Harry Winston Inc.

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Harry Winston Inc.

718 Fifth Avenue
New York, New York 10010
Telephone: (212) 245-2000
Fax: (212) 489-6715
Web site: http://www.harrywinston.com

Private Company
Employees: 200
Sales: $85 million (2001)
NAIC: 448300 Jewelry, Luggage, and Leather Goods Stores

Harry Winston Inc. is the corporate name of The House of Harry Winston, one of the worlds most prestigious luxury jewelers. The worldwide operation is run from a Fifth Avenue location in New York City, where the company not only maintains a salon open to a select clientele, but also operates workshops that design jewelry and cut, polish, and set gems. Harry Winston also owns a salon in Los Angeles, where it tends close ties to Hollywood and is spotlighted during each years Academy Awards, when famous actresses borrow multimillion-dollar jewelry for the evening. In addition, Harry Winston salons are found in Paris, Geneva, Tokyo, and Osaka. Approximately one-fifth of the companys income is generated by less expensive jewelry manufactured in Rhode Island and Hong Kong and sold to mass-market retailers, who are forbidden to reveal the source of the merchandise in order to preserve Harry Winstons reputation for exclusivity.

Harry Winston and the Birth of His Company: 1890s-1930s

When Harry Winston established his business in 1932, he already had many years of experience in the jewelry business. His father, a Ukrainian immigrant named Jacob Winston, had opened a jewelry retail and repair shop in Manhattans upper west side in 1890. His mother died when Harry was seven, and a year later he and his father, who suffered from asthma, moved to the West Coast for health reasons and opened a jewelry store in the center of the Los Angeles business district at a time when the film industry was just beginning to establish itself in the area.

According to lore, Harry early on demonstrated an ability to recognize valuable stones when at the age of 12 he noticed a two-carat emerald ring on a tray of junk jewelry in a pawnshop window. He bought the ring for 25 cents and resold it two days later for $800. He dropped out of high school at the age of 15 and went to work for his father to devote himself full-time to the store as well as to visit boomtown saloons, where he sold gems to oil prospectors who struck it rich.

At the age of 18, Harry moved back to New York with his father, who opened another Manhattan jewelry store, which he would operate until just before his death in 1929. With $2,000 saved from his California enterprises, Harry began to operate entirely on his own, buying and selling in the New York Diamond Exchange, which required sound, quick decisions and the boldness of a gambler. In 1916, at the age of 19, he started his own company, The Premier Diamond Company, located at 535 Fifth Avenue. In a matter of just two years, Winston was able to parlay his limited capital into a stake of $10,000 in cash and jewelry worth another $20,000. Unfortunately, an employee ran off with all of his money and inventory. With the help of bank financing, Winston was able to maintain his independence and rebuild his business. Because at his first appointment bank management mistook him for a messenger, he subsequently hired a distinguished looking gentlemen to serve as a front. He soon turned to the estate sales of the wealthy to buy jewelry that had gone out of fashion. He removed the stones and, to prepare them for resale, had them recut and reset to offer greater brilliance in a modern setting. His first major estate sale occurred in 1925, after which his activities gained notice in newspaper society columns. Winston achieved a national reputation in December 1930 when he bought the famous jewelry collection of mining tycoon B.J. Lucky Baldwin, which included the largest diamond ever sold in a U.S. public auction, a 39-carat-emerald-cut diamond. Although the collection also included a 26-carat ruby that was one of the largest rubies in the world, Harry Winston became linked to diamonds, especially large ones.

In 1932, Winston closed down Premier Diamond and established Harry Winston, Inc. in order to begin producing his own line of jewelry. He sought to highlight the jewels own shapes by minimizing the setting. He was supposedly inspired one Christmas season when he observed how a holly wreath was shaped by its leaves, then applied the concept to jewelry design, relying on light platinum settings that allowed for the three-dimensional arrangement of stones, so that they, rather than the metal, dictated the design. He had a particular dislike for the yellow-gold used in older settings, which he felt distorted the color of the gems. His flair for new designs and penchant for publicity allowed Winston to flourish during the Depression years, when he became a major figure in the New York diamond business who in many ways was personally responsible for keeping the industry afloat in the city. He boosted New York while at the same time he gained an international reputation when in 1935 he paid $700,000 to De Beers Company for the 726-carat Jonker diamond, named after a South African man, Jacobus Jonker, who found the stone on a farm. Winstons plan to split the diamond into smaller stones for reselling was so fraught with peril that even Lloyds of London would not insure the company for damage. He essentially risked his entire investment, which only added greater emphasis on his decision to have the work done in New York rather than Europe. It was the first major stone, in fact, to be cut in the United States. After a number of European experts examined the diamond and indicated precisely where it should be divided, Winston turned to Lazare Kaplan, a Russian-born immigrant, to do the work, paying what was an incredible sum of $30,000. After nearly a year of study, Kaplan concluded that if he followed the advice of the European experts he would destroy the Jonker diamond. He determined his own plan and successfully split the giant stone into 12 diamonds, the largest at 126.65 carats. Winston was then able to sell the results for a total of $2 million, realizing a hefty profit on his investment.

Acquiring the Hope Diamond: 1949

Over the ensuing decade Winston acquired other large, uncut diamonds, including the 726.6-carat Vargas, discovered in Brazil in 1938, and the 155-carat Liberator, discovered in Venezuela in 1943. Winston also continued to purchase cut stones through estate sales. In 1949, Winston paid $1 million for the worlds most famous diamond, the sapphire-blue Hope Diamond, notorious because of a curse supposedly attached to it. According to the myth, the Hope Diamond was originally part of a 112.5-carat diamond stolen from the statue of a Hindu goddess in India in 1642 and smuggled out of the country by Jean-Baptist Tavernier, a French gem merchant. He sold it to the King of France, Louis XIV, who had the stone cut down to 67 carats. He subsequently died of smallpox and Tavernier at the age of 80 was attacked and devoured by wild dogs. Louis XIV and his wife Marie Antoinette then inherited the throne and the diamond and were ultimately beheaded during the French Revolution. These deaths established a foundation for a later belief that the Hope Diamond was cursed and anyone who touched it would come to a disastrous end. A recut 44.5-carat stone surfaced in London some 30 years after the death of Louis XIV and Marie Antoinette. It was purchased by merchant Henry Thomas Hope, whose name has been attached to the diamond ever since. He gave it to his wife, who ran off with another man, and eventually was forced to sell it to fend off bankruptcy. A succession of ill-fated owners of the Hope Diamond followed. In 1911, the famous Paris jeweler Pierre Cartier sold the stone to Washington socialite Evalyn Walsh McLean and, according to some, essentially used the curse as a marketing ploy, going so far as to insert a clause in the sales contract stating if any fatality occurred in the family within six months, the Hope Diamond could be exchanged for jewelry equal to the $180,000 McLean paid for the stone. She certainly had her share of family troubles over the next 46 years, and in fact died of pneumonia wearing the Hope Diamond, but the curse did not scare off Harry Winston. He acquired it as part of McLeans jewelry collection for an estimated $1.5 million.

Winston then combined the Hope Diamond with a number of other jewels to create a touring exhibit called the Court of Jewels, which traveled around the country for the next four years. Although it was good showmanship and garnered excellent publicity, the tour, and others that followed, were very much an expression of Winstons deep love of gems. Because so many of the finest examples were in private hands, he simply wanted the public to have a chance to share his joy in appreciating beautiful stones. In 1958, he donated the Hope Diamond to the Smithsonian Institutions Hall of Gems and Minerals, sending it by registered mail in a plain wrapped package. Over the years, he donated more gems to the Smithsonian, gems which one day would be housed in the Winston Gallery that now serves as an entrance to the Janet Annenberg Hooker Hall of Geology, Gems, and Minerals.

For uncut stones, Winston, like other diamond dealers, was reliant on The Syndicate, De Beers Consolidated Mines, Ltd., which had so much control of diamond production, around 85 percent, that it could essentially determine who could buy diamonds and name the price. In the 1940s, Winston sought an independent source of uncut stones by funding a South American jewel-hunting expedition. Other attempts followed, including one in Sierre Leone that almost resulted in the severing of his relationship with De Beers. The parties settled their differences and Winston was able to negotiate a better deal with De Beers. He would become the Syndicates largest customer.

Company Perspectives:

Winston discreetly maintains an elite and exclusive clientele. The most powerful industrialists, wealthiest potentates, prominent royal families, and celebrated stars have bought their most treasured jewels from Harry Winston and continue to do so today.

Winston opened a Geneva salon in 1955, followed two years later by a Paris salon. His reputation as the King of Diamonds during this period was reflected in the song Diamonds are a Girls Best Friend, made famous by Marilyn Monroe, who uttered the tag line, Talk to me, Harry Winston. He was friends with Hollywood royalty as well as actual royalty and was a frequent guest for tea with the Queen of England. Although known for big diamonds and showrooms with drawn shades where salespeople often outnumbered the few customers permitted to enter, Winston had other operations that contributed to his business. He sold industrial diamonds, as well as less expensive engagement rings that could be purchased through such pedestrian channels as Montgomery Ward mail-order catalogs. By the early 1960s, Winston was estimated to generate as much as $50 million in annual revenues. Because he was such a private man, the accuracy of this amount could not be verified. Winston was so private that he refused to allow his photograph to be taken, claiming that this decision was at the behest of his insurer, Lloyds of London.

As Harry Winston aged, he faced the question of passing on the business to his two sons, who proved to have divergent personalities. He was prompted to utter an oft repeated statement: I have two sons, one a genius, one a moron. The eldest, Ronald, eagerly learned about the jewelry business from his father. He graduated from Harvard University with majors in both chemistry and English, then studied rocket propulsion at New York University before honoring his fathers request that he help him run the family business. Younger brother Bruce, on the other hand, showed little inclination for academics and was far less ambitious than his brother. After spending only a few months at American International College in Springfield, Massachusetts, he dropped out to travel around Europe. At the age of 18 he married a dancer, and they divorced three years later. Concerned that Bruce might squander his inheritance, Winston wrote a will that split the business between his sons, but Ronald was to be awarded his stake outright, while Bruce would have his shares held in trust. Every five years, 20 percent would be turned over to Bruce, who would also receive a living from a trust run by his brother and two trustees.

Death, Succession, and the Future: 1970s-2000s

Harry Winston died at the age of 84, and Ronald took over the family jewelry business. He talked about the need to make the salons more accessible to a younger clientele, a theme that he would repeat periodically but never actually act upon. Ronald was credited with starting the practice of lending jewelry to actresses for the Academy Awards, which served as the firms most overt effort at publicity. He also oversaw the opening of a new salon in Beverly Hills in 1986 and Tokyo in 1988. He also launched Winstons Ultimate Timepiece Collection, which created and sold watches in the $100,000 price range.

When Harry Winstons wife died in 1986, Ronald attempted to get his brother more involved in the business, naming him to the board of directors. For the most part, however, Bruce remained uninterested, reportedly signing whatever documents that required his signature without even reading them and generally preferring to spend his time sailing and driving his collection of sports cars. According to his attorney, Edward Wohl, Bruce in 1989 began to question Ronalds running of the company, especially in light of several years of reported losses. Moreover, during this period Ronald increased his salary from $350,000 a year, the same amount Bruce drew, to $1.13 million. Ronald claimed he was entitled to the money because he actually ran the company. Bruce went to court in 1990, seeking a full accounting of Harry Winston, Inc., and Ronald responded in January 1991 by calling a special meeting of the board of directors in order to claim the 50 percent of company stock promised to him by his fathers will, then promptly dismissed his brother from the board. This act set off a bitter, decade-long legal battle.

The Winston brothers wasted few opportunities to castigate one another in the press, creating a public relations nightmare for a company that traded on decorum and taste. Ronald accused Bruce of being under the control of his attorney, Wohl, whom he claimed would realize more money in legal fees than Bruce if he simply sold his share of the business in a reasonable settlement. Bruce, on the other hand, accused Ronald of using company assets for his personal benefit. He pointed to Ronalds charging of expenses incurred in Beverly Hills during a bizarre effort to train for the 1988 Olympics. Ronald hoped to represent the Marshall Islands in the 100-meter sprint at the age of 47, but the country failed to qualify for the games. He insisted that the expenses charged to Harry Winston Inc. were related to the opening of the companys salon on Beverly Hills Rodeo Drive. Nevertheless, Ronald further revealed an eccentric nature during legal proceedings. Like his father, he was reluctant to be photographed and insisted that a Lloyds of London policy forbade pictures for security reasons. During one videotape deposition he wore a plastic pig mask, and in another he donned a Lone Ranger costume.

To settle the suit Ronald offered his brother $4.5 million, which he subsequently increased to $17 million, and finally $28 million in September 1997. Bruce refused these offers and eventually the court forced Ronald to return his stock to trustees and abide by their decision on the selling of the company. In the end, Ronald acquired complete control of Harry Winston Inc., buying out his brother for $54.1 million in the summer of 2000. In order to finance the deal Ronald took on a partner, the private equity investment firm Fenway Partners.

Key Dates:

Harry Winston is born in New York City.
Winston establishes his first company, The Premier Diamond Company.
Winston buys the B.J. Lucky Baldwin collection of jewels, which includes largest diamond ever sold in a U.S. public auction.
Harry Winston Inc. is formed.
Winston acquires the 726-carat Jonker diamond.
Winston acquires the Hope Diamond.
Paris Salon opens.
Hope Diamond is donated to Smithsonian Institution.
Harry Winston dies.
Tradition begins of lending jewels to be worn at the Academy Awards.
Beverly Hills salon opens.
Harry Winstons son Ronald buys out his brother Bruce Winstons share of business.

With the squabble with his brother finally ended, Ronald planned to take Harry Winston into a new era. He hired a new marketing firm to create an ad campaign to position the company as a lifestyle brand. Looking to bring in executive talent that had shied away from the company in recent years, he then hired Patricia Hambrecht, formerly with Christies, to serve as president. He also hoped to attract new customers by offering more jewelry that cost less than $100,000, lowering the minimum price from $6,000 to $4,000. Even perfume, handbags, and eyeglasses under the Harry Winston label were entertained. The company looked to open as many as 15 salons in such major cities as Chicago, Las Vegas, London, and Hong Kong, as well as to renovate the older Fifth Avenue and Paris locations. Overall, Ronald hoped to soften the image of Harry Winston, a task that would entail a wholesale change in attitude for its sales personnel. Even at this late date, one media account of the changes at the company told of a woman at the Fifth Avenue salon who was shopping for earrings in the $35,000 price range. She was advised to try Tiffanys.

Principal Competitors

Bulgari S.p.A.; Cartier S.A.; Compagnie Financière Richemont A.G.; Montres Rolex S.A.; Tiffany & Co.

Further Reading

Burleigh, Nina, The Trouble with Harry Winston, New York, January 18, 1999, pp. 46-53.

Conroy, Sarah Booth, Hope & Despair: The Curse of the Diamond,Washington Post, September 29, 1997, p. D2.

Parr, Karen, Harry Winston Buffs Its Image, Womens Wear Daily, July 13, 1998, p. 8.

Shor, Russell, New York Judge Orders Sale of Harry Winston,Jewelers Circular Keystone, March 1998, p. 78.

Wade, Lambert, Gems in the Rough: Sibling Feud Tarnishes the Diamond Empire Built by Harry Winston, Wall Street Journal, February 14, 1996, p. A1.

Wadler, Joyce, Tranquility Elusive for Famed Jewelers Heir, New York Times, October 17, 2000, p. B2.

Well, Melanie, Reconstructing Harry, Forbes, October 1, 2001, p. 93.

Ed Dinger

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