Scientific Atlanta Explorer 2200

[Lyle Roblez]

ScientificAtlanta is a manufacturer of communications and testing equipment with operations in eight countries. The company produces materials for use in cable television operations and satellite technology as well as instruments for electronic measurement and testing. Long a leader in the construction of satellite earth stations, Scientific-Atlanta grew rapidly in the 1970s as a result of its involvement with the cable television industry, only to scale back and restructure its operations in the 1980s.

In addition to its satellite products for the cable industry, Scientific-Atlanta manufactured testing and measuring devices for telecommunications, industrial, and laboratory use. The company added to its instrumentation operations when it acquired the San Diego-based Spectral Dynamics Corporation, a manufacturer of scientific devices, in 1978 for $17.4 million. Spectral Dynamics brought with it Europeansales subsidiaries in Germany, France, England, and the Netherlands. With these additions, Scientific-Atlanata boasted a sales network that covered 40 countries and was supported by a worldwide service network that adjusted and repaired its instruments. Both Scientific-Atlanta and Spectral Dynamics relied on continual research and development to bring new products to market, thereby enhancing market share and fostering company growth.

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Scientific-Atlanta, Inc. is a leading manufacturer of set-top cable boxes and other satellite transmission equipment. Long a leader in the construction of satellite earth stations, Scientific-Atlanta grew rapidly in the 1970s as a result of its involvement with the cable television industry, only to scale back and restructure its operations in the 1980s. In the 1990s, the company was one of the first to invest heavily in developing interactive digital cable technology.

Scientific-Atlanta was founded on October 31, 1951, by six professors at the Georgia Institute of Technology. Hoping to market a device that recorded the patterns of antennae, the six pooled $600 to start the company. By 1956 the fledgling firm had completed development of its first product, built its first plant, and amassed 30 employees.

In addition to its satellite products for the cable industry, Scientific-Atlanta manufactured testing and measuring devices for telecommunications, industrial, and laboratory use. The company added to its instrumentation operations when it acquired the San Diego-based Spectral Dynamics Corporation, a manufacturer of scientific devices, in 1978 for $17.4 million. Spectral Dynamics brought with it European sales subsidiaries in Germany, France, England, and the Netherlands. With these additions, Scientific-Atlanta boasted a sales network that covered 40 countries and was supported by a worldwide service network that adjusted and repaired its instruments. Both Scientific-Atlanta and Spectral Dynamics relied on continual research and development to bring new products to market, thereby enhancing market share and fostering company growth.

Once rid of its less promising areas of operation, Scientific-Atlanta focused on more profitable concerns, such as its satellite communications networks. The company enhanced its holdings in this field when it bought Advanced Communications Engineering, which helped Scientific-Atlanta take second place in this growing field. Despite the earlier skepticism of industry analysts, the company discovered a strong demand for satellite communications networks among corporations and in developing nations, where land-based cable communications systems were prohibitively expensive.

Not content to simply alter its product lines, Scientific-Atlanta also moved to significantly control its costs. The company pared its workforce, firing 1,000 workers, and instituted a wage freeze. To reduce problems in its manufacturing operations, the company replaced its domestic assembly lines with cellular manufacturing teams. In an effort to control expenses at its overseas manufacturing outfits, Scientific-Atlanta worked out an agreement with its Japanese supplier to reduce the impact of currency fluctuations on its bottom line. Along with these changes, Scientific-Atlanta eliminated three-quarters of its senior-level management; this turnover allowed the company to revamp its corporate culture, reducing the number of financial reports necessary by two-thirds and incorporating engineers in the early stages of new-product design in an effort to control manufacturing costs. Productivity was increased and the time it took to manufacture many items shrank markedly.

Explorers sales rose in 2000, and so did sales of satellite transmission products. The company signed several international deals, equipping cable providers in the United Kingdom, Germany, and Argentina with transmission equipment. Set-top boxes were going to Britain and Canada. The company also had a significant presence in Latin America and the Pacific Rim.

Scientific-Atlanta began laying off workers at its Juarez, Mexico plant due to the slowdown in business. However, some still felt there was room for growth, as only 22 percent of U.S. cable customers were expected to have digital service by the end of 2001.

In the late 1990s and early 2000s, Scientific-Atlanta began to gain ground on arch rival Motorola. In the first half of 2001, Scientific-Atlanta had secured a 37 percent share of the digital set-top box market. Although this still lagged behind the 58 percent share held by Motorola, it was higher than the 30 percent market share Scientific-Atlanta held in the late 1990s.

Analysts started to downgrade Scientific-Atlanta stock in mid-2001. Digital set-top box growth had slowed as the North American economy worsened, and Scientific-Atlanta's shipments began to decline. According to an October 2001 article in Broadcasting & Cable, Scientific-Atlanta's stock, "a hot pick on Wall Street just nine months ago, has been battered this summer, largely by a serious slowdown in the growth of digital TV sales by cable operators." The firm began to trim operating costs in October of 2001, which prompted some analysts to look more favorably upon its outlook. However, when digital set-top box shipments remained low, analysts again downgraded the stock, and prices continued to fall.

Some believed that the firm would be well positioned for growth once the economy improved. Scientific-Atlanta's newest set-top box was considered better equipped to handle interactive services, a potential growth market for cable operators and equipment makers, than those of its rivals. According to Wachovia Securities Analyst George Hunt, as quoted in Broadcasting & Cable, Scientific-Atlanta is "the best technology company in the cable television space."

Six Georgia Institute of Technology professors created Scientific-Atlanta on October 31, 1951, with plans to sell an instrument that recorded antennae patterns. The young firm began to manufacture electronic testing equipment for the space and defense industries in the 1960s. By the early 1970s, products included telephone testing devices, as well as various electronic implements designed specifically for federal government use. Sales totaled $16 million a year.

Sidney Topol left Raytheon Co. to become president of Scientific-Atlanta in 1971. He focused the firm on telecommunications products, and in 1973, Scientific-Atlanta unveiled a portable satellite station at a large communications convention, and shortly thereafter, Scientific-Atlanta began to market its portable satellite stations to the fledgling cable television industry. The satellite allowed cable television operators to transmit their programming to a large number of stations in different locations. Growth in the cable industry intensified in the mid- to late 1970s, and sales at Scientific-Atlanta began to soar, reaching $45 million. The firm held a 66 percent share of the cable television satellite stations market during the 1970s. The firm also began to make and market other cable television system devices, as well as products not related to the cable industry, such as testing and measuring devices for telecommunications and industrial industries. In 1978, Scientific-Atlanta paid $17.4 million for Spectral Dynamics Corp., a maker of laboratory implements with operations throughout Europe. The following year, the firm bought automatic testing devices maker Adar Associates Inc.

By 1980, Scientific-Atlanta was the largest cable satellite stations supplier in the world. Early in the decade, the firm paid $5.5 million for coaxial cable manufacturer Systems Communications Cable, Inc. Quality control issues with set-top boxes (units placed on top of television sets to receive cable channel broadcasts) began to plague the firm; in 1982, these problems resulted in Scientific-Atlanta's first quarterly loss in 13 years. Scientific-Atlanta eventually stopped making set-top boxes in its U.S. plants; instead, the firm hired Matsushita, an electronics company based in Japan, to handle the manufacturing. Early in the 1980s, growth in the U.S. cable television industry began to slow, and demand for cable-related equipment weakened. In 1984, leading cable broadcasters Home Box Office (HBO) and Showtime chose MA/Com, Inc. over Scientific-Atlanta to develop signal scrambling equipment that would prevent homeowners without cable subscriptions from gaining access to cable transmission via satellite dishes. Attempts to diversify into other markets failed, prompting Topol, by then chairman, to hire an outside consultant, William E. Johnson, to restructure operations.

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