Whittaker Corporation Business Information, Profile, and History
History of Whittaker Corporation
The Whittaker Corporation grew from a manufacturer of aircraft valves in the 1940's to a conglomerate of nearly 140 widely diversified businesses. Until Joseph F. Alibrandi stepped in as president in 1970, the company faced impending bankruptcy. Although it is now much smaller and more manageable in size, nevertheless. Whittaker continues to struggle with maintaining a continuous and stable product line.
In 1947 engineer William R. Whittaker borrowed $4,800 to begin the manufacture of aircraft valves. Later he broadened the product line through an acquisition to include the production of guidance instruments. In 1956 the company merged with one of the first commuter software companies and the newly formed company assumed the name of one partner--the Telecomputing Corporation. Despite the reorganization, William R. Whittaker remained the top executive and principal shareholder of the company.
The further acquisitions of Monrovia Aviation Corporation and Narmco Industries allowed the company to enter into the manufacture of metal and non-metal materials. This shift in product orientation is attributed to Whittaker's desire to diversify away from its dependence on U.S. military contracts. Although the company had grown into a $60 million manufacturer of aerospace components, it remained vulnerable to trends in defense industry expenditures. In addition to the acquisitions, Whittaker's growth strategy included implementing cost control measures and performance records. The company now adopted the name of its founder and became the Whittaker Corporation.
To guide the company through this period of reorientation and growth, William Whittaker looked for a new president. He found his ideal executive in 1964 in the person of William Meng Duke, a Ph.D. in engineering from UCLA. Duke's previous management positions included senior vice presidency at Los Angeles' Space Technology Laboratories and head of International Telephone & Telegraph Corporation's U.S. Defense Group. Possessing both an impressive amount of scientific knowledge and a talent for business. Duke's leadership potential seemed well matched to Whittaker's goals. As the company founder moved up to the position of chairman, Duke attempted to prove his business acumen.
In the next five years, through an aggressive and expansive program of acquisition, Whittaker grew from an obscure Los Angeles-based company to a complex of 80 diverse companies with a total annual sales of $753.4 million in 1969. Although Whittaker's business ranged from manufacturing pleasure boats to industrial chemicals, Duke did not consider his company a conglomerate. According to Duke, 70% of Whittaker's products remained related to some aspect of the integrated manufacture of metal and non-metal materials. Whether in processing alloys, chemicals or ceramics, Duke claimed his company could produce not only a variety of materials but also could construct a product tailored to a customer's particular needs.
Wall Street analysts observed the spectacular rise in Whittaker's stock price. From less than $1 a share in 1964, the stock price rose to $46 a share in 1967. Despite such growth, however, a number of problems began to surface. As late as 1967 nearly one-third of Whittaker's business remained tied to military contracts. In particular, $30 million in volume was generated from products, such as helicopter blades, used in Vietnam. Moreover, the management of such a wide variety of businesses became troublesome. At the Columbus-Milpar subsidiary, for example, an undetected problem in inventory build-up and quality control caused a major profit loss. And finally, the number of acquisitions had put tremendous financial strain on Whittaker's resources.
By 1970 the company was operating on a $332 million debt. Stock prices dropped to $6 a share. To remedy the situation Joseph F. Alibrandi, a 41 year old executive from the missile's systems divisions at the Raytheon Company, assumed the position of president. Alibrandi took immediate action by selling nearly a quarter of the 135 aquisitions. The company's net income rose and long term debt was significantly reduced. While these improvements brought tangible results, a number of surprise setbacks illustrated the types of difficulties facing the new top executive. One setback involved the attempted sale of the Crown Aluminium subsidiary. A $6 million inventory shortage cancelled the sale and forced Whittaker into the embarrassing situation of regaining control of the subsidiary. Another problem surfaced when Whittaker's housing subsidiaries falsely anticipated a $2.8 million profit.
Despite these setbacks Alibrandi continued his five-year program to restructure the company. Strict financial and organization guidelines were mandated to all levels of operation. The assiduous young executive was soon promoted to chief executive officer. The son of Italian immigrants, Alibrandi exhibited shrewd leadership skills while refusing the many perks associated with his high-level position. Of the 50 remaining businesses at Whittaker, Alibrandi planned to concentrate on five areas of growth, including technology, industrial chemicals, recreational products, transportation, and metals. These distinct areas were eventually absorbed into wholly owned divisions.
By 1976 Wall Street analysts once again looked favorably on Whittaker's performance record. A welcomed increase to Whittaker's business came with a $100 million contract from Saudi Arabia to establish a health care program. Alibrandi had made prior contacts with the Saudis during his employment at Raytheon; he had managed the Hawk missile installation project. Using these former contacts, Alibrandi proposed the health-care management contract to the Saudi Arabian ministry of defence.
In the marine division the company constructed a line of recreational yachts. The Columbia division manufactured luxury sailing yachts requiring costly hand labor. Although these boats were sold at high prices, the division reported a $5.6 million loss. While many criticized Alibrandi for investing in an area of business that did not fit well with Whittaker's other operations, the president defended the division as a future profit maker.
Although the original five-year plan actually required seven, by 1977 the company reported two consecutive years of earnings growth. This achievement occurred despite major obstacles in two areas of business. A hydraulic device plant in France experienced difficult labor problems and a freight-car manufacturing operation depleted its order backlog. Whittaker's greatest source of profits emerged from the life sciences group. The renewed Saudi Arabian contract contributed $150 million over the next two years and products developed out of cancer research generated approximately $1 million.
As Whittaker's product lines continued to strengthen their performance, the metal division emerged as the company's largest operation. Moving into a highly diversified business of metal products, the group generated 42% of total sales in 1978. Included in this division was the manufacture of railroad freights, which now held a backlog of orders worth $200 million. The technology division volume, comprised of the hydraulic equipment business and the aerospace component operation, increased due to a growing demand for products. In the marine division, Whittaker became one of the largest producers of commercial fishing vessels and recreational boats.
Despite these gains Alibrandi's major business thrust remained in the life sciences and chemical groups. Through the Saudi contract Whittaker was now the United States' largest healthcare service supplier to a foreign country. A $10 million contract to build a hospital in Abu Dhabi increased Whittaker's overseas presence. To augment growth Alibrandi planned future expansion in the areas of biomedical testing, healthcare management consulting, and specialty chemicals. By 1980 five new chemical companies subsidiaries joined the division. In addition, Alibrandi sold the less profitable chemical operations and hired a new group of executives.
In 1981 Alibrandi announced a strengthened commitment to healthcare. In an effort to alleviate the company's dependence on the cyclical markets of chemicals, metals and marine vessels, Alibrandi planned to make healthcare Whittaker's major line of business. Through a number of acquisitions the president and chief executive officer hoped to construct an integrated hospital supply and management company.
Even as the company experienced disappointments over the next several years, Alibrandi continued to expand the company's orientation toward healthcare. Several successful acquisitions reported less impressive performance records than was anticipated and two attempted acquisitions failed. Even more disturbing was the fact that the Saudi Arabian contract was awarded to a competitor. Despite these setbacks, Alibrandi invested $100 million in building a nation-wide network of Health Maintenance Organizations; an investment, it is said, that he hoped would become the foundation of Whittaker's business. The first of these HMOs was purchased in Norfolk, Virginia, and Alibrandi hoped to acquire ten similar organizations by the end of 1985.
Although Health Maintenance Organizations represented Whittaker's new market strategy, the pursuit of growth through specialty chemicals and aerospace equipment was not abandoned; between 1985 and 1986 Whittaker acquired five additional chemical subsidiaries and five defense electronic and aerospace subsidiaries. Ranging from manufacturers of enamel stripping to producers of coil coating, these new businesses attempted to strengthen Whittaker's diversified technologies
A surprising turn of events in recent years have significantly changed Whittaker's business orientation. The company suddenly announced it was selling its HMO businesses to the Travelers Corporation. Although Alibrandi claimed he never planned to remain in the health maintenance field on his own, analysts attribute the abrupt shift to cost overruns. Critics now accused the company of lacking a stable product line. Furthermore, the hospital supply business reported disappointing figures, the chemical division continued to suffer from cyclical markets, and the aerospace operations remained subject to trends in defense spending.
In the most recent episode of Whittaker's shifting market orientations, the company stated it would sell all of its healthcare and metal production businesses and concentrate on chemicals. Wall Street analysts applauded this decision as an attempt to regain a company focus. The purchase of Du Pont's adhesive business, for example, increased Whittaker's sale of adhesives to 25% of total sales in chemicals. The company also announced it would buy back 6 million of its 12.8 million outstanding shares. While some analysts interpret this action as a protective move by management to defend against a possible takeover attempt, other analysts interpret it in the opposite way where the stock repurchase represents an attempt to attract a potential suitor. While Whittaker maintains it is not a takeover target, the company's precise business orientation remains a question of the future.
Principal Subsidiaries: Acrodyne Industries, Inc.; Bennes Marrel S.A.; Cochran Systems, Inc.; Compass Financial Corp.; Falcon Research Col.; Great American Chemical Corp.; Holborn Reinsurance Co.; Holex Inc.; Medical Systems Export Corp.; Metropolitan Financial Services Corp.; Riva Boats International S.p.A. (Italy); Thixon, Inc.; ToxiGenics, Inc.; Whittaker Controls, Inc.; Whittaker General Medical Corp.; Whittaker Health Services, Inc.; Whittaker Healthcare Ltd. (Cayman Islands); Whittaker International N.V. (Netherlands Antilles); Whittaker International Services Co.; Whittaker Life Sciences International, Ltd.; Whittaker Life Sciences, Ltd. (U.K.); Whittaker M.A. Bioproducts, Inc.; Whittaker Marine Export Corp.; Whittaker Medical International Ltd. (U.K.); Whittaker Metals Corp.; Whittaker Metals, Inc.; Whittaker Oil & Gas Corp.; Whittaker Purchasing Services Ltd.; Whittaker Survival Systems (U.K.) Ltd. (U.K.); Whittaker Technical Products Export Corp..
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