Andrew Corporation

1932–1954

Andrew Corporation is an international supplier of communications equipment, systems, and services. Among the company's principal products are coaxial cable, connectors, and systems used in various telecommunications systems; a variety of antennas and antenna systems, including microwave antenna systems and special application antennas used in cellular systems, navigation, FM and television broadcasting, multipoint distribution services, instructional television, radar systems, and surveillance systems; and wireless accessories, including portable antennas, batteries, battery chargers, paging accessories, and hands-free kits. About 57 percent of revenues are generated in the area of coaxial cable systems and bulk cables. Andrew has eight manufacturing plants in the United States and additional factories in Canada, Australia, Scotland, Brazil, China, and India; nearly half of revenues stem from products exported from the United States or manufactured abroad.

1937-49: From Consulting to Manufacturing

The company was founded as a sole proprietorship in 1937, when 34-year-old engineer Victor J. Andrew began to manufacture equipment for the directional antennas used by AM radio broadcasters. Andrew received a Ph.D. from the University of Chicago in 1932, and then worked at the Army Signal Corps Laboratories in Fort Monmouth, New Jersey, and at Westinghouse in Chicopee Falls, Massachusetts. Andrew soon returned to Chicago to go into business for himself, renting a bungalow on the city's southwest side where he installed a modest array of tools and equipment. His first sales were for custom designed phasing, tuning, and transmission line equipment for AM radio, though Andrew also offered his services as an engineering consultant to broadcast antenna users. Andrew had intended to make consulting the major part of his business, but World War II brought with it a ban on new broadcast station construction, and so he had little consulting work to do. Andrew concentrated instead on manufacturing, developing a number of new products and achieving significant sales of phasing and tuning equipment and of coaxial cables and rigid coaxial lines.

A strong demand for broadcast products spurred the company's initial growth, and the company moved to new quarters in the same Chicago neighborhood several times in its first ten years. During World War II, Andrew received large orders from the military for coaxial cables and later for dry air pumps which the Air Force used to pressurize airborne radar pods. After the war, Andrew continued its ties to the military, supplying coaxial transmission line which was used to monitor nuclear blast testing both above and below ground. In 1947 the company was incorporated as Andrew Corporation, with Victor Andrew installed as board chairman and CEO, and his wife Aileen named president. That same year, Andrew bought 430 acres of undeveloped land in the Chicago suburb of Orland Park--the clear land being necessary for outdoor testing of antennas--and eventually the company built its manufacturing and management facilities there as well.

1949-69: Microwave Antennas, HELIAX, and International Expansion

Andrew Corporation began making and marketing microwave antennas for both civilian and military communications in 1949, and Cold War demand for Andrew's products during the 1950s kept the company busy. Andrew made switching devices, waveguides, and high-powered coaxial lines that were used in military radar systems. Its HELIAX continuous, semi-flexible coaxial cable came on the market in 1953 and became an important part of company growth. Coaxial cable, including HELIAX and RADIAX slotted coaxial cable, continued to make up the bulk of the company's business into the 21st century.

As demand for Andrew's products grew, the company opened new offices in the United States and abroad. In 1951 the company incorporated a branch, Andrew California Corporation, in order to take advantage of the growing West Coast electronics industry. Two years later, the firm opened a Canadian affiliate because Andrew had had substantial export sales to Canada. The Whitby, Ontario, affiliate immediately did well for itself, supplying other British Commonwealth markets and opening up new opportunities for Andrew abroad. Meantime, net sales exceeded $2 million in 1954.

Meantime, net sales exceeded $2 million in 1954.

1958–1987

Andrew Corporation had been actively scouting European markets since 1958, and in 1966 the company was offered a large microwave antenna system contract in England, with the proviso that a portion of the equipment had to be manufactured in Australia. Due to the clause, Andrew entered both the British and Australian markets at once, founding Andrew Antennas Proprietary Limited in Australia and Andrew Antenna Systems Limited in the United Kingdom the same year. The Australian division took on a contract for the installation of microwave equipment along a 1,500-mile route from Adelaide to Perth. The company experienced many initial difficulties caused by the long distance between the U.S. design team and the Australian affiliate, but despite many costly setbacks, the project was completed satisfactorily, and the Australian branch eventually became one of Andrew's most successful foreign operations.

Early 1970s to Mid-1980s: Shift to Private Microwave Antenna Systems

In the early 1970s, Andrew's market began to change from government and military contracts to private sector applications. In the United States, companies were allowed to compete with AT & T in long-distance communication beginning in 1972, and these so-called Other Common Carriers (OCCs) utilized microwave antennas for their telephone service. Andrew was an acknowledged world leader in microwave technology, and its business grew appreciably as the OCCs such as MCI and Sprint undertook large-scale construction projects. Andrew's growth in the microwave antenna business was at times as much as 25 percent a year between 1972 and 1984. The company held around 60 percent of the world market share in microwave antenna systems, with higher percentages in its top markets in the United States, Canada, and Australia.

The company had unparalleled technical expertise and had been in the market longer than any of its competitors, and in the early 1980s Andrew's dominance was unchallenged. Sales in 1980 reached $89 million, with two-thirds coming from domestic markets. That year Andrew went public, though the Andrew family retained a substantial portion of the stock.

When the U.S. Justice Department broke up AT & T in 1982, Andrew grew even more rapidly. AT & T itself was one of the company's top customers, and with the breakup it and the OCCs demanded still more Andrew microwave transmission technology. The company experienced record sales, with revenues for 1984 exceeding $200 million for the first time. But sales declined abruptly in 1985 when fiber optics began to supersede microwave technology in some areas. Fiber optic cables were found to transmit voice and data faster than microwave systems and with less distortion. Andrew management had had some signs that this might happen, but had anticipated more time to prepare for the new technology.

Late 1980s to Early 1990s: Seeking New Markets

Floyd L. English, who became president and CEO of Andrew in 1983, had worried for years that the company was too narrowly focused. As soon as Andrew's sales began to slacken, English took measures to shift the company into other markets. The company began acquiring smaller firms that would help Andrew open new markets. Andrew was particularly interested in cellular telephone technology and in reentering government work with intelligence gathering communications systems. Andrew bought two small military communications manufacturers, Scientific Communications, Inc., and Kintec Corp., in 1986. With these acquisitions, Andrew was able to secure U.S. Army and Navy and international contracts for antenna receivers and optical tracking equipment, and by 1987 sales in the company's government products division had climbed by 88 percent.

1987–1997

However, while sales increased, earnings did not, and the defense electronics business experienced difficulty because of cost overruns and technical problems. Andrew's government division operated at a $3.9 million loss in 1988. In 1991 DRAGON FIX radio transmission interceptors manufactured by Andrew were used in the Persian Gulf War, but the government division still did not turn a profit.

In the late 1980s, the company predicted that corporations would continue to need enhanced communications between distant computer workstations, and Andrew planned to become a major player in the computer networking market. Andrew bought two companies involved in computer linking technology, Scott Communications, Inc. and Local Data, Inc., in 1987. In 1990 it spent $15 million on a similar company, Emerald Technology, Inc. These acquisitions formed the core of what became a major business area for Andrew. By 1993, computer interconnect technology made up about 15 percent of Andrew's total sales.

Andrew also expanded its mobile communications business rapidly, developing an innovative slotted coaxial cable called RADIAX that eliminated problems with cellular phone use in tunnels, subways, and buildings. The company won a contract to wire the new English Channel rail tunnel with a distributed communications system utilizing the company's RADIAX cable, and subsequently worked on many subway projects, particularly in Europe and Russia. Andrew entered joint ventures in Russia to build fiber optic communication systems in subways in Moscow and St. Petersburg and then created another joint venture to build and operate a 400-mile fiber optic network between Moscow and St. Petersburg. The Andrew network gave callers from these metropolitan areas clearer signals and access to international communications links. This was especially important to Western companies operating in Russia, who had not had effective communication with home offices. In 1994 Andrew worked on in-building communication systems for the new Denver International Airport and in one of the world's largest office buildings, the USAA building in San Antonio, Texas.

By 1992, Andrew had completely recovered from the decline in its U.S. microwave telecommunications business. Sales that year were a record $442 million, with nearly half coming from overseas (an area that had been just ten percent of profits in 1990). Earnings were also strong, and the company's stock performed well. The computer networking business turned only a modest profit, but the government division finally turned a profit in 1992. While this area had lost $1.9 million in 1991, the next year profits were $5.6 million on sales of $66 million.

Though the U.S. cellular market showed signs of maturing, Andrew had hopes for continued growth abroad. Andrew had been a major supplier to a consortium led by its longtime customers AT & T and GTE, and their Argentina contract was worth an estimated $35 million. In 1994 Andrew took on a $5.6 million job for subway communications in Hong Kong and had many new orders in Eastern Europe. In addition, Andrew's involvement in Russia offered the promise of substantial growth because the country averaged ten telephones per 100 inhabitants.

Mid-1990s and Beyond

In 1995 Andrew received the largest order in its history, a $48.6 million contract to expand the cellular telephone and paging systems in the Hong Kong Metro. In December 1995 the company purchased 51 percent interests in two Brazilian firms, Mapra Industria e Comercio Ltda. and Gerbo Telecommunicacoes e Servicos Ltda., that manufactured and distributed antennas, waveguides, and towers as well as providing installation services. With Mapra and Gerbo, Andrew formed a cable manufacturing company in which Andrew held a 70 percent stake. In 1997 the company increased its stakes in Mapra and Gerbo themselves to 70 percent.

1995–2003

In March 1996 Andrew acquired the Antenna Company, a maker and marketer of wireless telephone antennas and wireless accessories, including batteries, battery chargers, and hands-free kits. The company also increased its presence in South Africa that year through the purchase of an 80 percent interest in the Satcom Group of Companies for $3.2 million. Revenues surged by 20 percent in 1996 in large part because of the emergence of personal communication systems (PCS), which functioned as a phone, pager, answering machine, and voice-mail system, while also delivering crisper sound and more security than analog cellular phone technology. After the Federal Communication Commission held its PCS auction in early 1995, the winners scrambled to set up PCS infrastructure&mdashøwers and microwave antennas--with many of them contracting with Andrew for the work.

In the late 1990s Andrew was hurt by a slowdown in the expansion of the U.S. wireless market--particularly that of PCS&mdash well as by the global economic crisis that affected the company's international operations, particularly its major undertakings in Russia and Brazil. Revenues peaked at $869.5 million in 1997 (an increase of 9.6 percent over the previous year), before declining to $852.9 million in 1998 and $791.8 million in 1999. During this period Andrew launched two separate restructuring efforts to jettison underperforming businesses and focus more sharply on core areas. In mid-1997 the company disposed of its network products business and its fiber optic sensors and global messaging development activities, and also significantly restructured its wireless products operation in Europe. Andrew recorded a $22.8 million after-tax charge in fiscal 1997 in relation to this restructuring. In March 1999 the company announced its second major restructuring in less than two years. Initiatives this time included the phasing out of its line of AVS small aperture earth station products, the divestment of its SciComm government electronics business, a shift to the outsourcing of telecommunication tower manufacturing, and the transfer of wireless accessories manufacturing from Addison, Illinois, to Mexico and China. Approximately 600 permanent employees and 280 temporary and contract workers lost their positions as a result, and Andrew recorded an after-tax charge of $28.1 million during fiscal 1999.

In addition to the second restructuring, Andrew also made a number of purchases to beef up its core businesses in 1999. It purchased the remaining 20 percent of Satcom and acquired Maine-based Passive Power Products, Inc., the largest supplier of digital television filters in the world. In October 1999 Andrew announced that it had acquired Chesapeake Microwave Technologies, Inc., a maker of radio frequency and microwave amplifiers and assemblies used in wireless communications systems.

In the late 1990s Andrew set a long-term goal of generating $500 million in annual revenue from new businesses by 2002. The company identified three main markets for this growth: wireless, Internet access, and broadcast. The wireless sector, although its growth had slowed, still had tremendous potential as only eight percent of the world population used wireless services as of 1999. In addition, the Strategis Group forecasted subscriber growth of more than 20 percent per year through 2003. In the Internet sector, Andrew was focusing on the emerging market for broadband wireless Internet access. By late 1999 the company had received two major orders for local multipoint distribution services (LMDS) antennas; LMDS was designed to provide high-speed Internet access and two-way, broadband, wireless transmission of data, voice, and video. In the broadcast sector, Andrew was involved in another emerging technology, that of digital television, and was manufacturing digital TV antennas, filters, and combiners. Andrew's involvement in these various cutting-edge technologies positioned the company for a new period of rapid growth, although much would depend on the speed with which consumers adopted the new products.