Burroughs Address to Shareholders - 1959
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||Remarks of President
Ray R. Eppert
at 74th annual meeting
held in Detroit
May 7, 1959
Resume of 1958, 2
Military Awards, 6
Product Program, 7
Systems Approach, 8
220 Computer System, 9
MICR Technology, 10
Competitive Position, 13
Since we convened a year ago, 4,800
stockholders have joined the many thousands of men and women who share
ownership in Burroughs Corporation.
Last week was Invest-In-America Week
-- set aside to emphasize the importance of capital investment by
men and women such as yourselves in the lifestream of American competitive
enterprise. I think your presence here this morning, together with our
expanding stockholder rolls, make an eloquent commentary on the continued
vigor of democratic capitalism. Investment in America has been one
touchstone of our country's greatness. .it is assuredly an even more
important source of strength for the future.
Resume of 1958
The 12 months since our last meeting
have been genuine milestones in your company's history. It was a year of
challenge as well as accomplishment. The late recession caused a sharp
curtailment of capital investments and a subsequent stretch-out in orders
and deliveries. This business downturn confronted your company-as it did
others -with falling rather than rising market demand. It placed a high
premium on aggressive selling, operating austerity and prudent
administering of finances. We feel that Burroughs not only weathered this
test of economic adversity, but emerged from it the stronger because of
the toughening discipline it imposed.
Nineteen fifty-eight was distinguished
by an increased tempo in the launching of our new product offensive. We
brought forth during this 12 months the first fruits of a long-range
development program in automation equipment, to broaden our revenue base
and deepen our market penetration. With the introduction of these key
which I will later describe, we approached the major
goal of welding our various machines into total integrated data processing
All of these advances along a widening product frontier
are based on electronics-the coin of the future in the business machines
industry. We have a task-force of top engineering and research specialists
in our Paoli laboratories and in the company's various divisions,
representing over 10% of our total personnel of 35,000. These engineers
are the architects of our large commercial and military electronics
programs. Management planning is polarized around research. around new
product development, the lifeblood of any corporation. Through this
research capability, your company is strategically placed in the
mainstream of the new technology.
I should like to make one final generalization about 1958
- namely, tthat we gained ground on a major objective which I
defined here last year, the sharpening of our corporate image. While our
product line had grown in diversity and sales increased 600 % in a single
decade, the public conception of our business failed to keep up. Last year
we initiated an institutional advertising and public
relations program to update our public personality and
assume the correct identity of an aggressive corporation dedicated to the
electronics age. The name "Burroughs"' for many decades has
meant solid, dependable serviceand these virtues persist. They are now
being joined in the public mind by the image of a powerful company whose
products and know-how give it commanding leadership in the field of
Despite the recession, our total world-wide revenue in 1958 climbed
to the all-time high of $294 million. This surpassed the previous year's
record by over $10 million and represented a five-year increase in the
revenue level of nearly $100 million. Entering 1959, the unfilled order
backlog amounted to $220 million-an increase of 40 % over last year. This
strong order position reflected the accelerated
demand for our new electronic accounting and proof machines, and our 220
electronic computer systems. In addition, undelivered equipment on the
SAGE, Atlas and electronic communications programs were prime causes for a
considerable increase in our military product backlog. As you know, our
net earnings for the year 1958 dipped rather sharply to $6,407,934. This
was due to a complex of factors-principally the combined effect of our
product development expenses and the general business recession.
Accelerating our new product programs has, of course, involved heavy
expenditures during a transition period when many of the incoming orders
were concentrated on the newer but non-deliverable equipment.
We did not permit the anticipated profit decline in
1958 to impede our planned program of facilities expansion. As you have
noted in the annual report, our large Cumbernauld, Scotland plant was
completed. Two new bank serv
ice plants were placed in operation in
Malden, Massachusetts and Park Ridge, New Jersey. These facilities will
volume-produce bank checks coded with magnetic ink.
on which the entire bank automation
program hinges. Other bank service plants will be activated this year,
giving us unrivalled ability in the area of magnetic ink document
What about 1959? As of March 31,
world-wide income was $80,922,856 compared with $67,998,240 in the first
quarter of 1958. Net income after taxes was $1,533,408 against
$1,100,414Iast year. Incoming orders for commercial products were 25 %
ahead of the same period in 1958. This profit improvement occurred in
spite of abnormal engineering costs which were deliberately incurred in
order to expedite certain automation and data processing developments.
These equipments are now being demonstrated. More about this later. We
expect the rising profit and volume trends indicated in the first quarter
to continue in 1959.
Our sales last year and during the first
quarter of this year reflect certain programmed and evolutionary changes
in the character of our business. The advent of the new technology has
made this industry more competitive than ever before. Because electronics
occupy center stage, we are deliberately permitting our electronic
products to assert their dominance in percentage of total sales. We are
consistently reinforcing the technical competence of our salesmen, to
insure that they can compete effectively in the more sophisticated
marketplace of electronics.
During this period of strenuous product
realignment, however, we have in no sense forsaken our traditional market
in conventional machines. Without changing the bias of
our development program, we have taken
steps to keep functionally modern those mechanical and electro-mechanical
products which fathered the corporation. Adding, calculating and
accounting machines have been equipped with attachments, for instance,
which make them compatible with the newer electronic systems.
Our electronics program has been further
stimulated by the receipt of prime government contracts involving
precision computational and data processing equipment in numerous areas
vital to the nation's security. The most glamorous such project is our
guidance computing system for the Atlas intercontinental ballistic
missile. In addition to many test shoots, the Burroughs computer was the
electronic control which guided the Atlas satellite along a mathematical
groove of space into orbit last winter. These complex systems were
developed from Burroughs research and built at our Military Electronic
Computer Division, together with giant data processors for the SAGE air
defense network. Our total contract value in these two projects alone
totals to date over $200 million. Overall, military products account for
about 24 % of gross revenue.
I want to emphasize that your management
regards such military awards as a permanent phase of our business. Apart
from our patriotic duty to serve defense needs, we consider military
procurement and weapon systems work to be a stable and productive field
quite compatible with our stated objectives. Yet, we have maintained a
sensible balance between defense research and production contracts. We
have not engaged in development contracts which have nowhere to go--like
building a boat in a basement. And we have the further good fortune to be
in a business whose
commercial projects and defense products require
research in the same general area of techniques. Thus, both our regular
business and the Defense establishment profit from these efforts.
As products grow in complexity, field maintenance
contracts for service to customers have increased. ..and represent an
important sustaining source of income.
Finally, our graphic systems business has shown growth,
based on the proven capability of our Todd Division for producing checks,
safety paper and other documents requiring considerable technical skill in
layout and design. This phase of the business is accelerated, of course,
by automation programs involving the use of magnetically encoded forms.
The U. S. and Canadian market continues to be the
largest single source of company revenue. Our International Division has
spearheaded a successful drive to capture a larger share of foreign
business. Burroughs overseas has been growing very rapidly, and in 1958
revenue from the International Division alone was one and one-quarter
times the total Corporation of just 12 years ago.
I would like now to particularize my
earlier references to our extensive new product program-our "pipeline
to the future." I think the pipeline image is a good one. It
emphasizes the basic concept which has shaped this entire campaign. In any
period of rapid technological change manufacturers must at all costs guard
against the obsolescence of their products by competitors. ..and against
losing touch with the requirements of the marketplace. We are constantly
dealing in competitive futures. ..demanding an accurate appraisal of
tomorrow's customer needs
and, most important, a planned program
to have product answers ready when these needs come
due. Without belaboring the metaphor, you can see
the urgency of keeping our product pipelines full.
At one end, we must have a continuing injection of
research and development effort. ..at the other, a steady outpouring of
new products and techniques. ..carefully synchronized, carefully phased-in
with the developing needs of our customers. There is a time lag, of
course, between input and output...particularly when we are changing the
product mixture. Under favorable conditions, it typically requires at
least four years to move a product from design and drawing-board stages to
the production line.
As a footnote to this pipeline concept,
our machines are being designed for assimilation in
total data processing systems. From the small adding
machine to the million dollar computer, each product
fits organically as a building block in systems held together by common
language magnetic tape, punch cards, punched paper
tape, and the dramatic new magnetic encoded source
document. They permit automation to be acquired
progressively in any desired degree by any sized firm. Such systems
involve an enormous amount of data input and output,
of course. Thus, a prime target has been the
perfection of those peripheral devices which feed in raw data and record
the processed results. The competitive battle of
data processing, it is clear, must be won on the periphery. ..we believe
we have taken the lead on this frontier, offering a line of input-output
gear whose scope and versatility surpasses anything in the industry.
Let me quickly discuss some of these new
which we have seized the initiative in
the automation race. I commented earlier on our conscious adaptation of
military developments to commercial hardware. A clear example of such a
dividend is the electronic teleprinter developed by Burroughs for the U.
S. Signal Corps. Having been operated successfully at over 3,000 words per
minute, this revolutionary device is the fastest page printer in
communications history. It not only serves the government in high-speed
transmission of weather reports, battle orders and other logistic data.
..but also can supply up-to-the-second message speed required by stock
exchanges, telegraph offices, news gathering services, and so forth.
Letters are shot at a racing roll of paper at one-millionth of a second by
a bank of electrode guns. This becomes an ultimate printing technique,
therefore, whose only limitation is the speed with which paper can be
moved. (Incidentally, the maximum speed we have attained to date is 170
miles per hour.)
220 Computer System
We are also producing a radically new
all-transistorized line printer system used specifically with the
Burroughs 220 electronic computer. It is the fastest such printer
commercially available. Capable of printing up to 1500 lines of
information per minute, this unit for the first time takes full advantage
of the computer's internal speed in printing out results,
On the input side, we equipped the 220
computer last year with the world's fastest photo reader. ..transmitting
punched tape coded information to the computer's memory at the record
speed of 1,000 characters per second.
First deliveries on the 220 computer
system were made in the last quarter of 1958 and are continuing at a
pace. This computer enjoys the same iron-clad
reliability as our smaller 205 computing system.
We introduced another computer last year, offering
everyday businesses the advantages of the newer techniques on a
low-cost basis. The F2000 computer, with its exclusive program
selector, has found ready acceptance among businesses with
repetitive problems, such as payroll and check preparation,
billing, loan schedules, tax billing, etc.
A new bank machine which prepares simultaneous and
original printing on ledgers and statements was introduced
just last month. This is our dual printer Sensimatic,
permitting a single speedy posting operation with identical data
printed on both sections of a combined form. Since less
time is required to handle accounts, this machine gives banks
much higher productivity and efficiency at a low level cost.
We are currently at work on an initial contract awarded
in 1958 by the U. S. Post Office for the production of ten automatic
mail sorting machines, each of which will sort 36,000
pieces per hour to 300 destinations. Installations of these
giant systems are scheduled for the last half of this year.
The heart of our new product offensive is the
spectacular science called magnetic ink character
recognition--MICR. You have all, I think,
been exposed to our progress with this new
technology through your dividend stuffer and our national
advertising campaign. The slogan, "From checks to
computers, there's a Burroughs MICR program for any system
of automation you choose," sums up our unique capability
in an area of major competitive importance. Your
company traditionally has been the largest single
supplier of business machines to banks.
...We have asserted our leadership, therefore, in offering banks relief
from the avalanche of paperwork involved in check and deposit accounting.
The magnetic automation program will equally benefit commercial
establishments. ..in billing, inventory control, sales analysis, insurance
policy handling, accounting, data reduction, etc. But the initial impetus
behind this effort pinpoints the important banking market.
For the past four years Burroughs has
devoted a tremendous amount of research and development work in
collaboration with the American Bankers Association to develop a common
language for magnetic ink character recognition. This is the famous E 13 B
type font which you have seen in our advertising. ..the small numbers
which are written in magnetic ink at the bottom of the check to identify
the bank number, your account number and the amount. Because they are
readable by automatic sorters and other equipment, these tiny numbers have
revolutionized the historic function of the check and other documents.
Where once the check was used merely to transfer funds from one account to
another, it soon will become the chief vehicle for transmitting all the
vital information required throughout an entire banking or accounting
Because the MICR printing tolerances are
extremely fine, proper document control at the source is vital. Through
our Todd Division, with its long history of precision check production and
supply, we are able to volume-produce magnetically inscribed coded
documents guaranteed to meet
the rigid specifications set down by the
ABA. Your company is fortunate in being the industry's only triple threat
in the MICR program. ..major equipment manufacturer, major document
supplier and major systems specialist. ... We have organized a
battery of automation products which we consider exclusive from both a
competitive and customer service point of view.
We begin with our new
Imprinter---designed for precise on-premises encoding of magnetic ink
characters by the bank itself. Larger orders for checks can be handled by
our Todd printing plants. Next we have our MICR Amount and Account Number
Printer for on-the-spot automatic proving of encoded documents after they
have made their
way through public hands and back to the banks.
Following this is the MICR Proof and Distribution System, also with
magnetic amount printer, of principal importance in automating the proof
and distribution of "over the counter" deposits
and the transit operation between banks.
The most dramatic component in the system is the
world's fastest document sorter, currently on
display and arousing enthusiastic response. It reads
magnetic ink data on checks, deposit slips and other documents, and sorts
the items at the rate of 1560 a minute. It can
handle mixed paper and card stock documents of
various sizes and various degrees of wear and mutilation. Finally, its
output can be connected to a forthcoming multi-lister when an electronic
computer is to be used as a processing unit in the system. In just one
pass, the documents at full sorter speed---1500 items per minute---can be
listed, totaled, and the account identification and
money factors converted to magnetic tape for computer input. Thus,
editing, sorting, proving and conversion to magnetic tape is accomplished
in a single, automatic, high-speed operation.
As you can see, this automation program involves
products from all divisions of our company.
The competitive implications of our
automation programs, of course, are tremendous, and the demands for
greater productivity are becoming more urgent.
In the United States, in spite of our great population
growth, the Gross National Product must and will expand at
a very much faster rate than the labor force available to produce this
higher economic activity.
Greater automation is essential if we
are to achieve the productivity goals which will assure a continued rise
in our standard of living and the maintenance of a competitive position
for America's products in world markets.
Your company is in the most dynamic
sector of this field--office automation. Today more people are involved in
data processing in offices than are employed in all manufacturing in the
United States. The equipments produced by your company and the business
machines industry will find a market of explosive proportions as the years
This much is certain: the key to
adequate earnings lies in our ability to bring useful products to a
demanding market. As I have described at some length, Burroughs has molded
a powerful, thoroughly tested product line for exploiting the automation
market. ..in which every machine can qualify as componentry for integrated
data processing systems.
These factors are not easy to translate
statistically on an exact timetable. But coupled with our overall
capability in deliverable hardware and production facilities, we are
confident that your company is entering a period of strong competitive
In closing may I express our thanks to
all of Burroughs world-wide employees for their loyal and vigorous efforts
in meeting today's problems. To you, the growing family of Burroughs
shareholders, go our sincere thanks for the confidence and support you
have so generously given us in management. Thank you.
Stockholders elected the following ten Directors of the Corporation:
Harold S. Chase, Walker L. Cisler, Ray R. Eppert, Thomas G.
Long, Ray W. Macdonald, Charles H. Percy, Charles Sawyer, Kenneth C.
Tiffany, George L. Todd, and Irven Travis.
Stockholders also approved an increase in authorized capital stock from
7,500,000 shares, with a par value of $5 per share, to 8,500,000
shares, and amendment of the Articles of Association to this effect. The
vote was 5,373,197 shares for, and 58,403 shares against.
Following the meeting, the Board of Directors appointed
two new vice presidents of the Corporation. FRANK G. ARMSTRONG, director
relations, was named vice president--industrial
relations. JAMES F. LILLIS, controller, was appointed vice
president and controller.
Armstrong joined Burroughs in 1946 as supervisor of
personnel relations, was named assistant director of industrial relations
in 1953 and director in 1957. A graduate of the University of Michigan in
1935, he received a law degree from the Detroit College of Law in 1946.
Lillis joined Burroughs as assistant controller in
1949, and was promoted to controller in 1951. For several years
previously, he served on the staff of Price Waterhouse & Co.,
certified public accountants. He received a degree in business
administration from New York University.
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