Broadcasting Telecasting (Oct-Dec 1957)

MANUFACTURING CHANNEL 4-SI6HT You don't have to be a Sherlock, nor do you need a glass to magnify the resultant effect of the use of Channel 4 in the great Golden Spread. More than 100,000 TV sets in a vastly healthy and wealthy market. Power: Visual Aural 100 kw 50 kw Antenna Height 833 feet above the ground KGNC-TV CHANNEL 4 CONTACT ANY KATZ MAN AMARILLO, TEXAS SLIGHT SET LAG EXPECTED IN '58 • N. Y. investment firm reports on manufacturers' outlook • Forecast: 5% decline in tv output, narrower profit margins Page 92 • December 9, 1957 Barring an unusual run on radio-tv sets during the Christmas shopping spree, what's the status of the receiver manufacturing industry? The prospects presented by Arnold Bernhard & Co., New York, investment adviser, in "The Value Line" investment survey released last Monday: With disposable income leveling off and unemployment rising, replacement demand is likely to falter in 1958; tv manufacturers already have experienced a long recession during the past two years; current prices of the stocks "do not yet fully discount the lower profits visualized for 1958;" sales now are down; there's been an inventory readjustment and a better supply -and -demand balance achieved, but the industry "is at a level of production well below capacity." Seen for 1958: a 5% decline in tv set production "in view of the developing general business recession." The survey reported "profit spreads . . . may not deteriorate much below the 1957 level for some companies. This is likely to apply especially in the television section [of consumer durables] where factory output has dropped to about 6.6 million units this year from 7.4 million in 1956, while retail sales declined only moderately below 6.8 million units of 1956. However, inventories of tv sets have been built up again in the past two months in anticipation of a Christmas season bulge at retail." The report warned: "If the new thin models (made possible by the 110-degree angle picture tube) do not sell well during December, the industry will probably enter a new inventory readjustment phase in early 1958." In the electrical industry's biggest volume appliances, market saturation is high, according to the investment adviser. For tv, saturation is given at 80%. Quick summary or highlights on individual companies reported by the survey: Admiral Corp. — "A cyclical recovery in profits in the years ahead will likely be accompanied by a wide price [of stock] advance ... at best, stock may be expected to yield 2.4% over the coming 12 months" contrasted to average annual return of 4.2% in past years. Admiral's earnings reports are looking better; its seven-year pattern of lower earnings can be expected to be broken next year; its increased prices and higher unit volume in the higher-priced and highermargined table and console models should more than offset a smaller volume of set production. Collins Radio — It is "isolated against the ups and downs of civilian business cycles by its heavy backlog of government orders. Therefore the current general business recession should have little effect on this company." (Collins Radio designs, manufactures and sells specialized radio communication equipment among many products — including those used in defense). Cornell-Dubilier Electric Corp. (a leading manufacturer of capacitors) — The expected drop in both tv set and auto production (8% predicted) will hurt Cornell-Dubilier which sells condensers and aerials to the tv industry and radio aerials to automobile makers — "lower sales in 1958 seem probable." Allen B. DuMont Labs— DuMont can be expected to break about even next year. The company suffered in recent months when the demand was for lower-priced portable sets in which DuMont doesn't specialize; its $20,000 profit for the third quarter was the first such showing since the final three months of 1954. "Currently operating at a break-even point and paying no dividend, the [DuMont] stock is an outright speculation on the success of management in developing earnings in the future." Emerson Radio — This company completed its fiscal 1957 (ended Oct. 31) without paying a dividend — "an abrupt break in the 14-year cash dividend record." Though its financial position is satisfactory, the company may have done little better than break even in 1957 and has little hope conditions will improve in the next 12 months. Sales of Emerson radios apparently did well but the tv line (as well as air-conditioners) was down. An expected bulge in tv set sales last Christmas did not come about and Emerson's inventory was a large hangover in the market during much of 1957. General Electric Co. — "Ranks with the bluest of the blue chips. It does 22% of the business in one of the real growth industries. . . . We project a 40% increase in profits and in dividends over the next three to five years." GE's record profits achieved this year "may prove a temporary peak," profit margins can be expected to weaken as sales slip. Hoffman Electronics — Its "reputation for quality electronics is growing rapidly • • • earning power should expand in the years ahead." One of its divisions makes radios, phonographs and tv sets, another semiconductors. Estimate: $40 million sales this year, $48 million next year. Magnavox — "Reported record sales and earnings for its recently completed fiscal year (ended June 30), a remarkable showing since the industry as a whole has been experiencing hard times." Primarily responsible for the sales gain was a near 20% increase in tv set sales and doubling of hi-fi phonograph sales. Net income increased 21% in the period, though the profit margin narrowed from 10.6% in fiscal 1956 to 9.4% in fiscal 1957. Prediction: Moderate increase in sales and earnings for the full fiscal year. Motorola — This firm is one of the largest auto radio manufacturers (important competition is from General Motors' Delco Div.) and traditionally has supplied one Broadcasting