Sunday, February 15, 2009


6 companies born during downturns

Think a recession is a bad time to start a company? Imagine if the founders of these major corporations had thought the same...

4. A bright idea in a financial crisis

Company: General Electric
Industry: Energy and other
Founded during: Panic of 1873

Picture: A woman demonstrates a General Electric Toaster, ca. 1920.

Kicking off the Long Depression was the Panic of 1873, which began when major investment firm Jay Cooke & Co. collapsed, causing the NYSE to shut down for days. The ensuing financial crisis lasted six years. Sound like an ideal time to open a laboratory? That's what Thomas Edison thought as he set up a facility in Menlo Park, N.J., in 1876. There, he produced the first light bulb in 1879 - the same year the panic officially ended. Although economic conditions would remain poor until 1896, Edison had gained enough momentum to start a company he called Edison General Electric Company. In 1896, Edison's GE landed a spot on the first-ever Dow Jones Industrial Average. Today, it is the only remaining company of the original twelve.

Status today: GE posted $183 billion in revenues in 2008, but its earnings were down 19%. Profits from GE's consumer and industrial segment dropped 65% during the year, and GE Capital's profits fell almost 30%. While GE's energy sector saw a modest growth in profits, the company is bracing for a rough 2009.

5. Outliving a long depression

Company: IBM Industry:
Industry: Computer
Founded during: The Long Depression, 1873-1896

Picture: A tabulator from 1890

Aptly named, this era comprised a series of unfortunate events. The Vienna Stock Exchange fell. The Coinage Act of 1873 demonetized silver, pushing investors away from making long-term loans. U.S. banks collapsed twice, causing the Panic of 1873 and the Panic of 1893. But three startups - the Tabulating Machine Company, the International Time Recording Company and the Computing Scale Corporation - developed technologies during this 23-year period that were in demand despite the sour economy. A time clock for recording workers' hours, for example, was needed as industrial production at the end of the century surged. Also, a tabulating machine was vital during the immigration wave, to tally up the expanding population. These three companies merged in 1911 as the Computing-Tabulating-Recording Company, which changed its name to IBM several years later.

Status today: If it's true that what doesn't kill you makes you stronger, IBM came into this recession well-fortified: Big Blue is a veteran of near-death experiences.

IBM's wild success in the 1960s led to antitrust action by the U.S. Department of Justice. The fallout from U.S. v. IBM took its toll over the next decade and radically reshaped IBM's business operations. IBM eyed oblivion again in the early 1990s, as its traditional hardware and mainframe computing business dried up. Under Lou Gerstner's leadership, IBM overhauled its business model, shifting the emphasis from products to services. Although consumers are spending less on technology in the current economy, IBM recently posted a strong quarter, which it attributed to an increased demand for its outsourcing services. Last year, the company had record revenue of $103.6 billion. However, thousands of layoffs are reportedly underway in IBM's sales and software units.

6. Rising above inflation

Company: Procter & Gamble
Industry: Household products
Founded during: The Panic of 1837

Picture: A P&G distributor makes his rounds in the 1870s.

Candle maker William Procter and soap maker James Gamble joined forces to start a small household-goods business in Cincinnati. It was a risky move for the brothers-in-law: The shaky economy had a full six years of financial crisis ahead. Massive migration to the West caused land prices to rise, and inflation soon followed. Under President Martin Van Buren, bank failures and concerns about the paper economy spurred the greatest economic decline since the birth of the country. But P&G survived and went on to score lucrative contracts to supply necessities to the Union Army during the Civil War.

Status today: With $83.5 billion in revenue in 2008, Procter & Gamble has built a portfolio of some of the most recognizable brands in the U.S., including Tide, Pampers, Oral-B, Iams, Pantene, Duracell and Pringles. The company's shares took a hit this past year, but it has held steady against smaller competitors such as Johnson & Johnson and Colgate-Palmolive, and its earnings remain strong: P&G had net earnings last year of $12.1 billion.

Because consumers rely on P&G products in good times and bad, it is considered a titan even in a rough economy.

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