More from 1954… Industry’s Pulse

1954 Industry Pulse: People and companies looking to invest in control engineering have the potential for great success, but there are plenty of pitfalls for the upstarts looking to gain a foothold against the established companies.
By CFE Media October 11, 2014

October 1954 feature stories include servo components and man's role with them, process analysis, jobs for a new computing device, and control makers facing lean markets. Courtesy: CFE Media, Control EngineeringHappy 60th, Control Engineering! Our magazine first published in September 1954. This monthly column in 2014 will resurrect some of our favorite material from the 1954 and 1955 issues. Technologies have progressed, but they continue to pave the way for today’s innovations. Here is a full-length article penned in 1954 that talks about investing in control engineering and the potential that lies ahead, particularly with the advent of computers and data processing technology.

Suppose you have a few hundred or a few thousand dollars to invest. Do you have enough confidence in control engineering to bet on its future? Where would you put your money-in the companies who use automatic processes, or those who manufacture instruments and controls?

More and more brokerage houses and security analysts are asking these questions. Several have assigned staff members, full time, to keep tabs on control and evaluate its investment potential.

Generally, these specialists agree that control engineers are piloting an outstanding growth field. Some of the stocks may not yield fat dividends now, but their value sure seems to increase. The professional judges of investment must decide just where they and their clients can make money, how much, and how soon.

One of the reports they are studying closely is the Stanford Research Institute’s (SRI) recent survey of the electronics market. SRI finds that factory sales of data-processing equipment soared from absolutely nothing in 1940 to $25 million in 1953. The current trend? Almost vertical, in SRI’s opinion, pointing to $500 million in 1960. Electronic instruments for industrial control projects the same bright picture: $3 million in 1940, $65 million in 1953, and probably $150 million in 1960. Add in the machinery that goes with the instruments and the electronic end of control engineering will be a $1 billion field.

In midsummer, one New York brokerage house finished a study of a thriving young California company that specializes in electronic instruments and computers. While recommending the stock to their customers, the analysts declared, "The real growth in electronics will be in process control."

The research department of one of Wall Street’s biggest firms is now distributing a four-page summary of automatic control companies. It starts by expressing general enthusiasm for the prospects of control, particularly for data processing and electronic industrial control.

Most of the space, however, goes to an analysis of 38 stocks-what they are selling for now, last year’s price range, earnings, and dividends. The analysts have broken them down into five manufacturing groups: data processing, electronic components, control instruments, machine tools and machinery, and miscellaneous. The list is nowhere near complete. In fact, the analysts point out that some companies not yet in the field, "May still have an opportunity to enjoy a vigorous participation in its development."

Not every company will strike gold in automatic control. How can you tell which companies will do best? Investment professionals are glancing back through history at earlier growth industries including automobiles, radio, television, and chemicals.

The firm that is going to prosper has to be rich in basic technical knowledge and it needs a sound, imaginative engineering staff. Exclusive control of important products and processes has given many of today’s "blue chips" a jump on their competitors.

But it takes smart production and hard selling to turn products into profits. And only too often a promising company has failed because it lacked the financing for developing its ideas, getting into production, and weathering temporary setbacks.

The big company, fortified by previous success in some other field, has an edge over the little group that starts with an idea and piggyback capitalization. The established company can afford to pay for its research and development, and it can stand to lose money for a while. Besides, it has already built a reputation and a marketing organization. But the investor’s dream is the rare shoestring operation that parlays the genius of a few engineers into a position of leadership. This is the company whose stock zooms 10 or 20 times in value over a few years.

Some investment counselors are peering backstage at the people who buy controls and use them. The first company in any industry to make effective use of computers in its accounting, as well as to control instruments in its production, stands to gain a competitive advantage. In the next few years, control and computer manufacturers may not be able to keep up with their orders. And the companies that get equipment before the big rush begins will open a lead over their rivals.

One company, which has ordered an extensive data-processing system, is already sweating out the delivery. The executives are convinced the equipment will save them several thousand dollars a month-money they are, in effect, now losing through the delay. This will be a familiar story for years to come.

– 2014 Edits by Chris Vavra, production editor, CFE Media,