Loewe AG

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Loewe AG


Industriestrasse 11
Kronach, D-96317
Germany
Telephone: (49) 9261 99 0
Fax: (49) 9261 99 500
Web site: http://www.loewe.de

Public Company
Founded:
1923
Employees: 965
Sales: EUR 341.9 million ($451 million) (2006)
Stock Exchanges: Frankfurt
Ticker Symbol: LOE
NAIC: 334310 Audio and Video Equipment Manufacturing

Loewe AG is one of Europe's leading producers of high-end televisions and audio systems. Loewe developed the world's first electronic television set in the 1930s and has remained an innovator in the field ever since. Loewe produces a variety of luxury televisions, including sets with integrated hard disk recorders, digital TVs, and sets with ultra flat plasma and LCD screens. In addition, Loewe manufactures DVD recorders, audio systems for home theaters, loudspeaker systems, and remote control devices. The company had sales in 2006 of approximately EUR 341.9 million, about half of which were realized on the international market. Loewe AG is based in the Franconian town of Kronach where it employs about 1,000 employees. The company has subsidiaries throughout Europe and enjoys cooperation with Sharp, the Japanese electronics producer.

FOUNDED AT THE BIRTH OF RADIO BROADCASTING

Radiophon GmbH, the firm that evolved into Loewe AG, was founded on January 2, 1923, in Berlin, Germany. Its three founders were businessman Erwin Buttermilch and two engineers, Gerhard Grüttner and David Ludwig Loewe. Within a year the company had been taken over by Loewe and his brother Siegmund and its name had been changed to Radiofrequenz GmbH. Siegmund Loewe's work would have momentous implications for the young company. He was a brilliant engineer and inventor who oversaw a number of developments in electronics that would decisively affect the course of broadcasting and consumer entertainment for the next 50 years. Under his leadership, the company produced a small tube broadcasting device whose first broadcast of music and speech was demonstrated for German President Friedrich Ebert in March 1923. Ebert was so impressed by the invention that Radiofrequenz was able to persuade the German post officethe public body that had authority for regulating broadcaststo form an association for making commercial radio broadcasts. It was the birth in Germany of radio for the masses; until that time, radio had been reserved for military use. The first public broadcast was made in late October 1923. Listeners were required to pay a fee of 60 marks, funds that provided start-up capital for the industry.

Radiofrequenz was one of the first companies to receive government permits to produce and sell radio receivers. Demand was so great that within a year the company had outgrown its first small workshop in Berlin. At the same time it began setting up its own specialty companies for the production various devices and parts. For example, Loewe Audio GmbH was founded to produce radio tubes, Orthophon-Apparatebau GmbH for the production of radios, loudspeakers and resistors, and Eudarit-Pressgut GmbH for spare parts for radios. By 1925 the products of all these companies were being sold under a single brand name, Loewe-Radio.

As the firm expanded, Siegmund Loewe was making a series of important discoveries. In 1924 he invented the multielement tube and developed high ohm resistance, which made possible high and low frequency resistor amplifiers. Despite its rapid advances, in the mid-1920s Loewe was forced to cease production of tubes. The action was initiated by a consortium of European manufacturers, including Siemens & Halske, AEG, Felten-Guillaume, and Telefunken, who controlled rights of certain essential electronics parts invented by the Austrian Robert von Lieben. As a result of these restrictions, for approximately one year Radiofrequenz endured serious financial hardships. Siegmund Loewe did not surrender. In 1926 he filed a suit in the German patent office claiming the rights to six patents. The legal action prodded Telefunken to accept a compromise. On August 15, 1926, Radiofrequenz was able once again to produce and sell multielement tubes in Germany. The agreement also permitted Radiofrequenz to export single-element tubes.

By 1926 the German radio industry had experienced a thorough consolidation, shrinking from about 150 companies in 1924 to only 40 in 1926. Radiofrequenz was able to survive on the strength of Siegmund Loewe's strong product research and development program. For example, Radiofrequenz introduced a product in 1926 that caused a sensation: the OE 333 Ortsempfänger (local shortwave receiver). The new radio was retailed for only 39.50 reichsmarks (or RM, the currency that preceded the deutsche mark in Germany), a price surprisingly low for the time. Demand for the radio was so high that Radiofrequenz had to initiate three, round-the-clock shifts for its production lines. In September 1926, it marketed a similar radio for middle and long wave bands. By the end of 1928, high demand for Radiofrequenz products required the company to move to a large, new factory in Berlin and increase its workforce to more than 1,100. In 1929 the company was reorganized as a holding company, Berliner Radio-Handels-Aktiengesellschaft, with various subsidiaries including Radiofrequenz GmbH (radios and loudspeakers), Loewe Radio GmbH (resistor production), Loewe Audion GmbH (tube manufacturing), and Astrowerk GmbH (real estate management). Shortly thereafter, as the result of a lawsuit brought by the machine builder Ludwig Loewe, the company lost the right to use the names Loewe Radio and Loewe Audion. The latter company became Audion-Werke D.S. Loewe, and in February 1930, Loewe would reclaim its family name, in part, when the holding company was renamed Radio-aktiengesellschaft D.S. Loewe.

COMPANY PERSPECTIVES


For an increasing number of people, true luxury means being able to shape their lives according to their own ideas and being able to demonstrate this freedom to others. This desire has prompted Loewe to develop a new generation of premium TV set concepts geared towards the idea of holistic individualism. In other words: Exclusive design, thanks to a variety of colour, shape and material options; Perfect room integration, thanks to a variety of set-up solutions; Upgradable intelligence such as deferred viewing, (DR+) thanks to MediaPlus concept; Uniform entertainment systems, thanks to custom made peripherals. Everything we do is also governed by strict brand guidelines. Such guidelines guarantee that a Loewe will always remain a true Loewe with its unmistakable premium character: Minimalist, sculpturesque language of form; Only practical innovations with clear added value; Intuitive operation; Brilliant picture and sound experience; Superior workmanship.

GREAT DEPRESSION, NAZI DICTATORSHIP, AND WORLD WAR II

German radio was in such a strong growth phase at the end of the 1920s that the industry was essentially unaffected by the onset of the Great Depression in 1929. Loewe registered company profits of more than 90,000 RM every year from 1929 through 1931. Its workforce grew during the first three Depression years, from about 1,100 in 1929 to 1,500 in 1932. Factors that helped strengthen the radio industry were the explosion of the German radio audiencewhich expanded from three million in 1929 to over four million in 1932and the introduction of mass produced radio parts which lowered the cost of sets considerably. Loewe helped itself with the EB 100, a low-priced tube radio that included a built-in loudspeakeruntil then headphones had to be used to listen to most radios. The model brought the firm steady revenues in the early 1930s.

Loewe's research in the early 1930s did not limit itself to radio technology. The firm was making rapid strides toward commercially feasible television. In 1929 the company formed Fernseh AG. Taking its name from the German word for television, Fernseh AG gathered expertise from the four equal shareholders: the English company Baird Television Ltd., a pioneer in television technology, Robert Bosch AG, a leading firm in electronic technology, Zeiss Ikon AG, a specialist in optical technology, and Loewe for its radio and broadcasting know-how. The group unveiled its first televisions at the Berlin Broadcasting Exhibitions of 1932 and 1933. Loewe introduced its own first commercial television set at the latter exhibition. For the Olympic Games in Berlin in 1936, so-called television parlors were set up which were broadcast to Loewe TVs for the benefit of those who could not get tickets. It was the first TV broadcast ever of a sporting event. Loewe continued developing TVs for the remainder of the 1930s, including a console that included a radio, a phonograph, and a television. World War II interrupted these plans, however, and postponed the rise of commercial television until the early 1950s.

The Nazi government, from the beginning of its regime, forced changes on the company. It pressured the partly Jewish Loewe brothers into emigrating. After Nazi-instigated demonstrations against David Ludwig Loewe, the firm's general manager moved to England in April 1933, where he took over the company's subsidiary. At first, Siegmund Loewe remained in Berlin where he was forced first from his leadership of the German Broadcasters Association in 1933 and then from the chairmanship of Radio AG D.S. Loewe in 1938. The Nazi government also seized Loewe's share of Fernseh AG. Before emigrating to Switzerland in 1938, Siegmund Loewe refused all offers to sell his company, a fact that enabled him to regain ownership of the firm after the war's end.

Once the Loewe brothers were gone, the Nazis "Aryanized" the company's name, changing it first to Löwethe German word for "lion"and then to Opta Radio. With the shift to a war economy, the company's fortunes skyrocketed. Radio production was considered an essential war industry. As such, it received practically unlimited financial support from the Bank der Deutschen Luftfahrt (German Aviation Bank). Between 1937 and 1943, the firm's revenues rose from 8.4 million RM to 62 million RM. It also grew through the forced absorption of other German radio companies. During the war the company's output was primarily radios and radar equipment for the German air force.

KEY DATES


1923:
Radiophon GmbH is founded.
1926:
Triple tube, world's first integrated circuitry, is developed.
1927:
Loewe Radio Company, the firm's first foreign subsidiary, is founded in London.
1928:
The cone loudspeaker is introduced.
1949:
TV production begins.
1951:
First cassette tape recorder is introduced.
1963:
Dr. Siegmund Loewe dies, and the Loewe family sells its shares to Philips Electronics.
1964:
Firm is restructured and Loewe Opta GmbH is founded.
1965:
Loewe Opta AG is renamed Internationale Industrie- und Verwaltungs-Aktiengesellschaft (IVAG).
1967:
Production of radios is discontinued and Düsseldorf radio factory is sold.
1979:
Factory in Berlin is closed down.
1987:
The Loewe Art 1 is the first television featuring completely digital technology.
1995:
Loewe CS 1 is marketed as the world's first recyclable television set.
1997:
Loewe Xelos @media is the world's first TV set with integrated Internet capability.

REBUILDING AFTER WORLD WAR II

At the end of the war, after Germany and Berlin were divided into zones of occupation, Loewe's main Berlin plant was located in the city's American sector. Nonetheless, it was completely stripped of its production equipment by the Russian army before the American military entered the city in July 1945. Its other factories were in Germany's eastern zone. They were eventually nationalized by the government of the German Democratic Republic. It took a full year, until spring 1946, before the company could resume the manufacture of radios and broadcasting equipment. The first radio did not leave the factory until 1947. That same year the firm began producing radios in a facility in the Franconian town of Kronach. Almost immediately the factory proved too small and a larger one was built, which eventually became Loewe's main factory. Siegmund Loewe returned to Germany in 1947 as well. American military authorities approved the return of the company to his ownership, a transfer that was completed in November 1949. Shortly afterward the company's name was changed from Opta Radio AG to Loewe Opta AG.

LOEWE AND THE WEST GERMAN ECONOMIC MIRACLE

Commercial television was introduced in Germany in 1952 following a seven-year ban by the Allied occupation forces. By that time, Loewe had been producing TV sets for three years and showing them regularly at industrial trade fairs. Ironically, when TV broadcasting began in Germany, Kronach, where Loewe was producing sets, lay beyond the reach of the nearest TV signal. To remedy the problem, Loewe built Germany's first translator station to amplify and rebroadcast TV signals in Kronach. In the 1950s and 1960s Loewe's product range grew significantly. To its line of radios, audio equipment, and televisions, the firm added the Optaphon, the world's first tape recorder to use cassettes. It also produced combination consoles, usually a TV-radio or a radio-phonograph in a single cabinet. In 1959, Loewe brought out the first electronic flash for cameras, a product so popular that by 1965 it was offering a range of flashes. When the company celebrated its 40th birthday in 1963 its catalog consisted of 15 televisions, 20 radios, 24 radio-phonograph combos, three portable radios, five tape recorders, two electronic photo flashes, and an early video recorder. It had also registered approximately 2,000 patents. Loewe was an active participant in the West German Economic Miracle of the postwar era; its capital surpluses increased ninefold, from about DEM 532,000 to 4.8 million between 1950 and 1965. By the mid-1960s the firm employed a workforce of approximately 5,200; 3,000 of these based in Kronach, 1,500 in Berlin, and another 700 at a small plant in Düsseldorf.

LEAVING BERLIN AND DÜSSELDORF

In 1963 Dr. Siegmund Loewe passed away. Following his death, the Loewe family divested itself of all of its shares in the company, selling them to Philips Electronics, the Dutch company, and other companies. One year later Loewe was fully restructured. A new firm, Loewe Opta GmbH, was founded with headquarters in Berlin and branches in Kronach and Düsseldorf. That company, in turn, absorbed all of the diverse Loewe production businesses. The consolidation was significant, placing the three Loewe factories under a single management. Less than one year later, in January 1965, Loewe Opta AG, the successor to the very first Loewe firm, was reorganized into Internationale Industrie- und Verwaltungs-Aktiengesellschaft (IVAG; International Industrial and Administrative Stock Company). It took over the management of the company's industrial R&D, production, sales, and distribution. The complicated chain of reorganizations concluded in 1970 when IVAG absorbed Loewe Opta GmbH and adopted its name at the same time.

The German TV industry in general, and Loewe in particular, went into a recession in the mid-1960s when consumers, anticipating the introduction of the first color sets in Germany, put off buying televisions. Another factor in Loewe's financial problems was the availability of inexpensive electronic products from low-wage nations, particularly in the Far East. To counteract the trend, Loewe turned its own sights on foreign markets and became in the 1970s increasingly dependent on them for sales. Another step Loewe took just before the onset of the 1970s was to produce televisions exclusively. The company stopped producing radios and sold its Düsseldorf radio plant in 1967; in 1979 it manufactured its last stereo phonograph, shut down its factory in Berlin, and relocated completely to Kronach. The move was not an immediate success. The company's revenues fell steadily during the 1970s, from DM 400 million in 1973 to DM 215 million in 1979.

STABILIZATION AND CHANGE

The 1980s represented a period of stabilization for Loewe Opta GmbH. Between 1980 and 1996 company revenues rebounded, growing from some DEM 207 million to DEM 500 million. Revelations of antitrust violations presented Loewe with an opportunity to regain the independence it had lost after its founder's death. In the mid-1980s it came to light that Philips had obtained much more than the 15 percent interest in Loewe it had claimed in the 1960s. Five other companies were also Loewe shareholders and all of them were closely affiliated with Philips. In fact, the Dutch giant controlled all Loewe stock. German antitrust authorities forced Philips and its affiliates to dispose of all Loewe shares. In response, in 1985 a management team, Loewe Management GbR, was able to purchase 51 percent of Loewe Opta GmbH stock. An investment company, Technologie-Investitions GmbH & CO KG (TIG), and the auto manufacturer Bayerische Motoren Werke (BMW) obtained the remaining shares. In 1991 the management group, strapped for cash, sold 25.1 percent of its holdings to Matsushita Electric Industrial Co. Ltd., the world's largest manufacturer of consumer electronics, including the Panasonic and Technics lines. Two years later BMW sold its own Loewe holdings to Matsushita as well, giving the Japanese firm a 48 percent Loewe share. In 1995, however, the management group at Loewe was able to boost its own holdings to 51.9 percent when it acquired the shares held by TIG.

Another major shift in Loewe ownership occurred in 1997 when Matsushita sold its Loewe stock to a London-based venture capital firm, the 3i Group plc. At that time Loewe was producing a variety of products: high-end TVs, its core product; automotive electronics, a division first launched while BMW was an active partner in the Loewe firm; new media, such as the Loewe [email protected] an Internet-compatible television; and telephones and answering machines in its subsidiary Binatone GmbH. 3i would play a key role Loewe's initial public offering on the Frankfurt Stock Exchange in 1999. When the company went public, a new corporate umbrella organization Loewe, Holding GmbH, was founded, in which the Loewe management group held a controlling 60 percent share.

DECLINE AND RECOVERY

By the 1990s, Loewe's TV production was concentrated exclusively on the high-end, premium market. Between 1993 and 1997 Loewe's market share in that area nearly doubled, increasing from 7 to 12 percent. By 2002, however, Loewe found itself in an ever-worsening crisis. The quality of its plasma and LCD TVs left much to be desired, and within two years' time the firm recorded losses amounting to more than EUR 50 million; its share in the high-end TV market plunged by 90 percent. Although the writing seemed to be on the wall for the firm, Loewe refused to throw in the towel. Working together closely, management and workers hammered out a plan they called "Taurus," as in "let's take the bull by the horns." In phase one, both groups agreed to defer a large percentage of their incomeworkers deferred 50 percent, for examplewhich would be paid later with 25 percent interest. In phase two, across-the-board pay cuts were put in place for the entire company for the years 2005 and 2006. At the same time, 25 percent of the total workforce, management and workers, were laid off.

During the reorganization in 2004 and 2005, Loewe brought 20 new premium television models to market. Nonessential parts in the sets were produced in China, but the key componentsthe electronics, the picture and sound reproduction, and the controlswere manufactured in Germany for top quality, and were advertised as such. At the same time Loewe entirely ceased production of picture tubes, in favor of the flat screens consumers were purchasing in record numbers.

In early 2005 the firm was able to purchase back the stock held by the 3i Group. At the same time Loewe launched a corporate venture with another Japanese consumer electronics producer, Sharp. As part of the agreement, Sharp pumped badly needed capital into Loewe in exchange for some 29 percent in Loewe shares. As 2006 began Loewe revenues had increased by almost 29 percent, reaching almost EUR 319 million. The trend continued through 2006, when the Soccer World Cup was held in Germany and gave a healthy boost to television sales. Looking forward, 2007 also seemed as if it would be a good year. The company projected another revenue increase of about 20 percent. Loewe's renewed prosperity was signaled in June 2007 by the purchase of a 10 percent share in the firm by the London-based fund manager EQMC.

Gerald E. Brennan

PRINCIPAL SUBSIDIARIES

Loewe Opta GmbH (99%); Loewe Opta Benelux N.V./S.A. (Belgium; 90%); Loewe Opta Nederland B.V. (Netherlands; 100%) Loewe France S.A.S. (75%); Loewe Italiana S.r.l. (99%); Loewe Austria GmbH.

PRINCIPAL COMPETITORS

Matsushita Electric Industrial Co., Ltd.; Royal Philips Electronics N.V.; Sony Corporation; Victor Company of Japan, Limited; Samsung Group; Panasonic Shikoku Electronics Co., Ltd.; Pioneer Corporation; Toshiba Corporation.

FURTHER READING

"BMW Lifts Loewe Opta Stake," Financial Times, November 29, 1985, p. 15.

Davies, John, "Cartel Office Continues Philips Probe," Financial Times, January 22, 1985, p. 16.

Dentz, Markus, "Der Loewe bruellt wieder," Finance, January 27, 2006, p. 20.

Die Loewe-Chronik: 75 Jahre Loewe Opta GmbH (19231998), Loewe Opta GmbH, 1998.

Dodsworth, Terry, "Why Loewe Is Set on a Premium Path," Financial Times, June 10, 1987, p. 22.

"Ein Mann, ein Loewe," Süddeutsche Zeitung, June 27, 2007, p. 18.

Familari, Peter, "Loewe Looking at Lions' Share," Sydney Daily Telegraph (Australia), August 17, 2005, p. 16.

"Fonds 3i steigt bei Loewe aus," Süddeutsche Zeitung, August 25, 2005, p. 20.

"In Luv with a Loewe," Courier Mail (Queensland, Australia), August 8, 1996, p. 21.

Kroneck, Stefan, "Loewe im Profil," Börsen-Zeitung, January 3, 2007, p. 11.

, "Loewe will zurück zu alter Ertragsstärke," Börsen-Zeitung, January 3, 2007, p. 11.

Lammers, Bill, "High-End German Television Sets Maintain a Low Profile," Cleveland Plain Dealer, December 19, 2002, p. E4.

"Londoner Finanzinvestor steigt bei Loewe ein," DPA-AFX, June 26, 2007.

"Nach dem Einstieg von Sharp sucht Loewe weitere Investoren," Frankfurter Allgemeine Zeitung, June 24, 2004, p. 17.

Peters, Rolf-Herbert, "Die fränkische Revolution," Stern, July 13, 2006, p. 86.

"Sharp wird größter Aktionär des Fernsehgeräteherstellers Loewe," Frankfurter Allgemeine Zeitung, December 10, 2004, p. 16.

Thompson, Nick, "Binatone Buys Venture Stake," South China Morning Post, October 2, 1992.

Vargas, Nicole, "A Whole New Game," San Diego Union-Tribune, February 19, 2005, p. D8.

Wagstyl, Stefan, "Matsushita Electrical Set to Make First Foreign Acquisition," Financial Times, June 30, 1990, p. 10.