Oak Industries

~ the obituary ~

Edward S. Bessey started Oak Manufacturing in 1932, in the Depression, in a 400,000 square foot plant in Crystal Lake, Illinois. The products were electrical switches and Bakelite parts, dial light bulbs and socket assemblies, and then through the thirties and forties the components radios were made of. In the early 1950s, with television arriving everywhere at once, Oak found the thing it would be known for inside the industry: the tuning dial. By 1980 it was the largest maker of television tuning dials in the United States, and for years it was the largest employer in its town.

That is a respectable but unmemorable history, and it is not why the company is worth a grave. In 1971 Oak built one of the earliest cable television set-top boxes and pioneered the addressable converter, which let a cable headend talk to one particular decoder in one particular house. Owning that technology put a components manufacturer one short step away from owning a television service, and in 1973 it took the step, forming a joint venture with Chartwell Communications that eventually became National Subscription Television.

The service was ON TV. It launched in Los Angeles in April 1977 and ran until 1985 on a mechanism you can describe in one line: buy airtime on an ordinary UHF station and send the programming out scrambled, then rent every subscriber a box that unscrambles it. Cable was still patchy and expensive to lay, and over-the-air subscription television reached neighborhoods no cable franchise had got to yet. Oak made the boxes. It expanded to seven more metropolitan areas, Detroit and Chicago among them, and in 1981 ON TV brought in $260 million, more than Oak's components and materials businesses put together.

ON TV launched before I was born and had been sold off before I started school, so what I hold of it is a row of dates with no texture underneath them. What makes it legible from here is the business model, which turns up again later under other names. You rent the decoder by the month, and the day you stop paying, the picture goes back to being noise.

~ the case file ~

~ the scrambled signal ~

Los Angeles was the strong market by a wide margin, over 400,000 subscribers at the peak in 1982, which was more than half of everything ON TV had. The company moved its head office to Rancho Bernardo in San Diego in 1979 to be nearer the people who made the programming, and by 1983 it was co-producing films, putting money into Psycho II with Universal as the first of a planned four.

Then it came apart quickly. Over-the-air subscription television did not grow the way the projections said, because cable kept getting built. The early-80s recession hit the components business. Oak's new TC-56 cable converter shipped with technical faults and went into a voluntary recall, and its share of that market fell from more than half to about fifteen percent. ON TV systems started closing in 1983 amid programming disputes and fights with stations over adult content. The SEC opened an investigation into overstated 1982 earnings and into the company's use of the chairman's wife for interior design work. Shareholders sued. In 1985 Oak sold the last ON TV operation, the Los Angeles one, to a competitor called SelecTV, and began offloading the UHF stations it had bought to carry the service. The Chicago one took until 1995, because somebody challenged the license.

~ the proxy fight ~

Everitt A. Carter, chairman for twenty one years, resigned abruptly late in 1984. E. L. McNeely came in as interim chairman that November and stayed, and he spent the next two years selling things. The Latin American subsidiaries and a unit called Adec went in 1985. In 1986 the materials division went to AlliedSignal, which paid down $195.5 million of the $230 million Oak owed. The Rancho Bernardo headquarters staff went from 250 to 50. Oak's net worth crossed back from negative $69.9 million to positive $65 million, and contemporary analysts gave McNeely the credit for keeping it out of bankruptcy court.

It did not save his job. Roderick M. Hills, a former SEC chairman and a friend of McNeely's who had joined Oak's board in 1985, ran a proxy fight against him in April 1989, backed by a British investment firm called MIM that held a quarter of the stock. The charge sheet was McNeely's run of unrelated acquisitions and an aggregate net loss of $227.7 million across 1983 to 1989. At a two-hour annual meeting MIM's chairman said Oak had treated him with "offhandedness and contempt"; McNeely answered that he had snatched the company from the jaws of death. Hills took 77 percent of the vote and McNeely was out a week later, after which he accepted a seat on the board he had just lost. Oak had by then earned a place on The Wall Street Journal's annual list of the ten worst-run companies in America.

~ bought for a laser ~

William S. Antle III took over at the end of 1989 with eight weeks to turn the company around and a liquidation plan drawn up for seven of its nine divisions in case he could not. He put the California headquarters on the market in February 1990 and moved the company to Waltham, Massachusetts. The communications division was sold that May and the Crystal Lake plant closed for good in July 1991. What was left by 1992 was profitable and much smaller, and it sat in a completely different line of work: quartz oscillators, railway maintenance equipment, rotary switches, the controls inside gas kitchen stoves.

Then in August 1995 it paid $112 million for Lasertron, which made 980-nanometer pump lasers for fiber optic systems, and that purchase is the only reason anybody remembers the end. On 15 November 1999, in the middle of the optical networking boom, Corning agreed to buy Oak Industries for $1.8 billion in stock. Corning's own annual report records the merger as a pooling of interests completed on 28 January 2000, with 44.3 million Corning shares and 8.1 million options issued, plus a $47 million charge in the first quarter that was mostly legal and banking fees. Oak had 3,900 employees and no layoffs were expected. The Crystal Lake factory was still standing in 2016, when a church bought it to turn into a chapel.

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