Wang Laboratories, Inc.

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Wang Laboratories, Inc.

One Industrial Avenue
Lowell, Massachusetts 01851
U.S.A.
(508) 459-5000
Fax: (508) 452-0896

Public Company
Incorporated: 1955
Employees: 26,796
Sales: $2.87 billion
Stock Exchanges: New York Zurich Basel Geneva Lausanne

Wang Laboratories was started in the early 1950s as a one-man unincorporated research-and-development company providing services in the areas of specialized electronics and digital equipment. From this beginning Wang evolved into a pioneer in the calculator market as well as in niche markets of word processing and small business computers. Today Wang markets, designs, and manufactures computers and peripheral equipment, specializing in office automation.

Founded in 1955 by An Wang, Wang Laboratories originally had no plans to develop and build computers. Wang had left his native China in 1945 to study applied physics at Harvard, where he earned his doctorate in 1948. After graduation Wang performed postdoctoral work at Harvard’s Computational Laboratory, where he invented the magnetic pulse memory core which was to become a standard component of computers for the next 20 years.

Wang left the Harvard laboratory in 1951 after the institution announced it was suspending computer research and founded his own company later that year. The company focused on the development of specialized electronic and digital equipment which would utilize Wang’s magnetic core. When Wang began his business he had no contracts and no orders, only a $70-a-month office in Boston and $600.

Wang Laboratories initially sold magnetic cores and provided contractual services to perform research and development. Wang was his own salesman, and frequently attended electronic trade shows attempting to drum up business. In 1952 Wang secured the first of many consulting contracts to custom design digital equipment when the company was hired to develop a synchronizer and counting device for a Cambridge, Massachusetts, company called Laboratory for Electronics.

Wang’s first encounter with International Business Machines Corporation (IBM) came long before Wang’s entrance into the computer market. In 1951 An Wang had offered IBM a license on his pending patent of the magnetic memory core. This began four years of negotiations on a patent sale. Meanwhile, Wang had been contracted by IBM to devise a method for using magnetic cores to perform memory functions for IBM’s electronic calculating machine. Wang was awarded a patent on the core just weeks after it was sold to IBM in 1956. Years later, An Wang suggested that IBM had encouraged a challenge to the patent claim in order to hasten a sale.

When Wang Laboratories incorporated in 1955, An Wang was registered as president and treasurer. Following the patent sale to IBM, the company’s focus gradually began to shift from consulting to development and sales of its own products. The transition ultimately proved fruitful, but the mid-1950s were also a time that An Wang later admitted was fraught with business mistakes.

In the late 1950s Wang was busy with a number of government contracts, an arena Wang Laboratories still serves despite the company’s transition to computers. As a result of one such contract with the United States Air Force, the company developed an angular encoder to measure cloud cover. This technological breakthrough in the application of transistors spurred the advance of Wang’s encoders and also aided in the development of automated control systems for companies producing and using machine tool makers.

By the late 1950s Wang Laboratories was marketing various types of control units sold under the brand name Weditrol (Wang Electronic Digital Control Units). In the last two years of the decade the fledgling company produced 60 to 80 of those units annually, and sold them for about $700 each.

With funds needed for expansion, Wang entered an agreement in 1959 with Warner & Swasey Company, a Cleveland, Ohio-based machine tools company which was buying Wang’s control systems. An Wang forfeited 25% of the company’s holdings to Warner & Swasey in return for $50,000 worth of an equity investment and another $100,000 to be made available for short-term loans. “I regretted the alliance almost at once,” Wang later wrote, noting he had given up too much control for too small a price.

During this period Wang also lost the exclusive right to manufacture a semi-automated hyphenating phototypesetting machine it had developed. In the late 1950s Wang agreed to design and build the machine for Compugraphic. The product was cheaper than competing fully automated systems on the market. At the time the only phototypesetters able to justify text were extremely expensive, costing upwards of $1 million. Wang’s hyphenating process could greatly increase the productivity of newspapers, such as those served by Compugraphic’s equipment. The finished product was dubbed Linasec, and Wang Laboratories received about $30,000 for each machine Compugraphic sold. Even though Wang retained the patent on the Linasec, Compugraphic retained the right to manufacture the machines while immune to royalty payments. Wang closed out the decade with about 20 employees.

In the early 1960s Wang embarked on a new direction and developed its own sales organization to sell products directly to users. The company was growing, and to accommodate the growth it moved twice during this time—to Natick, and then Tewksbury, Massachusetts. The first big year for Linasec was 1963, when the company recorded $300,000 in sales. Linasec revenues more than doubled in the next two years, allowing Wang to exceed $1 million in sales for the first time, in fiscal 1964.

Wang’s greatest success of the decade evolved around the creation of its landmark LOCI and 300 series programmable calculators. The LOCI debuted in 1965 and was the company’s first electronic scientific calculator. It also spurred the creation of the desk calculator market, where Wang held almost sole proprietorship for much of the late 1960s.

While Wang dominated the new desktop-calculator market, the company again found itself in need of capital for further expansion and repayment of short-term loans. In 1967 Wang went public and sold 210,000 shares of common stock through the New York Stock Exchange. The company was, by then, a well-known leader in the electronic desktop-calculator field.

The stock offering shared top billing with President Lyndon Johnson’s proposed tax increase in July 1967. Shares were originally offered at $12.50, but when the Wang shares were finally sold in August, the stock received a sizzling reception. The stock opened the day with a bid of 36 and closed better than four points higher. Wang established its presence overseas in 1967. The company ultimately located sales, service, and administrative offices in Europe and Asia, as well as the United States and Canada.

Foreseeing competition in the calculator market, in 1967 Wang made its first attempt to build a computer. The computer was inadequate though, largely a result of Wang’s minimal programming experience. The following year Wang acquired that experience when it purchased Phillip Hawkins, of Arlington, Massachusetts, then the state’s largest supplier of data-processing services.

While some of Phillip Hawkins’s staff left the company shortly after the $7.4 million purchase, the deal did bring Wang the programming experience needed to build computers. In 1970 the company announced it would enter the computer market with the 3300 model. This model, too, had drawbacks, and it was not until the introduction of the 2200— Wang’s fourth computer—that the company successfully penetrated the minicomputer market.

An Wang still held control of the company he founded, and despite internal disagreements, the company decided to gradually begin withdrawing some of its less-developed and lower-priced calculators from the market in order to prepare for an eventual total withdrawal from the calculator market.

Meanwhile, Wang’s success in the desk-calculator market continued while the company developed its first computers. In 1969 Wang posted a 40% sales increase over the previous year and had more than 1,000 employees. In 1970, the huge success of calculators helped the company record its first year of $25 million in sales.

The period between 1970 and 1975 was a time of word-processing and computer-product introductions, but it was also a period of unstable earnings. The computer industry chuckled at Wang’s debut into the word-processing market, the 1200 BASIC, which was an electronically controlled dual-cassette typing system dependent on an IBM typewriter’s internal workings to serve as a terminal. Performance problems with the 1200 arose during its first year on the market, and Wang saw its first-ever quarter of declining revenues in 1973.

This situation worsened with the oil crisis which struck in 1973. The year before, various auto-dealer packages had accounted for 70% of Wang’s business. When the bottom dropped out of the automotive-sales market, Wang also suffered greater losses. In 1975 the company turned to periodical bank loans, reduced salaries, and—for the first time—was forced to lay off workers.

The following year, though, the company made an impressive turnaround, with growth stimulated by sales of Wang’s new computer systems. Then, in 1976, the introduction of a cathode-ray-tube (CRT)-based word-processing minicomputer finally gave Wang a significant corporate presence and propelled Wang into the office-computer market.

Wang strengthened its marketing efforts during this time, including a three-month television advertising campaign in 1978 which portrayed Wang as David and IBM as Goliath. Wang, then the 32nd-largest computer maker, was only the second, after IBM, to use television advertising.

By the end of 1978, Wang boasted that it was the largest worldwide supplier of CRT-based word-processing systems and the largest supplier of small business computers in North America. Beginning in 1978, Wang also began increasing its assets through a number of acquisitions, including a partial purchase of InteCom, in 1984. That acquisition was complete by 1986. Other Wang acquisitions included the 1978 purchase of Graphic Systems and the 1988 purchase of Informatics Legal Systems. Minority-interest purchases included U.S. Satellite Systems, in 1982, and Telenova, in 1985.

Between 1976 and 1984 Wang’s revenues skyrocketed 61% annually. Meanwhile, the company made a further commitment to development of word-processing and data-processing products, increasing its research-and-development budget from $3 million in 1976 to $160 million in 1984. During this growth surge, Wang also broke into the Fortune 500 market: by 1983, nearly half of company revenues were generated by Fortune 500 customers.

This eight-year period—the longest running period of consistent financial growth for Wang in company history—was also marked by continual developments in improved product lines. Later products took direct aim at IBM’s large portion of computer-market revenues. Wang’s VS (virtual storage) computers were introduced in 1977, its Office Information Systems series was introduced in 1979, and its Integrated Information Systems line was introduced in 1980.

Wang continued to move to cut into IBM’s market share in the 1980s. In 1980 a word processor, designed to compete with an IBM model, was introduced. The battle was enhanced by a price reduction in 1981. That same year Wang introduced office machines that transmit voice as well as data. The following year a Wang personal computer debuted, taking aim at IBM’s dominance in that market. By 1984 Wang had acknowledged that IBM had set the standards, and the company responded by marketing other products that allowed its computers to use IBM software and communicate with IBM PC (personal computer) models.

Ten years after Wang had left calculators for computers, a computer-market recession hit, sending profit margins into a nose dive. After reaching $1 billion in sales in 1982, and $2 billion in sales in 1984, sales plummeted in the third quarter of 1985, with Wang posting its first decline in ten years. Wang responded to a net income falloff of 66% by announcing a layoff of 1,600 or 5% of its workers, and pay cuts for executives.

In the 1980s Wang began to attempt to penetrate IBM’s market, which often meant costly setbacks when its attempts went awry. Critics suggested that Wang had been too slow to respond to the growth of personal computers, clinging to its once-heralded minicomputers of the late 1970s, which in the late 1980s were being pushed aside by the smaller and sometimes more powerful personal computers. The company also had a poorly regarded service division, which failed to keep pace with Wang’s sales and development. Wang had also made initial, unsuccessful attempts to build a better PC, than IBM, before committing to build computers that were compatible with IBM machines.

During the later half of the 1980s the company underwent a number of organizational changes which brought on resignations of top-level management. John F. Cunningham was named company president in 1983, with An Wang retaining his board chairmanship and position as CEO. Cunningham had been at Wang since 1967, and made his mark promoting office automation. In July 1985, amid news of sharply declining revenues, Cunningham resigned. Following Cunningham out the door less than two months later was Executive Vice President Jon A. Kropper.

An Wang resumed his position as president until he named his son Fred to the position in 1986. That same year the company celebrated its 35th anniversary, with the best news coming early in the year when the company was awarded a $480 million, five-year agreement with the air force mini-computer multi-user program.

After resuming the position of president, An Wang quickly increased his visibility throughout the company and initiated changes which saw marketing executives reporting directly too him. Only a week after reorganizing the marketing division in the spring of 1986, the company’s top marketing executive, J. Carl Masi Jr., resigned. Masi, Kropper, and Cunningham, all went on to head smaller computer firms.

Later that year Fred Wang, who was then serving as treasurer, was named president. Under Fred Wang, profits varied, with the company earning modest profits in 1986, then losing $70 million his first full year. Wang reported a $92 million profit in 1988 only to lose $424 million in 1989. While the company continued to upgrade its systems, Wang’s U.S. revenues shrunk and the company stayed afloat through overseas sales. By 1989, An Wang was in more control of the company’s sales divisions in the wake of a $67 million third quarter loss. The company announced further layoffs and executive pay cuts.

In August 1989 An Wang announced that Fred Wang would resign as president, and later that month Richard W. Miller, a former General Electric executive, was appointed to succeed him. Just a week before the resignation the company announced it had hired an investment-banking firm to raise capital and renegotiate its revolving credit agreements to prevent Wang’s creditors from calling in its loans.

During the 1990s Wang began to market information systems to manage all of an organization’s business information. The Freestyle system has integrated the computer, handwriting, and use of telephone and facsimile machines into a single system designed to meet all data-processing and communication needs for office workers.

By late 1989 Wang was supporting almost $1 billion of debt, having lost an additional $500 million in 1989. Miller announced plans to overhaul the company, selling off noncore operations, real estate, and leasing operations, and cutting an additional 2,500 jobs.

The Wang family now owns less than 35% of company holdings, although it has retained control of operations through special stock classes. How long Wang Laboratories will be run by a Wang, how Wang will fare in the future, and whether Freestyle will create another new marketing opening, remain uncertain.

Principal Subsidiaries

Wang Credit Corp.; Wang International; Financial Limited (Republic of Ireland); Wang Informatis Legal and Professional Systems, Inc.; InteCom Inc.; Wang Information Services Corp.; Wang Financial Information Services Corp.; Wang Australia Pty. Ltd.; Wang Gesellschaft m.b.H. (Austria); Wang Europe, S.A./N.V. (Belgium); Wang Canada Ltd.; Wang Industrial Co. Ltd. (China); Wang Computer China Limited; Wang (UK) Ltd.; Wang France S.A.; Wang Pacific Ltd. (Hong Kong); Wang Nederland B.V. (Netherlands); Wang Svenska AB (Sweden); Wang Computer Ltd. (Japan); Wang New Zealand Ltd.; Wang de Panama, S.A.; Wang Computers (Pte.) Ltd. (Singapore); Wang (Schweiz) A.G. (Switzerland); Wang Computadoras, Inc. (Puerto Rico); Wang Deutschland GmbH (Germany); Wang Italia S.p.A. (Italy); Wang de Mexico S.A. de C.V.; Wang Europe S.A./N.V. (Luxembourg); Wang Computer Korea, Ltd. (South Korea); Wang Espana, S.A. (Spain); Wang Ireland Ltd.; Wang Latin America, S.A. (Venezuela).