Western Union Telegraph Company

views updated

WESTERN UNION TELEGRAPH COMPANY

WESTERN UNION TELEGRAPH COMPANY. The Western Union Telegraph Company resulted from the 1856 merger of Hiram Sibley's New York and Mississippi Valley Printing Telegraph Company and lines controlled by New York businessman Ezra Cornell. At Cornell's insistence, the newly formed venture was named Western Union to represent the consolidation of western telegraph lines.

During its first years, Western Union expanded rapidly by systematically acquiring its competitors. By 1861 it had completed the first transcontinental telegraph line, uniting the Union and providing rapid communication during the Civil War. The system proved so efficient that it prompted the U.S. government to discontinue the historic Pony Express. The company soon began experimenting with new technologies. In 1866 it introduced the first stock ticker, developed by then-employee Thomas Edison, and in 1871 it introduced money transfer as a complement to its existing telegraph business.

Having first declined to purchase the patent for Alexander Graham Bell's telephone, Western Union subsequently purchased the patents of Bell's competitor Elisha Gray. Western Union's foray into the telephone business proved unsuccessful, however. By 1879, faced with stiff competition from Bell, Western Union agreed to exit the industry. In return it received the promise that Bell would no longer operate a telegraph business.

By the early 1900s, the telephone industry had grown dramatically and the telegraph giant found itself a subsidiary of the American Telephone and Telegraph Company, which purchased Western Union in 1909. The U.S. government, however, fearing a monopoly, forced the sale of Western Union just four years later.

For many years the company continued to be an innovator in the communications industry. In 1914 it introduced the first consumer charge card; in 1924, it was one of several companies to develop a high-speed facsimile system. Ironically, facsimile services would eventually become a contributing factor in the decline of the telegraph industry.

Over the next several decades Western Union revenues began to fall. Fierce competition and the development of more efficient technologies for message delivery led to the decline of the telegram. Determined to remain a player in the telecommunications industry, Western Union diversified into Telex in 1958 and launched the country's first domestic communications satellite, Westar I, in 1974.

By 1984 the company was facing financial crisis. Burdened with massive debt, it sold its satellite interests to Hughes Aircraft in 1988 while its electronic mail and Telex services were bought by AT&T in 1990. By 1991, with the threat of bankruptcy looming, Western Union's board of directors voted to change the company's name to New Valley Corp, a reference to its predecessor, the New York and Mississippi Valley Printing Telegraph Company.

The effort to protect its historic name and preserve the reputation of its lucrative money transfer business did little to solve the company's financial woes, and in 1994 its still-profitable businesses were sold to First Financial Management Corporation (FFMC) under the name Western Union Financial Services. Just one year later, FFMC merged with electronic commerce giant First Data Corporation.

Today Western Union is primarily a financial services company and operates as a subsidiary of First Data. Money transfer, once an ancillary business, has become its chief source of revenue. Although Western Union still runs a version of its historic telegram service, telegrams now account for less than 1 percent of its business.