Blonder Tongue Laboratories, Inc.

views updated

Blonder Tongue Laboratories, Inc.

One Jake Brown Road
Old Bridge, New Jersey 08857-1000
U.S.A.
Telephone: (732) 679-4000
Fax: (732) 679-4353
Web site: http://www.blondertongue.com

Public Company
Incorporated: 1950
Employees: 437
Sales: $53.6 million
Stock Exchanges: American
Ticker Symbol: BDR
NAIC: 33431 Audio and Video Equipment Manufacturing

Blonder Tongue Laboratories, Inc., located in Old Bridge, New Jersey, manufacturers a comprehensive line of electronic equipment intended primarily for the private cable television industry. Its customers include multiple dwelling units (MDUs), the lodging industry, and institutions such as hospitals, schools, and prisons. Following a one-stop shopping approach, Blonder Tongue offers all the electronic equipment required to create a cable TV or security system, ranging from products that acquire and distribute signals to ones that offer interdiction in order to prevent signal piracy. Interdiction products are also sold to cable giant Cablevision, which account for 30 percent of the company’s annual sales. In addition to traditional analog cable TV, Blonder Tongue is heavily involved in the development and sale of products geared toward the emerging broadband technologies, including digital satellite receivers and cable modems.

Ike Blonder and Ben Tongue Meet During World War II

Isaac “Ike” Blonder, one of the founders of Blonder Tongue, was born in New York City in 1916. At the age of six he moved to rural Connecticut, where he developed a passion for the new radio technology. As a teenager he helped out in his father’s auto repair garage, repairing early car radios, in addition to working on his neighbor’s home sets. After earning a B.S. in Physics from the University of Connecticut and an M.S. in Physics from Cornell University, in 1941 Blonder worked for a brief period as a troubleshooter in a General Electric radio factory. He then accepted a one-year commission in the U.S. Army in order to be involved in military research. Pearl Harbor soon followed, however, placing the United States on a war footing, and Blonder found himself shipped to England to serve as a radar officer in the British Army. While in the service, he became friends with another radar officer, Robert Rines, whose father was a patent attorney in the radio business. When the war was over, Blonder began to search for a job after he was decommissioned. It was Rines’ father who suggested that Blonder visit Panoramic Radio Corporation, located in Manhattan. Still dressed in his army uniform, he observed a young man working on a band pass amplifier, and the two fell into conversation. The young man was Ben Tongue, and this chance meeting would lead to the eventual creation of Blonder Tongue Laboratories. Robert Rines also played an important role in the company’s development. (Decades later Rines became better known to the general public as one of the most prominent hunters of the Loch Ness Monster, an interest he shared with Blonder.)

Designated 4F by his draft board, Tongue attended Northeastern University from 1942 to 1945, earning an electrical engineering degree. He had only been working at Panoramic for a short time before meeting Blonder, who soon joined him at the company, which was involved in the manufacture of spectrum analyzers, used in radio tuners. The two men became roommates for a period of time, sharing a Brooklyn basement apartment large enough to accommodate their accumulation of electronic equipment. Blonder stayed with Panoramic less than two years, opting to teach physics at City College in New York. Because it had been heavily dependent on government contracts that were terminated after the war, Panoramic was forced to radically downsize. Staffing levels fell from 150 employees to just seven, resulting in Tongue being named chief engineer at the age of 27. Blonder in the meantime grew bored with teaching and in 1948 took an engineering position at TeleKing Corporation, a New York television manufacturer. Not only did he become involved in television, he gained his first experience with a master antenna system. Because several TeleKing lab engineers needed access to the one television antenna on the roof of the building, Blonder developed a splitter and amplifier system so that several televisions could share a single feed.

Although no longer roommates, both Blonder and Tongue were living north of New York City when they began exploring the possibility of starting their own business. Deciding to take advantage of the mounting interest in television, in 1949 they conceived of a device to improve television reception for outlying areas, a tricky proposition at the time because tuning a channel also required adjusting a booster. A prototype of a device to allow viewers to simultaneous adjust the tuner and booster was built, although it never went into production. Despite lacking a product, however, Blonder and Tongue pooled their money, some $5,000, and started up a business in early 1950, calling it Blonder Tongue Laboratories. They rented an old dance hall in Yonkers, New York, which had formerly housed an illegal gambling operation that took bets on horse races from the nearby track. Within days, Blonder Tongue was raided by the local police, who suspected that two engineers were actually bookies attempting to again set up shop.

In the beginning, Blonder and Tongue earned money by installing high-end televisions for wealthy Westchester homeowners while developing their first marketable product, a broadband booster that allowed for the amplification of all 12 channels (2 through 13) rather than just one at a time. Blonder turned to a pair of friends, Dave Gelass and Harold Baker, who were sales representatives for Centralab Corporation and as a favor took the Blonder Tongue booster, the HA-1, to the May 1950 Chicago Parts Show. Because it was the only product on the market that was an automatic tuner, a number of sales reps at the show expressed an interest in representing Blonder Tongue. Very quickly the new company had orders for the HA-1, which was initially listed at $49.50 and sold to distributors for $20. Some fifty people were hired to produce the product at the Yonkers facility, and demand was so high that many customers simply maintained standing orders for the HA-1, so that once an order was completed another automatically opened. By year’s end, Blonder Tongue generated nearly $33,000 in sales, resulting in a profit of more than $5,400.

Incorporation in 1950

The company incorporated in 1950, with Blonder becoming chairman and Tongue the president of the organization. Rines, also given a stake, made a valuable contribution to the business as a patent attorney and adviser. Over the years, Tongue received 30 patents and Blonder 39. Early in 1951, Blonder Tongue, needing more space, moved to a larger facility in Mount Vernon, New York, where it soon began to produce a new product. Having learned that their HA-1 was being used as part of master antenna systems for apartment buildings, Blonder and Tongue developed a device more suited to the purpose, a high-gain, higher power broadband amplifier, the CA-41-M. They followed up with similar broadband amplifiers, much of the technology subsequently copied by others. Blonder Tongue made products that could have established it as a major player in the cable television industry, which was just starting to develop in mountainous areas of the country where television reception was poor or non-existent. The reason Blonder Tongue did not aggressively pursue the cable business was purely financial. Cable operators were struggling and often took as long as a year to pay their bills. Also operating on a shoestring, Blonder Tongue had no choice but to sell their products to distributors who could pay immediately. They in turn sold the equipment for television installations in homes and apartment buildings. Although Blonder Tongue did develop a line of cable quality equipment, it simply could not afford to finance the early cable operators, as a result opting to focus on products geared toward individuals or small master antenna systems.

Another successful product developed and sold by Blonder Tongue in the 1950s was a UHF converter, which was sold both under the Sears Roebuck and Radio Shack labels. To keep up with the demand for its products, the company was forced to continually relocate to larger facilities. After only a year of operating out of the Yonkers dance hall, Blonder Tongue moved to Mount Vernon, New York, but soon outgrew that space as well. Deciding that New Jersey offered a better business climate, in 1952 Blonder and Tongue moved their company to Westfield, New Jersey, where they began to manufacture a number of products for master antenna systems. In 1955, the business relocated again, virtually overnight, in response to a renegade union’s attempt to organize its workers. According to Tongue, the union organizer “turned out to be an infiltrator from the FBI, gathering information on the UE [an alleged communist union]. So he was sort of a two-faced fellow.” Established now in Newark, New Jersey, Blonder Tongue was soon back in business and another union stepped in to represent the workers.

Company Perspectives:

Blonder Tongue’s focus has always been and continues to be customer driven. To this end, we have adopted a philosophy of Quality, as defined by the customer. This philosophy is exemplified by our company slogan, “The Standard Of Quality In TV Signal Distribution.”

Over the next several years, Blonder Tongue spread its operations to a number of locations in Newark, as the company developed a line of products for closed-circuit television, including monitors and cameras. The company had particular success with its Vidicon industrial camera. However, around 1960 Japanese competitors introduced an inexpensive camera that forced Blonder Tongue out of the business. The company then entered the audio market, producing radios, tuners, a graphic equalizer, amplifiers, and speakers. Although these products sold well for a time, they were all based on monaural technology, and when stereo became popular the company elected not to invest in the new technology and left the field. To this point, Blonder and Tongue, although the top officers of the company, concentrated on engineering and product development, leaving day-to-day operations to a manager. They were shocked to learn in the mid-1960s that the company was in such severe financial trouble that it was on the verge of failure. Taking immediate action, they fired the manager, cut staff, consolidated operations, and assumed more active roles in the running of the business. Tongue relinquished his position as chief engineer and became the CEO. The business soon stabilized and returned to profitability.

During the 1960s, Blonder Tongue products made inroads with cable television, but mostly with smaller operations and generally through word of mouth rather than as the result of active promotion. For several years, Blonder became personally involved in the cable business, serving as the president of a small system in Sonoma County, California, while continuing to fulfill his duties in New Jersey. He and Tongue also became involved in other television ventures. In 1964, they launched a Patterson, New Jersey, UHF television station broadcasting into the New York City market, channel 47. Searching for a paying niche, they turned to foreign-language programming, trying several languages before discovering a large untapped Spanish market. Channel 47 became the first successful Spanish-speaking station in the country. After Blonder Tongue moved out of rapidly deteriorating Newark in 1970, relocating to Old Bridge, New Jersey, the company became involved in the first successful subscription television station, channel 68 in Newark, New Jersey. Its system for scrambling signals in order to create subscription television (STV) had been approved by the FCC in 1971 and applied to channel 68 in 1974. The venture soon ran out of funds, but Wometco Broadcasting acquired the station and contracted with Blonder Tongue for STV decoders. The technology was then applied to other pay-per-view stations around the country. However, the business ultimately dried up because Canadian companies had been selling decoders and, more importantly, STV was only capable of scrambling a single station and was therefore unable to compete with the emerging cable systems that began to offer a multitude of channels. Blonder Tongue then designed a pay-per-view system for cable called Guardsman, which was introduced in 1985.

Blonder and Tongue Sell Business in 1989

In 1989, after almost four decades in business together, Blonder and Tongue decided it was time to step down. They sold the business to two electrical engineers, James Luksch and Robert Palle, who had experience with cable television equipment manufacturer Texscan. Luksch teamed with Carl Pehlke to form Texscan in 1965 and ultimately became president of the company. Palle worked at Texscan from 1976 to 1985, serving in a number of positions. When they acquired Blonder Tongue the business was generating around $10 million in annual sales and essentially breaking even. Electing to retain the Blonder Tongue name, Luksch took over as chairman and Palle became chief operating officer. When the FCC in 1991 permitted private cable operators to transmit signals via microwaves over allocated frequency bands, they positioned the company to take advantage of the resulting boom in the private-cable industry. In 1993, Blonder Tongue acquired MAR Associates, a California maker of microwave amplifiers, transmitters, receivers, and accessories. A year later, the company introduced a line of private cable products geared toward smaller system operators. In 1995, Blonder Tongue gained access to Phillips Electronics’ interdiction technology in order to provide signal protection for the private cable industry. As a result of these efforts, the company saw its revenues grow from $22.7 million in 1992 to nearly $52 million in 1995, with net earnings increasing from $1.3 million to more than $6.4 million during this period.

In December 1995, Blonder Tongue went public, netting over $14 million, money used to reduce bank debt and acquire the company’s Old Bridge facilities. The Telecommunications Act of 1996 appeared to offer even greater opportunity for the company, with long-distance telephone companies now allowed to compete in the cable television business and likely in the market for new equipment. By now, close to 80 percent of Blonder Tongue’s sales were to private cable operators, serving MDUs, hotels, schools, and prisons. In 1996, the company lost one of these major customers, Interactive Cable Systems, which caused a temporary dip in revenues. During the same year, it entered into a license agreement with a subsidiary of EchoStar to manufacture commercial satellite receivers for private cable operators. In 1999, Blonder Tongue, drawing on its STV legacy, signed a major deal with a major cable operator, Cable-vision, which agreed to order 100,000 interdiction subscriber management units, a contract worth over $800 million. Not only would the devices scramble pay-per-view channels, they allowed Cablevision to better manage their changing channel lineups and programming packages.

In the early years of the new century, Blonder Tongue experienced falling revenues, although it remained a profitable business. Management took steps to better position the company for the future, one that was becoming increasingly digital. Blonder Tongue’s less-expensive analog products remained viable with many of its customers, yet the company began to actively develop digital products. It also tried to attract more business from major cable companies, while maintaining its dominance in private cable and small franchise cable operators. The company’s QQQT product line provided an inexpensive digital upgrade to some 8,000 small U.S. cable systems. In 2002, Blonder Tongue signed an exclusive agreement to distribute products from Third Millennium Technologies to provide low-cost broadband Internet capabilities to multiple dwelling unit cable providers. The company also looked to expanded its interdiction products to capture more sales from the larger franchise cable market, which held the greatest potential for sustained growth. With a solid reputation for producing quality electronics, Blonder Tongue was likely to enjoy continued success in a digital world.