Marquette Electronics, Inc.
Marquette Electronics, Inc.
Sales: $253.8 million
Stock Exchanges: NASDAQ
SICs: 3845 Electromedical Equipment
Founded in 1965, Marquette Electronics, Inc., has grown in harmony with the rise of computer technology to become a leading manufacturer of medical electronic equipment and systems for the diagnosis and monitoring of patients requiring critical care. The company is a world market leader in sales of computerized electrocardiographic equipment and related supplies, and is also one of the market leaders in sales of systems used for monitoring vital patient physiological parameters.
When Michael J. Cudahy and Warren B. Cozzens set out to establish an electronics company in 1965, they initially explored the manufacture of a wide range of electronic equipment. Even while their main product line remained sketchy, the two entrepreneurs, who had been manufacturers’ representatives, had agreed on a name for their fledgling company: “I’d had some consulting work done from a professor at Marquette [University], and I thought it would be a nice thing to do,” Cudahy told the Business Journal-Milwaukee.
Determining a product line took a little more deliberation, as the entrepreneurs had to feel out the market. In late 1965 Marquette delivered its first successful product: a centralized electrocardiograph (ECG) system, to Northwestern University Medical School in Chicago. The system, developed in collaboration with 3M, Hewlett-Packard Co., and a division of American Telephone & Telegraph Co., centralized the records of patient heart performance, a breakthrough in information storage and retrieval capabilities for the medical industry. Thus, Marquette derived its first business pulse through the marketing and distribution of a heart-monitoring device, setting the groundwork for a long line of innovative and use-friendly devices for medical professionals.
The success of its first electrocardiograph system prompted the young company to sell similar systems to dozens of other medical institutions in the United States and Canada, and before long Marquette was developing ECG’s of its own. The company established ties with major medical players, such as the Mayo Clinic in Rochester, Minnesota, and with technology firms including the data processing giant IBM. As computer technology and artificial intelligence evolved through the 1960s and 1970s, these alliances proved fundamental to Marquette’s role in solving medical problems with innovative technological tools and solutions.
By exploiting both technology and insight into medical needs, Marquette worked its way into a leading position in electrocar-diography, stress testing, ambulatory ECG monitoring, critical care monitoring, and cath lab data management, as well as many other segments of medical electronics. Just as the company had pioneered the analysis of ECGs by computer in the 1960s, it introduced the first commercially available computer-based exercise testing system in 1976. Such innovations helped Marquette sustain constant growth into the 1980s. Sales of $15.7 million in 1980 ballooned to $91.9 million by 1986 and $189.3 million by 1990.
These figures largely reflected strategic alliances and acquisitions through which Marquette was able to utilize technologies developed by other companies and enhance the productivity of its core products. In 1982, for example, the company acquired a patient-monitoring equipment line from General Electric Corp. That acquisition served as the basis for the creation of the model 7000 monitor, the industry’s first 32-bit microprocessor-based bedside monitor. In 1987 the company gained a new line of defibrillators through the purchase of 89 percent of the shares of TemTech Ltd., of Northern Ireland, which was renamed Marquette N. Ireland Ltd. And in 1988, the company acquired from Perkin-Elmer Corp. a line of equipment that monitored the composition of the breath of patients undergoing surgery. Expansion of that line brought about the formation of Marquette Gas Analysis, a subsidiary based in St. Louis.
Marquette’s forays into new technologies would ultimately enable the company to service every major facet of the critical care spectrum, from defibrillators in emergency cardiac care to instruments used to analyze respiratory and anesthetic gases, cardiac catheterization monitoring, fetal/perinatal monitoring, and clinical information systems. Most importantly, Marquette was able to integrate these various systems in the Marquette Unity Network, one body of information accessible throughout a hospital and its satellites. Marquette equipment was designed to share information among the operating room, recovery room, intensive care unit, telemetry step-down area, emergency department, cardiac cath lab, cardiology department, and other patient areas. Such an integrated system enabled medical institutions to improve the quality of health care delivery while increasing productivity and containing costs.
From its earliest days, Marquette’s innovative spirit was part and parcel of a progressive and nonconformist corporate character, guided in large part by the company’s charismatic president and co-founder, Michael J. Cudahy. Cudahy stressed the importance of a comfortable work environment run on mutual trust between employees and employers and empowering all levels of the workforce to go beyond job descriptions and contribute to Marquette’s innovation.
Marquette’s relaxed yet efficient corporate culture drew continued praise from the press, and landed the company among other progressive business leaders in The 100 Best Companies to Work for in America, by Robert Levering and Milton Moskowitz. As early as 1984, the company opened a child-care center, the first such on-site facility in the state of Wisconsin. Other features reflecting the company’s worker-friendly character included small offices for top management; an on-site restaurant, Le Bistro, that trusted employees’ discretion enough to serve alcohol; refusal to subject employees to drug testing procedures, despite pressure from major accounts and business partners to do so; access to phones for unmonitored local calls; and a marked absence of time clocks.
That atmosphere of familial trust and employee empowerment felt the strain of the company’s growth and expansion after the 1980s, however. By 1990, Marquette’s more than 1000 employees could hardly approach the accessible president on a regular basis, nor could they be expected to know each other on a first-name basis. Moreover, the need for more space set in motion plans to develop new facilities, further straining Marquette’s grow-but-stay-small scheme. In response, Cudahy moved to break the company down into semi-autonomous divisions, which could each maintain many of the qualities that the company had enjoyed in its smaller youth. “It’s my answer to the inevitable getting large—and fearfully, bureaucratic,” he told the Business Journal of Milwaukee.
As Marquette approached the 1990s, additional pressure was placed on the company’s independent character by the prospect of its selling shares to the public. For years, the company had offered an employee stock-ownership plan (ESOP), as one fringe benefit to its workers (in addition to a savings plan and profit sharing). After tremendous growth in the 1980s, shares held by employees had grown substantially, but represented no real-world value as long as they couldn’t be traded in the marketplace. Cudahy also had a vested interest in redeemable shares; by 1990, he owned 46 percent of the company’s Class A stock and 100 percent of its Class C stock, while Marquette’s ESOP owned roughly another 20 percent.
Despite the financial attraction of investing Marquette’s shares with market value by going public, Cudahy was resistant to the idea. In 1984, he had authored an article for Fortune magazine entitled “Going Wrong by Going Public,” in which he outlined the difficulty of maintaining corporate integrity and flexibility in a publicly owned business. By the late 1980s, however, he had somewhat tempered his views, maintaining that going public could actually help Marquette preserve its independence.
These deliberations came to a head in the fall of 1991, when Marquette sold 15 percent of its shares to outsiders, making its stock available on the over-the-counter market. Cudahy called the move “the lesser of two evils,” and took immediate moves to retain ownership in-house; after Marquette went public, more than 50 percent of its stocks were held by 13 Marquette directors and officers, while Cudahy himself held on to 37.6 percent of the shares. Moreover, in a vigorous drive to avoid what he called “the sell-out syndrome,” he turned down numerous offers by outside firms to acquire Marquette. Cudahy said that he would not let Wall Street narrow his vision to short-term goals. “I’m just going to do it the way I have been doing it ... and if they don’t like it, they can lump it,” he told the authors of The 100 Best Companies.
Despite its increasing size and status as a publicly traded company, Marquette continued to grow in the early 1990s without losing its innovative, progressive character. In mid-1991, the company embarked on a substantial expansion of its Milwaukee headquarters, adding 85,000 square feet as a stopgap construction program before proceeding with plans for additional facilities that growth would mandate within several years. The addition accommodated new robotics systems for production of advanced electronic circuit boards for a new line of monitoring devices in development. The new facility also enabled Marquette to move production of defibrillators from its subsidiary in Northern Ireland to Milwaukee, creating approximately 30 new positions at the headquarters and better servicing the rapidly growing American market.
Marquette also made the most of its expertise and improved production facilities by forging strategic joint ventures in the early 1990s. In July 1992, Marquette and Optical Sensors (OSM) announced an exclusive, worldwide joint manufacturing and distribution agreement for a system combining OSM’s fiber optic blood gas sensors with Marquette’s patient monitoring hardware and software. Marquette would sell the equipment to its existing customer base, leaving the rest of the market to OSM. In October of that year, Marquette announced another joint project with Gambro Engstrom of Stockholm, the first company to manufacture a critical care, volume-oriented ventilator and a leader in innovative anesthesia equipment. The initial joint project would integrate the Engstrom Anesthesia System, Model 9010 with Marquette products, allowing for a single display for viewing both patient and equipment status in the anesthesia environment, thus paving the way for future anesthesia products for worldwide distribution. With the stars the limit for its innovative products, Marquette was also awarded a contract from Martin-Marietta Corp. to manufacture mass spectrometry units, one of which would help monitor astronauts’ vital functions during a NASA mission in which the Space Shuttle would dock aboard the Russian space center, MIR, in June 1995.
Walking the fine line between its entrepreneurial spirit and its drive to become the world’s biggest medical electronics company, Marquette moved to strengthen its leadership team in 1993. In September of that year, the board appointed Barry K. Allen as Marquette’s new president and chief operating officer, joining Mr. Cudahy, who became chairman and CEO. The succession represented one of many steps toward strengthening the company for the rigors of an increasingly global and competitive marketplace.
By the mid-1990s, that marketplace was being aggressively cultivated: international sales accounted for 28 percent of total revenues in 1994, for example. A particular hot spot was Asia, where booming economies spurred new hospital construction requiring new equipment. In 1994 alone, sales of Marquette’s products in Korea doubled, according to that year’s annual report. Other Asian markets showed similar promise: growing health care services in Thailand called for construction of more than 30 private hospitals, and the Malaysian government launched a program to construct a cardiothoracic center in every 250-kilometer radius. Marquette also tailored its sales and marketing strategies to develop important markets in South and Central America. And in Europe, a group of international investors called Health Care International began construction of several facilities—including Clydebank Hospital in Glasgow, Scotland—that would bridge the gap between U.S. and European heath care styles. By 1994, nearly $3 million in Marquette products had been ordered for that facility.
Marquette continued to forge strategic partnership agreements with various companies in order to “leverage our established breadth and depth strategies,” according to a 1994–95 Interim Report for the third quarter. In September 1994, the company expanded on its joint venture with Gambro Engstrom AB by renewing the development agreement with that company’s parent, Instrumentarium Corp., of Helsinki, Finland. Among their expanded cooperative efforts was an anesthesia delivery workstation that Marquette added to its product line. In December 1994 Marquette also concluded an agreement with Nihon Kohden Corporation of Tokyo, Japan to sell and service Marquette products in that country.
Treading with measured steps into the operating room of the future, Marquette also signed a five-year agreement with North American Drager (NAD), of Telford, Pennsylvania, which held a 50 percent share of the anesthesia delivery machine market. According to the agreement, Marquette would provide signal acquisition circuit boards for use in NAD’s anesthesia delivery machines, promising additional penetration into that growing market.
With these alliances and its continued emphasis on research and development, Marquette was well positioned to enjoy excellent health in the medical electronics marketplace of the 21st century. The company faced daunting obstacles, however, as sweeping plans for health care reform helped turn that industry into a roller-coaster ride for investors and manufacturing companies alike. Sharon di Stefano, health care industry analyst at Smith Barney in New York, told Mark Dillon of the Miami Review that hospitals—under increasing government and insurer pressure to cut costs—wouldn’t have the budgets to buy high-tech devices in the Marquette vein. Cudahy, on the other hand, pointed out that long-term demographics of an aging population were in the company’s favor. Moreover, he argued that attention to cost reduction in emergency and routine patient monitoring would actually increase the need for efficient and effective devices like Marquette’s.
For Cudahy, the continued success of Marquette depended on the company’s innovativeness—an area in which it continued to excel. “We have ... looked for problems in medicine and the solving of those problems, under the assumption that if we solved a problem, sales would be very easy to come by,” he told Pat Foran of the Business Journal of Milwaukee. In other words, Cudahy placed the same confidence in his company that he had always placed in its individual employees: given the chance to think creatively and perform to their fullest, he expected nothing but the best.
Marquette Electronics, Inc., European Center (France); Marquette Electronics Pty Ltd. (Australia); Marquette Benelux N.V./S.A.(Belgium); Marquette France, S.A.R.L.; Marquette Electronics, Inc., Zweigniederlassung (Germany); Marquette Electronics, Inc., Asia Pacific District (Japan); Marquette Italia, Sri (Italy); Marquette Espana S.A. (Spain); Marquette Scandinavia (Sweden); Marquette Electronics (G.B.) Ltd. (United Kingdom).
Dillon, Mark, “Is Wall Street Misreading Marquette’s Pulse?” Miami Review, August 21, 1992, p. A6.
Foran, Pat, “The Inevitable: Marquette Electronics’ Michael Cudahy Bows to Change in Considering Stock Offering,” Business Journal-Milwaukee, January 29, 1990, Vol. 7, No. 16, Sec. 2, p. 10.
Kirchen, Rich, “Marquette Nixes New Plant Plans, Builds Addition, Business Journal-Milwaukee, May 27, 1991, Vol. 8, No. 33, Sec. 1, p. 1.
Levering, Robert, and Milton Moskowitz, The 100 Best Companies to Work For in America, New York: Currency Doubleday, 1993.
“Marquette and Nihon Kohden Sign Distribution Agreement,” Business Wire, December 5, 1994.
“Marquette Electronics, Inc. Gets Nod For NASA Contract,” Business Wire, June 24, 1993.
“Marquette Electronics Moving Its Defibrillator Manufacturing Operations from Ireland to Milwaukee,” Business Wire, April 10, 1992.
“Optical Sensors for Medicine, Marquette Electronics Sign Manufacturing, Distribution Agreement,” PR Newswire, July 9, 1992.