PerkinElmer, Inc.

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PerkinElmer, Inc.

45 William Street
Wellesley, Massachusetts 02481-4078
U.S.A.
Telephone: (781) 237-5100
Fax: (781) 237-9386
Web site: http://www.perkinelmer.com

Public Company
Incorporated: 1939
Employees: 10,000
Sales: $1.47 billion (2005)
Stock Exchanges: New York
Ticker Symbol: PKI
NAIC: 334516 Analytical Laboratory Instrument Manufacturing

PerkinElmer Inc. is a leading provider of analytical instruments used in the health sciences and industrial sciences markets. With operations in more than 125 countries, the company provides tools and instrumentation for drug discovery, genetic screening, and environmental and chemical analysis. It also offers technology solutions for biomedical imaging. A key contributor to the development of optical tools such as the infrared spectrometer, the spectrophotometer, and laser retroreflectors, the company is also known for its work on NASA's Hubble Space Telescope, an ambitious and ultimately unsuccessful project that has nevertheless provided scientists with some valuable information through space photography. The company has experienced several major organizational overhauls since the 1980s and announced plans to sell its fluid sciences division in 2005.

EARLY HISTORY

PerkinElmer Inc. traces its roots to the early 1930s when a common fascination with astronomy brought together an otherwise unlikely duo: Charles W. Elmer, the head of a firm of court reporters who was already not far from retirement age, and Richard Perkin, a young investment banker who had left Pratt Institute in Brooklyn, New York, after a year of studying chemical engineering to try a Wall Street career. The two met when Perkin dropped in on an astronomy lecture Elmer delivered at the Brooklyn Institute of Arts & Sciences. They soon became friends and also recognized a common interest in turning their hobby into a business opportunity in precision optics. Deciding to set up shop in New York City, Perkin raised $15,000 in start-up capital from his relatives, and Elmer was able to contribute $5,000. They ordered equipment from Europe, and on April 19, 1937, they formed Perkin-Elmer as a partnership.

Perkin and Elmer started their optical design and consulting business in a small Manhattan office, but within a year they were producing optical components in Jersey City, New Jersey. On December 13, 1939, they incorporated. The company moved to Connecticut's Fairfield County in 1941—initially to Glenbrook outside Stamford, later to Norwalk, and then to Wilton.

The onset of World War II made clear the importance of an American source for precision instru-ments, and Perkin-Elmer was able to operate at a profit from the start. In 1942, it became the first optical instrument maker to win a Navy "E" (for Excellence). The principal wartime products were instruments and components used in airplane range finders, bombsights, and reconnaissance systems. The company also was able, however, to arrange for research that extended its optical know-how into a brand new field, coming out with its initial infrared spectrometer in 1944. Germany also had done work in infrared spectroscopy, but had put it aside to concentrate on more urgent military needs, enabling Perkin-Elmer to build a substantial lead. The production of a spectrometer, which uses infrared rays for quick and accurate analysis of chemical compounds, was the start of a whole array of analytical instruments, such as gas chromatographs (which Perkin-Elmer introduced in 1955 as its second major analytical group) and atomic absorption spectrophotometers, collectively ushering in a new era in analytical laboratory operations. The equipment was used both for research and for production control, as well as several other activities, including crime investigations.

POSTWAR GROWTH

After the war the company was chosen to design and build the 33-inch Baker Schmidt telescope, which Harvard University installed in 1950 at an observatory in South Africa. As part of its defense work, in 1955, it built a Transverse Panoramic Camera, the 12- by 14-foot frames of which could take precise horizon-to-horizon aerial reconnaissance pictures from 40,000 feet, a major achievement in those presatellite days. From the early, unmanned satellite launchings on, Perkin-Elmer instruments were used regularly in spacecraft. Furthermore, the company remained a leading supplier of missile guidance equipment to the military.

During the 1950s Perkin-Elmer also moved energetically into foreign markets. It set up a manufacturing affiliate in West Germany in 1954 and in Britain in 1957, while sales units were established in several more countries. In 1960 a Japanese production unit, Hitachi Perkin-Elmer, was established, with Hitachi Ltd. holding a 51 percent interest. Cofounder Elmer died at age 83 in 1954. A year later the company sold its first stock to the public and began trading over the counter. On December 13, 1960—21 years to the day since Perkin-Elmer incorporated—Dick Perkin bought the first 100 shares for $47.50 a share at the traditional New York Stock Exchange ceremonies as Perkin-Elmer was listed with the ticker symbol PKN. Perkin-Elmer's stock underwent four 2-for-1 stock splits through the 1990s. While PKN tended to be quite a volatile stock, prices were generally well above that early level.

Perkin served as president and chairperson until June 1961, when he brought in Robert E. Lewis, who had been president of Argus Camera and Sylvania Electric, to take over as president and chief executive. Perkin remained chairperson, concentrating on long-range plans and overseas development, until his death at age 62 in 1969.

Perkin-Elmer came early to the laser era in 1961. In fact, the whole concept was so new that the unit handling the development was called the Optical "Maser" Department, because when Dr. Theodore Maiman first came out with the beams at Hughes Aircraft in 1960, their name was derived from Microwave Amplification by Stimulated Emission of Radiation. Since light waves, shorter and with higher frequency than microwaves, can be concentrated into narrower beams and operate at higher speed, the technology quickly centered on the optical maser version, that is, light beams. It was not long before "l" for light replaced the "m" and the term became laser. Most of Perkin-Elmer's laser work in the 1960s was in defense and space applications. One triumph came in 1969 when the Apollo 11 astronauts, their helmet visors protected by a Perkin-Elmer coating, deployed Perkin-Elmer laser retroreflectors on the moon's surface; shooting beams from earth at these reflectors later permitted extremely accurate distance measurements.

COMPANY PERSPECTIVES

PerkinElmer, Inc. is focused in the following businesses—Life and Analytical Sciences, Optoelectronics and Fluid Sciences. Combining operational excellence and technology expertise with an intimate understanding of its customers' needs, PerkinElmer provides products and services in health sciences and industrial sciences markets that require innovation, precision and reliability.

DIVERSIFICATION: 1970–85

During the 1960s, the company made some acquisitions supplementing internal expansion of its instrument line. Then, in the 1970s, in line with a trend in American corporate culture, Perkin-Elmer undertook a number of ambitious diversification moves. The foundation was laid for what Perkin-Elmer calls its material sciences business with the acquisition in September 1971 of METCO Inc. of Westbury, New York, the leading supplier of plasma and flame spray material and equipment. (After acquiring the corporation, Perkin-Elmer opted to lowercase the name to "Metco.") The Metco thermal spraying process applied a metal or ceramic coating to improve a part's wear, corrosion rate, or heat resistance. The improved surface provided by such spraying can permit the use of less expensive materials in all sorts of machinery and engine components.

Also during this time, Perkin-Elmer sought to take advantage of the transistor boom by entering the semiconductor equipment business. In 1973 it introduced the Micralign projection mask aligner, designed to facilitate the production of semiconductors. The company entered yet another popular field the following year, acquiring Interdata, Inc., active in super-minicomputers.

While building up its presence in these new areas, Perkin-Elmer also continued to enhance its analytical instrumentation and optical lines. Among major optical assignments, Perkin-Elmer received in 1977 the prime contract to develop the Hubble Space Telescope for NASA. This particular project proved to be a mixed blessing. After the $1.5 billion telescope was finally launched into space in 1990, it was discovered that the Hubble could not achieve its full mission because of some design and manufacturing flaws. Even so, it has been able to send back, as the New York Times put it, "valuable pictures of the near and far heavens."

In the instrumentation area, Perkin-Elmer began to introduce increasingly computerized equipment. For instance, in 1975 it brought out an infrared spectrometer controlled by a microprocessor; a decade later, the company offered augmented automation by use of robotics. Meanwhile, in 1977 Perkin-Elmer had further broadened its product base through the acquisition of Physical Electronics Industries, which specialized in surface science analytical instruments used to examine the chemical composition and bonding of the first few atomic layers of a surface. Later, the company began to explore biotechnology instrumentation.

RESTRUCTURING IN 1987

Up until the mid-1980s, Perkin-Elmer's growth formula had resulted in generally rising sales to a record $1.3 billion in the July 1985 fiscal year, compared with only around $300 million by the mid-1970s and less than $50 million in 1963. Profits, while more volatile, also had grown strongly from around $2 million in 1963. Profits peaked at $82.6 million, however, in fiscal year 1981. By the latter part of the 1980s, Perkin-Elmer determined that massive diversification no longer paid off. Again like so many other corporations, it entered a series of divestitures and restructurings.

Even as it proudly celebrated the 50th anniversary of Perkin-Elmer's start as a partnership, management bluntly told stockholders in the 1987 annual report that in this "watershed year … we faced the realities of a significantly changed marketplace. We recognized that markets for high technology goods … have become much more competitive." The message was accompanied by a $95 million restructuring charge, which left the company $18 million in the red for the July 1987 year, its first recorded loss.

KEY DATES

1937:: Charles W. Elmer and Richard Perkin form Perkin-Elmer as an optical design and consulting business.
1939:: The company incorporates.
1942:: Perkin-Elmer becomes the first optical instrument maker to win a Navy "E" (for Excellence).
1944:: The company launches its initial infrared spectrometer.
1955:: A Transverse Panoramic Camera is developed.
1960:: Perkin-Elmer lists on the New York Stock Exchange.
1971:: METCO Inc. is acquired.
1977:: Perkin-Elmer receives a contract to develop the Hubble Space Telescope for NASA.
1993:: Applied Biosystems is purchased.
1995:: Tony L. White is named president, chairman, and CEO; the company begins restructuring into two distinct groups: Analytical Instruments and Applied Biosystems.
1999:: The Analytical Instruments division is sold to EG&G Inc.; EG&G changes its name to PerkinElmer Inc.
2005:: PerkinElmer plans to sell its fluid sciences division.

This first stage of restructuring consisted mainly of dropping unprofitable product lines, consolidating plants, and streamlining sales and service operations, as well as scaling back their workforce by 6 percent. The company maintained its six basic business lines: analytical instruments, semiconductor equipment, optical systems, materials and surface technology, minicomputers, and the German manufacturing unit called Bodenseewerk Geraetetechnik (BGT), which specialized in missile and other avionic systems for the United States as well as the German government.

Fiscal 1988 brought the anticipated rebound, with profits of $72 million. By the end of the year an agreement had been reached to withdraw from the computer business. Back in 1985, Perkin-Elmer had put its computer business into a new subsidiary called Concurrent Computer Corporation and had sold an 18 percent stake to the public. The company arranged to sell its remaining 82 percent interest to Massachusetts Computer Corporation. The sale was completed early in fiscal 1989, with Perkin-Elmer realizing a moderate profit on the transaction.

As fiscal 1989 progressed, management decided on a far more drastic restructuring, dropping three more major business segments and leaving a company centered on just two basic fields: analytical instruments and material sciences. As a measure of the magnitude of these steps, the historically recalculated revenues from "continuing operations" for fiscal 1987 came to only $600 million or less than half the record $1.3 billion that all of the then-operating units had actually brought in. For fiscal 1989, both sales and profits from continuing operations showed healthy gains over the two preceding years, but an $82 million write-down of the businesses being dropped resulted in a net loss of $24 million.

Most of the actual divestitures took place between November 1989 and May 1990. BGT in Germany was sold to the Diehl Group. The Hughes Aircraft subsidiary of General Motors acquired most of the Government Systems (formerly called Optical Systems) operations, though some parts of this business were sold separately, in several instances to companies set up by former Perkin-Elmer subsidiary managers. Most of the semiconductor equipment operation was placed in a unit then acquired by Silicon Valley Group, while another portion went to a company formed by unit management. In three of the divestitures, Perkin-Elmer, at least temporarily, took a minority stake to facilitate the deal. While these dispositions had required a write-down of book value, the sales generated net cash inflow of nearly a quarter of a billion dollars. Perkin-Elmer used it to buy back some ten million common shares, more than 20 percent of the total outstanding.

CONTINUED REFOCUSING OF THE COMPANY THROUGH 1995

The more narrowly focused Perkin-Elmer boosted sales and turned a $44 million profit in fiscal 1990, but the next year, with problems aggravated by worldwide weak economies, the Persian Gulf war, and other international turmoil, events proved that the company was not yet in the clear. Gaynor N. Kelley, who had started at Perkin-Elmer in 1950, became president in 1985, and added the titles of chairperson and CEO in October 1990, cited the "excellent potential" of the company's two remaining businesses, but told stockholders in the fiscal 1991 annual report that "our management team concluded that additional changes were necessary to achieve that potential." He added: "This was a sobering realization because our company had already experienced tremendous upheaval." Another $53 million was set aside for necessary restructuring, this time pushing fiscal 1991 results $15.6 million into the red.

Kelley had started on his task almost as soon as he was placed in full charge. In December 1990, he issued a call to action, noting that while the company was intent on "preserving the things we do that work well, and changing those things that do not," it needed to recognize that customers are increasingly "solution-oriented rather than technology-oriented." He solicited help from teams of employees from all sectors of the company to implement his goals and develop new products that customers would want.

Whereas the United States was Perkin-Elmer's single largest market, it accounted for less than 50 percent of total company business; most of the foreign volume came from Europe. Kelley began formulating steps to attract more Pacific business, but his basic principle was that the company's products generally have a worldwide rather than localized market. Consequently, he instituted a switch from operating by geographical units to organizing around the product on a worldwide basis. The entire global instrument business was divided into three major groups: life sciences, organic sciences, and inorganic sciences. At the same time, management of the materials sciences operation was overhauled. The July 1992 year saw recovery with revenues at a post-divestiture high of $911 million and profits of $59 million. In Forbes, Reed Abelson ventured that Perkin-Elmer "seems finally on the right track."

Perkin-Elmer's contraction of its business lines did not mean abandonment of an aggressive search for new opportunities within its chosen fields. A prime example was the company's growing interest in biotechnology instrumentation. In 1986 Perkin formed a joint venture with biotech specialist Cetus Corporation. Utilizing the polymerase chain reaction (PCR) technique developed by Cetus, the venture produced DNA instrumentation products that could amplify DNA from tiny samples. In December 1991 Cetus was acquired by Chiron Corporation after selling its PCR technology to major drug producer Hoffmann-La Roche. As a result the Perkin-Cetus venture was replaced by a long-term agreement with Hoffmann. In early 1993 Perkin acquired Applied Biosystems, an expert in DNA sequencing and synthesizing systems, which could become the base for Perkin-Elmer's total biosystems effort. It is in such ways that Perkin-Elmer counted on invigorating its business without straying from its instrument orientation.

CHANGE: 1995 AND BEYOND

During the mid-1990s, Perkin-Elmer failed to shore up profits due to slow growth and expensive restructuring charges. By 1995, shareholders were dissatisfied with Perkin-Elmer's direction and demanded the company take action to increase shareholder value. Kelley stepped down that year and was replaced by Tony L. White. Under his leadership, Perkin-Elmer's operations were divided into two major divisions: Analytical Instruments and Applied Biosystems.

Over the next several years, the company made several acquisitions to bolster its holdings. Tropix Inc., a drug candidate screener, was added to its arsenal in 1996. It also purchased GenScope and genetic analyst firm PerSeptive Biosystems. After this purchase, the company teamed with Celera Genomics to map the humane genome.

In 1999, the structure of Perkin-Elmer changed dramatically. PE Corporation was formed as a holding company to oversee the operations of Applied Biosystems and its newly created unit, Celera. PE Corporation eventually adopted the Applera corporate moniker.

Meanwhile, the Analytical Instruments division, including the Perkin-Elmer name, was sold to EG&G Inc. EG&G had been established in 1947 by MIT professor Harold E. Edgerton and several former students and had been involved in a wide variety of activities including nuclear weapons management for the government. The company had been faltering in recent years and brought in Gregory L. Summe in 1998 to turn around the business. Summe cut jobs, sold off businesses, and spearheaded the Perkin-Elmer deal in 1999. In July, EG&G adopted the PerkinElmer Inc. name. Shortly thereafter, it sold the EG&G Technical Services business to the Carlyle Group investment firm.

When the dust settled on the reorganization, Perkin-Elmer stood as a company focused on life sciences, fluid sciences, optical-electronics, and analytical instruments. By 2002, nearly 80 percent of what was the old EG&G had been sold. Two years later, the company integrated its life science and analytical instruments businesses. Together, the new unit accounted for 65 percent of revenues in 2003.

Over the next several years, the company disposed of noncore assets and strengthened its major divisions by making key purchases and strategic partnerships. Perkin-Elmer increased its stake in Bragg Photonics Inc., a high-speed fiber optics communications component manufacturer. It also formed a licensing agreement with Incyte Genomics Inc. to develop DNA research capabilities. Acquisitions over the next several years included drug discovery tool manufacturer NEN Life Sciences Inc., Packard BioScience Co., and Elcos AG.

In 2005, PerkinElmer set plans in motion to jettison its fluid sciences business unit. Once completed, the company would strictly cater to the healthcare and life sciences markets. Under Summe's leadership, Perkin-Elmer had transformed itself into a leader in those markets—and this transformation appeared to be paying off. In 2004, revenue increased by 10 percent over the previous year. With sales and profits on the rise, Perkin-Elmer appeared to be well positioned for growth in the years to come.

Henry Hecht