostprofitablemultibillion-dollarcompaniesinthe"'''"'-'''andabrilliantperformerinadullstockmarket,Teledyne,Inc.
is
unique
company.Innowgymorethaninthestyleandcontrarythinkingofthemanwho.ruliSit.
Thesi~ular
IleDry
Siug1etOD
By
Robert
J.
Flaherty
W
HENTHEBUSINESSHISTORYofthiseraiswritten,Dr.Henry
E.
Singletonwillprobablybeoneofitstower-ingfigures,theequalinaccomplishment,
if
notinfame,ofgreatcorporateentrepreneurslikeAlfredP.SloanJr.,GerardSwope,DavidSarnoff,Royal-Little.Thisaloofsonofawell-to-doTexasrancher_isnoteworthyintworespects:forthesizeandqualityofthecompany,Teledyne,Inc.,thathebuiltfromscratch;andforhisalmostarrogantscornformostconventionalbusinesspractices.HenrySingletonhasalwaysmarchedtohisowndrummer-andtoamusicthatmostofhispeerscouldnotevenhear.Hisrecord
speaks
forItself.Until1960Teledynedidnotenexist.Fiveyearsago,whenitwasbarely14yearsold,it_..nked202ndamongmajorU.S.corporationslisted
in-Posess'
Profits500.YearbyyearithasclimbedintheFORBESlistsandlastyearstoodnumber68,anupstartthathadclimbedovertheheadsofgreatAmericancorporationslikeInternationalPaper,AvonProducts,TexasInstruments,Ingersoll-Rand.Whenthe1979listingscomeoutnextyear,Teledyneisalmostguaran-teedtohavemovedupseveralmorerungsontheprofitsladder.ButwhatreallydistinguishesTeledynebeyonditspositiononvariouslistsisthatduringaperiodwheninflationhasbeenerodingmostcorporateprofitmargins,aperiodwhencorpora-tionshavebeen.sellingmoreandenjoyingless,Teledyne'sprofitabilityhasbeengrowing,notshrinking.Itsreturnonequity,nearly33%lastyear,wasmatchedamongmultibillion-dollar(sales)companiesonlybyAmericanHomeProductsandAvonProducts.Aftertaxes,itsreturnonmanufacturingsalesWasafat7.2.%,
us.
5.4%forindustryasawhole.HasTeledynehadsetbacks?Indeedithas,butlookhowithaspulledouto~them:ItsPackardBelldivisioncouldn'tmakeitinhomeTVsetsandquitthemarket.Byemphasizingtheprofitableremainder,PackardBellislargerandmoreprofitablethanevertoday.Duringthemedicalmalpracticefiasco,Teledyne'sArgonautInsurancehadtowithdrawfromwritingsuchpoliciesandIDY'scasualtybusinesstooka$104millionwriteoff.Butbypushingitsconventionalworkman'scompensationandothercasualtybusinesses,Argonautrebuiltitsprofitsandlastyeartheysetanewrecord-$56.7million.WhoisthisbusinessgeniusHenrySingleton,whoturnssetbacksintosuccesses,whorarelyappearsattheBusiness....oundTableorrubsshoulderswithhiscorporatepeers?How_Je~hedoit?Canhekeepitup?FIrstthe"who."Heisaramrod-erect,austerelyhandsomemanof62whospentthreeyeatsatAnnapolis,thenswitchedt~theMassachusettsInstituteofTechnology,whereheearnedhisbachelor's,master'sanddoctorateofscience,allinelectri-
FORBES,JULY9,1979
TeledyneounderCbairmanHenrySingleton
.Be
.tuhlHJm
CIft4
co...iderthe
unthfnlcab...
45
 
calengineering.Educatedasascientistnotasabusinessman,do$2.6billion.Yetintheyearssalesweremorethandoubl:hedidnotleapintoentrepreneurshipbuttrainedforitoverfromthe$1.2billionlevel,Teledynemadeonlyonemnseveraldecadesatthebestschoolsofpracticalmanagementinacquisition.NordidTeledynegetdeeplyintodebt.IntheeatheU.S.-firstasascientistatGeneralElectric,thenasastagesofhisstock-buyingprogram,Singletondidhave
Te
managementmanatHughesAircraft,thenintheearlydaysatdyneborrowratherheavilybuthepaidthedebtdownagLittonIndustrieswhenfounderCharles"Tex"Thorntonandoutofcashflow.IntheprocesshewipedoutallofTeledyr.Roy
1.
Ashwerebuildingoneofthefirsttruly"hot"compa-convertiblesandwarrants.
Dilution?
Singletonvirtually
ck:
niesofthepost-WorldWar
n
era.NotWltil1960,whenhewas
drated
Teledyne'scapitalstructure.Growingthebusin43,didSingletonfoundTeledyne.Hedidsoincompanywithwhileshrinkingitscapital.Quiteatrick.Certainly
unique
twoofthebestbrains'ofthemodembusinessworld:Georgerecentbusinesshistory.Kozmetsky,nowdeanoftheCollegeofBusinessAdministra-Wheninvestors,disillusionedwithgrowth,againbegantionattheUniversityofTexas,andArthurRock,perhapsthebedividendconscious,TeledynecontinuedtorefusetopaU.S.'mostimaginativeventurecapitalist.cashdividend.Thesecond-highest-pricedstockontheMaybebecauseofhisunusualbackground,SingletonhasanBoard(afterSuperiorOil),Teledyne'scashyieldiszero.almostuncannyabilitytoresistbeingcaughtupinthefadsandButtherewereotherrewardsforinvestors.Withrevenfanciesofthemoment.Likemostgreatinnovators,Henrygrowing,profitmarginsthickeningandcapitalizationshriSingletonissupremelyindifferenttocriticism.Duringtheing,Teledyne'sremainingstockholdersenjoyedfantasticearlySeventies,wheninvestorsandbrokersalikelosttheirwardleverage.Duringtheyears1969to1978revenuesoriginalenthusiasmanddesertedTeledyne,SingletonhadTel-creasedby89%,netprofitsrose315%.Butlookatearningsedynebuyupitsownstock.Aseachtenderofferwasoversub-share!Theysoared1,226%.Withallthoseprofitsbeingplosscribedbyinvestorsoflittlefaith,Singletontookeveryshareback,Teledyne'sequitypersharejumpedfrom$11.38to.theyoffered.WhenWallStreet-indeed,evenhisowndirec-between1969andtheendof1978.Allthroughthee:tors-urged
him
toeaseup,hekeptrightonbuying.BetweenSeventiesWallStreetignoredthestock.
It
wasaconglomerOctober1972andFebruary1976hereducedTeledyne'sout-
It
hadfourbadyears.
It
wouldn'tpayadividend.Itkept
buy
standingcommon64%from32millionsharesto11.4million.itsstockagainstallrhymeandreason.Ugh!ScarcelyNormallyaseriousman,Singletonallowshimselftolaughanalystbothered_withit.ForyearsTeledynewasstuck
i
whenherecountshowhis'stubbornnessprevailed."InOctobernarrowrange,rarelygettingabove20.ButfinallyWallSt1972wetenderedfor1millionsharesand8.9millioncamein.caughton.Aftersellingaslowas7'l'sinlate1974,TeledWetookthemallat$20andfiguredthatwasaflukeandthatstockleapedtoover69in1976and,in1978,finallypassedwecouldn'tdoitagain.Butinsteadofgoingup,ourstockwent100mark.Teledyne,whichbrokealltherules,was
om
down.Sowekepttendering,firstat$14andthendoingtwoAmerica'sbest-performingstocks..bonds-fur-stockswaps.EverytimeonetenderwasovertheLet'sputHenrySingletoninperspective.Duringtheylstockwouldgodownandwe'dtenderagainandwe'dgetanewwhenhewasallbutignoringWallStreet,many
of
Amerideluge.Thentwomoretendersat$18and$40."topexecutivesweretrimmingtheirsailstoWallStreet'ssl
S
hareholderswhotenderedhappilyat$14or$40watchedingwinds.Considerseveralofthemostvisibleexamples:indismayas,onlyafewyearslater,thesharessoaredto
In
12.74TextronChairmanG.WilliamMiller,nowchain
-$
J30.HenrySingletonhadbeenright.TherestoftheoftheFederalReserveBoard,hadabrilliantplantoreiworld=dncludingsomeofhisowndirectors-hadbeenwrong.troubledLockheedatliftlerisktohisownshareholders,"Idon'tbelieveallthisnonsenseaboutmarkettiming,"Single-Textronstockdroppedbecauseanalystsquestionedthem_tonsays._l/Justbuyverygoodvalue-andwhenthemarketiser.Feelingthepressure,Millerbackedawayfromwhat
W~
readythatvaluewillberecognized."_havebeenabargainforTextron.Lockheedstockwas"WhatismostimpressiveisthatTeledyne'scapitalshrinkagesellingat$3pershare.Todayitissellingat$21pershare.wasnotachievedattheexpenseofgrowth,orbypartiallyEarlythisyearChairmanJamesD.Robinson
ill
ofAmerliquidatingthecompany.Allduringthese-years,TeledynekeptExpressmadeatemptingtenderofferforMcGraw-Hill.growing.Whereinitsearlydaysithadgrownthroughacquisi-badpublicityblisteredAmericanExpressandRobinson
bae
tions-145inall-initscapitalization-shrinkingdaysTele-away."JimmyThree-Sticks,"ashisHarvardBusinessScidynegrewfromwithin,andsteadily.
In
1970,whenacquisi-classmatescalledRobinson,facedabattleofwillsbetvtionshadceased,revenueswere$1.2billion;in1974,$1.7himselfandMcGraw-Hill'sHaroldW.McGrawJr.Faced
1
.!!!~~2in:!l.!~~~1~.9~~~L!an~d~so~o~n~'lTh:!!!i!s;;~~~!!!~W~i!!ll~;M~c~G~r;aw~'s~~~~~~~AmericanbackeddOl
Creativecapitalist
To
put
Henry
SiDgleton'sachievement..aJIUlJ:lager
In
lOmepenpective.FORBES
charted
Teledyne's
growth
:Ineales.totalprofitsandearaiDgs
per
IJbare
and
.tacked
themaeaiDstthe
perfol'llUUlCC
ofthe
30
'blue-chipcorporationsthatm.akeuptheDowJones:Industriala~rage.(ThesalesandearuiDCsofthe
DowcompaDles
weretotaledandthen
divided
by
30
to
get
an
average.)
Typically.
earniDg.per.hare
fall
to
grow..f8st
astotal
profits,
which.
ill
um;tead
to
lagbehind
sales
growth.By
that
teat,SlnC1eton
is
amostuntypicalJIl8.JUI{Cer-lDdeed.ina
claas
byhimself.
Teled)'llc
Dow
JonclindWltrlala
1969
1978
$1,295.
$4,703.
"Minions
Nedyae
has
actuallyshownslower
sales
growth
than
theaveragebigblue
chip.
Thechieffactor
is
thatintheputten
years.
whilemanyanothercom-pay
has
beenonanacquisitionandmergerbinge,Nedyae
baa
not.
Anita
growth
baa
beeninternal
46
FORBES,JULY9,
 
Xerox,whichthenhadaprice/earningsmultipleoftomergewithC.LT.FinanciaLItwasabeautiful-Xeroxwasgoingtopay$1.5billioninitsstockforC.I.T.ratiothatwouldhaveenhancedbothXerox'earningsand
)(10k
value.TodaythevalueofthatsameXeroxstockpackage
baS·
shrunk
tolessthan$1billioninmarketvalue,whileCLT.'sassetshaveincreasedbyalmost50%to$~llion.At
the
time,however,investmentanalyststurneduptheirnoses.Diluteahigh-technologystockwithagrubbymoney-lendingbusiness?XeroxstockretreatedandsodidXeroxChairman
C.
PeterMcColough.TodayXerox'multipleisdownto11timesearningsanyhow.-Insteadofbuyingrock-solidC.LT.;Xeroxpaid$920millioninstockforScientificDataSystems,afledglingcomputercompany.WallStreetapplaudedbutSDSsubsequentlyallbutcollapsed.ArthurRock,HenrySingleton'soriginalbackerandoneofSDS'backers,cleanedupagain.
I
wouldbehardtopictureHenrySingletontryinganunfriendlytakeover,butitwouldbehardertopicturehimbackingaway-asAmericanExpressdid-oncehehadmadeanoffer.Itwouldbeinconceivableforhimtobackaway&omtheLockheeddealortheC.I.T.dealjustbecausethebrokeragefraternitydisapproved.Hekeptbuyinguphisownstockwithbothhands,whenTheStreetcalledhimcrazy.
So
far,wehavenotevenmentionedwhatTeledynemakesorsells.That'sbecausewhatTeledynemakesorsellsislessimportantthanthestyleofthemanwhorunsit.ThefactisthatSingletonunashamedlyrunsaconglomerate.WhataretheproductsandservicesuponwhichSingletonhasputhisstamp?Offshoredrillingunits,autoparts,specialtymetals,machine
toots,
electroniccomponents,engines,highfidelityspeakers,unmannedaircraftandWaterPikhomeappliances.Aconglomerate,ofcourse,butSingletonisnotevenslightlydisturbedbythelabelvconglomerate."Sayshe:"Today,beingaconglomerateisneitheraplusnoraminus.Whilenotmanycompaniesarecalledconglomerates,mostare."Heticksoff
some
names:GE,WestinghouseandRCA.Thisdiffusecompanyisactuallyquitetightlyrun.Itsboardofdirectorsconsistsofonlysixpeople,nottheusualdozenormore,andallofthemclosefriendsandassociates:Singleton;
Singleton"-emaordfDarllydieclpllDedpunuitofwideprofit
ma.rgIDa
and
hJgh
retums
on
total
auetsIDeachofTeledyne'sfamilyof129compaDiea
Is
reflectedlDtheircomblDedprofit
growth-two
timesfuter
thaD
theaverace
Dow
company.SlDgleton..masterstrokeIDthe
put
decade
was
to
buylDthemajorityofTeledyne'sownsharesbetween1972
aDd
1978,whenthey
were
undervaluedandunwanted.
His
eamiDgs
per
sharesoared11time.futerthanthaw:oftheaverage
Dow
stock.
FORBES,JULY9,1979
47

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