Beckman Instruments, Inc. History

Company History:

A leading designer, manufacturer, and marketer of laboratory instruments, Beckman Instruments, Inc., sells a broad range of diagnostic products and laboratory systems to customers who conduct basic scientific research, new product research, and diagnostic analysis of patient samples. With operations in more than 20 countries and more than half its sales generated outside the United States, Beckman ranks as global leader, able to keep ahead of its competition by making groundbreaking discoveries in the field of laboratory analytical systems.

At the heart of Beckman's success lies a legacy of scientific innovations that propelled the company's growth, enabling it to carve a distinct and respected position in its industry. From the outset, Beckman earned a reputation as an important contributor to scientific progress, investing considerable time and money to develop new products representative of signal advancements in the scientific instrument field. As time progressed, additional pioneering efforts resulted in groundbreaking products, further bolstering the company's reputation, but underpinning Beckman's growing stature within the scientific instrument industry was also a concerted, aggressive approach to marketing. These ingredients for success were instilled in the company's corporate culture by Beckman's founder, Dr. Arnold Orville Beckman.

For his life's work, Beckman was awarded the National Medal of Technology in 1988, a remarkable achievement for a blacksmith's son who began his working career in an occupation entirely divorced from science and technology. Born in 1900 in Callum, Illinois, Beckman began playing the piano at nickelodeons in nearby Bloomington, Illinois at age 13, working after school and at night to fulfill his ambition to become a jazz musician. Furthering his education, however, took a firmer and more lasting hold on the young Beckman, leading him the shelve his musical aspirations and apply to the University of Illinois, where he earned B.A. and M.A. degrees in chemical engineering.

After leaving the University of Illinois, Beckman began working for Bell Laboratories in 1923, then two years later decided to return to school to pursue a Ph.D. at the California Institute of Technology. Beckman remained at the California Institute of Technology to teach chemistry after obtaining his degree, then began supplementing his salary from the university by working as a consultant. In this capacity Beckman was hired to devise a special ink for the National Postal Meter Company, a project that soon developed into the National Inking Appliance Company, an enterprise 10 percent-owned by Beckman and 90 percent-owned by the National Postal Meter Company.

The name National Inking Appliance Company was short-lived, lasting only from its adoption in November 1934 until April 1935, when the company was renamed National Technical Laboratories. Beckman continued to teach at the California Institute of Technology for six years after forming National Inking Appliance Company, dividing his energies between teaching chemistry and running his company until 1940. His company had already demonstrated considerable success by the time it gained its new name, introducing its first commercial product, the pH Meter, in 1935. Designed by Beckman, the pH Meter measured the acidity or alkalinity of almost any solution, combining electronics and chemistry to create a product that was the first of its kind. Although the pH Meter sold for $195, far more than the product it competed against--litmus paper--which cost a few cents per vial, orders for the more expensive and more sophisticated pH Meter grew steadily. By the late 1930s, as sales of other scientific apparatus declined with the lingering economic depression, sales of Beckman's pH Meter rose substantially, providing the financial fuel to fund the development of the company's next product, the DU Spectrophotometer.

Introduced in 1941, the DU Spectrophotometer represented Beckman's next hallmark product, a scientific instrument that used the pH Meter as an amplifier for a photoelectric cell to determine the intensity of various wavelengths in a spectrum of light. For this purpose, the Beckman DU Spectrophotometer represented a substantial improvement over competing products on the market at the time, increasing the accuracy of analysis and reducing analysis time by a considerable margin. Previously, hours or even weeks were required to conduct such an analysis, but the DU Spectrophotometer produced more accurate results in a matter of minutes.

By the time the DU Spectrophotometer was introduced, annual sales had topped $250,000; slightly more than a decade later the company generated more than $20 million a year in annual sales, recording growth that testified to the heavy demand for the company's products. Beckman Instruments was adopted as the new name for the company in 1950, by which point the company had firmly established itself as a leading manufacturer of analytical instruments used by both science and industry. As he had from the outset, Beckman took his profits and plowed them back into the company, enabling Beckman Instruments to fund research and maintain a steady stream of new products. This focus on the development of new products and the exploration of new technological possibilities gave the company a diverse product line, ranging from small liquid crystal displays to large process monitoring systems.

By the 1960s, after Beckman had gone public in 1952 and gained admittance to the New York Stock Exchange in 1955, the company's diverse products were competing in industrial, medical, educational, space, and defense markets. During the latter part of the decade the company began to shift away from defense and space exploration, which were subject to the vagaries of the federal budget. The company's president, William Ballhaus, explained to Forbes, "We wanted to develop a market where we could succeed or fail on our own, not because somebody cut the budget." To Ballhaus, Dr. Beckman, and the rest of the company's management this meant placing a greater emphasis on clinical and medical markets, which were growing rapidly as mounting malpractice suits were forcing doctors to increase the number of diagnostic tests they performed.

In 1965 medical research and clinical products accounted for 25 percent of Beckman's sales volume, a proportion that would climb to 33 percent by 1969 and 40 percent by 1974. This growth was driven largely by the introduction of new products introduced during the late 1960s, including the Beckman Protein Peptide Sequencer, an instrument used for the determination of protein structures, and the Beckman Glucose Analyzer, an instrument that quickly measured blood sugar in samples as small as 10 microliters. Like the pH Meter and DU Spectrophotometer before it, the Beckman Glucose Analyzer represented a substantial improvement over existing technology, completing in less than three minutes what had previously taken 30 minutes.

With instruments such as the Protein Peptide Sequencer and the Glucose Analyzer entering a burgeoning market, Beckman reaped the rewards. Annual sales, which had hovered around $130 million for five years--raising concerns about the company's continued financial growth--responded vigorously as the number of diagnostic tests performed in the United States increased from 2.9 billion to five billion between 1971 and 1975.

By the end of 1975, annual sales neared $230 million, thanks to the company's successes in both the medical and industrial sectors. Beckman's industrial products included a broad range of process control instruments, air and water pollution control instruments, and industrial research products, which combined generated nearly as much money for Beckman as its medical products. Together, medical and industrial products accounted for nearly 80 percent of the company's sales volume and provided much of its financial growth approaching the 1980s. Two other business segments rounded out the company's product line during the latter part of the 1970s. Scientific research contributed 16 percent to Beckman's annual sales, and defense-related business accounted for another six percent, considerably less than a decade before.

In 1982, the company was acquired by SmithKline Corporation, ending nearly a half century of independence. The merger between SmithKline and Beckman created SmithKline Beckman Corporation, a company that operated until the summer of 1989 when it agreed to merge with Beecham Group PLC. At the time, the Beckman unit of SmithKline Beckman Corp. was not performing well, as the federal government and large insurance companies began applying stricter control over health care costs. Medical equipment makers like Beckman were negatively affected by mounting concern over health care costs, leading the architects of the merger between Beecham Group and SmithKline Beckman to consummate their agreement without the assets that formerly composed Beckman, and the company was spun off.

On its own again after seven years, Beckman emerged from under the SmithKline corporate umbrella with its sales and profits roughly split between foreign and domestic markets, and comprising two primary business units: a bioanalytical systems group, which served the basic research market, and its diagnostic systems group, which focused on the clinical laboratory field. Revenues were roughly split between these groups. Despite the losses suffered from the clamp down on health care costs, the company was in better shape than a cursory assessment revealed. Though known primarily as a manufacturer of sophisticated equipment, Beckman derived roughly half of its sales and a greater portion of its profits from consumables, or the reagents and disposable items used by equipment operators. Unlike the company's medical equipment and instrument product line, these consumable products were not adversely affected by increased scrutiny of health care costs.

As the company entered the 1990s, the consumable side of its business provided a stable source of income, holding the company in good stead as it prepared to contend with greater governmental pressure to reduce health care costs. Reductions in government research spending plagued the company during the early 1990s, until management began focusing on increasing sales to private-sector biotechnology and pharmaceutical companies through Beckman's bioanalytical division. A promising new line of diagnostic instruments and eventual corporate-wide cost-cutting measures contributed to the company's resurgence as well, raising annual sales to $888.6 million in 1994 and lifting its net earnings to $42.2 million.

As the company charted its course for the future, management emphasized increasing efficiency and productivity, both in the types of systems designed for Beckman customers and in reducing internal operating expenses. Though questions about the health care industry in the United States clouded the company's prospects, Beckman's outlook was bolstered by its strong strategic positions in diagnostics and biotechnology systems. In 1995, the company pursued acquisitions and marketing alliances to augment its business focus on the chemistry of life.

Principal Subsidiaries:Beckman Analytical S.p.A.; Beckman Eurocenter S.A.; Beckman Instruments Pty. Ltd. (Australia); Beckman Instruments, Inc. (Canada); Beckman Instruments, Inc. (Naguabo); Beckman Instruments Espana S.A.; Beckman Instruments France S.A.; Beckman Instruments GmbH; Beckman Instruments, Inc. (Ireland); Beckman Instruments, Ltd. (Japan); Beckman Instruments, Ltd. (United Kingdom); Beckman Instruments International S.A.; SmithKline Diagnostics, Inc.

Further Reading:

• Armour, Lawrence A., "Just What the Doctor Ordered," Barron's, December 14, 1964, p. 3.
• "Beckman Gets Customers to Design Its Product," Business Week, August 17, 1974, p. 52.
• "Beckman Instruments Taps Medical Field in Big Way," Barron's, November 3, 1975, p. 59.
• "Beckman on Exchange," New York Times, November 8, 1955, p. 43.
• Bedingfield, Robert E., "Along the Highways and Byways of Finance," New York Times, November 27, 1955, p. F3.
• Boffey, Philip M., "Major Benefactor of American Science," New York Times, November 5, 1985, p. C3.
• Carey, John Gerald, "The Health Sciences Stock Index," Wall Street Transcript, February 9, 1970, p. 19,536.
• Joffe, Thomas, "Fishing with the Basses," Forbes, March 1, 1993, p. 144.
• "Keep Doing What You're Doing," Forbes, May 1, 1976, p. 21.
• King, Thomas R., "Stake in Beckman Instruments Held by Bass Group," Wall Street Journal, February 5, 1992, p. 16.
• Koenig, Richard, "SmithKline Sets Pretax Charge, 1,600 Job Cuts," Wall Street Journal, September 28, 1988, p. 3.
• Smith, Marguerite T., "These Health-Care Stocks Can Prosper Even in the Face of Cost Cutting," Money, July 1990, pp. 55--57.
• Smith, Randall, "SmithKline Merger Terms Give Control of New Concern to Beecham Chairman," Wall Street Journal, April 13, 1989, p. A8.
• Wyatt, Edward A., "Beckman's Back," Barron's, September 11, 1989, p. 17.

Source: International Directory of Company Histories, Vol. 14. St. James Press, 1996.

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