BEI Technologies, Inc. History
San Francisco, California 94104
Telephone: (415) 956-4477
Fax: (415) 956-5564
Sales: $213.7 million (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: BEIQ
NAIC: 334513 Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables
BEI Technologies, Inc. is leading the development of intelligent sensors across many markets.
- Baldwin Piano and Organ Company uses an optically encoded disk to make an electronic organ.
- The U.S. Army Signal Corp. contracts Baldwin to develop optical encoders.
- Baldwin encoders are first used in the U.S. space program.
- Baldwin spins off BEI Electronics, Inc.
- BEI Electronics spins off BEI Technologies.
- BEI expands internationally through its acquisition of Ideacod, a French manufacturer of electronic sensors used in factory automation.
- OpticNet, Inc., a subsidiary dedicated to the development of fiber optic components for the telecommunications market, is formed.
BEI Technologies, Inc. manufactures sensors, motors, actuators, and subsystems used by the aerospace, automotive, heavy equipment, industrial, medical, and military markets. The company is publicly traded on the NASDAQ and is based in San Francisco. BEI's actuators provide high-performance motion control for machinery. The company also makes brushless DC motors, ideal for sterile environments. Through the Duncan Electronics Division, BEI supplies position sensors to the automotive industry for greater comfort in seating as well as improved control through steering sensors. These devices also are used in agricultural equipment, drilling rigs, and medical equipment. BEI's inertial sensors use the company's GyroChip technology to provide stabilization, flight control, and guidance for the automotive, medical, aerospace, defense, and communications markets. The company's extensive line of rotary optical encoders uses a glass codewheel to measure motion, and the information then is translated into an electronic signal. BEI encoders are used in a broad range of industrial, office automation, instrumentation, military, and space applications. Displacement sensors use a fiber-optic probe to reflect light from a target surface to accurately measure displacements. BEI offers subsystems, combining controllers, and amplifiers to create a one-stop approach in providing motion-control systems used in highly automated robotic and pick-and-place applications. Finally, BEI manufactures miniscule silicon micro-electromechanical systems (MEMS), using micro-machining techniques. MEMS devices, both electrical and mechanical, are used in products such as pressure sensors, automotive anti-skid sensors, and air bag deployment sensors.
BEI's Lineage Dating to 1800s Piano Maker
Despite the high-tech nature of BEI's business, its history began with Dwight Hamilton Baldwin, a minister and school singing teacher who decided to open a music store in Cincinnati, Ohio, in 1862. As D.H. Baldwin & Co., the company became well known as a keyboard instrument dealer, then in 1889 the company began to make reed organs through its Hamilton Organ Company. A year later, Baldwin decided to make "the best piano that could be built," and a year later introduced its first piano, an upright model. Baldwin's first grand piano was introduced in 1895. Following Baldwin's death in 1899, the company achieved great fame with its concert grand pianos, which received numerous prestigious awards. It also gained valuable publicity due to the large number of artists who chose to use the Baldwin grand for their performances.
Baldwin grew into an international business, soon exporting pianos to more than 30 countries around the world. In addition to grands and uprights, Baldwin manufactured player pianos, which accounted for more than half of the company's sales by the early 1920s. But the rise of new media--movies, phonographs, and radio--soon resulted in dramatic cuts in this segment, and the situation only worsened with the advent of the Great Depression. Because it was well led and had an abundance of cash in reserve, Baldwin was able to carry on despite difficult conditions. During World War II the company was forced to cease making pianos, and to help in the war effort it used its woodworking expertise to manufacture wings and other aircraft parts.
Post-World War II Application of Electronics to Music
When the war was over Baldwin first became involved in the application of electronics to musical instruments. The goal was to create an organ that would reproduce the sounds of pipe organs found in European cathedrals. Baldwin engineers developed a way to use optically encoded glass discs to reproduce the organ tones. The codewheel transcribed the original organ tones into etched-in opaque and transparent segments, so that when the codewheel rotated it created an alternating pattern of light and dark. Photodiodes then translated this into an electronic signal, which in turn could be processed and amplified to create the tones and harmonics needed to reproduce the source sound. In the late 1940s Baldwin introduced the electronic organ to the church and home market.
Baldwin began to venture beyond musical instruments in 1951 when the U.S. Army Signal Corp., recognizing that the company's technology could help in the pointing and tracking of radar antennas, contracted Baldwin to develop optical encoders using rotary code patterns. In 1953 Baldwin developed the first 16-bit divided circle machine, and in 1955 produced the first experimental optical encoders. With a new electronics market to service, Baldwin acquired American Radio and Television in Little Rock, Arkansas, which became the company's manufacturing center. By 1960 all coded disk manufacturing and personnel were transferred to Little Rock. In 1962 Baldwin's research resulted in an 18-bit optical encoder that was used in American Space flights. A year later the company produced the first optical encoder for space with LED light source. Also in 1963, the electronics division was incorporated as Baldwin Electronics, Inc., often referred to by its initials, BEI.
BEI's parent company appeared to take a radical change in direction in 1968 when it formed Baldwin-Central to acquire Denver-based Central Bank & Trust Co., but in truth Baldwin had been involved in financial services since the end of the 19th century. The company was a pioneer in the use of installment plan contracts and by the mid-1930s had gained a reputation as the banker of the piano industry. Some 20 years later, 65 percent of Baldwin's assets were tied to financial services. In 1969 Baldwin added a second Denver bank, Empire Savings & Loan, which two years later became involved in multifamily construction lending. Later, Baldwin acquired a third Denver bank, Jefferson Savings & Loan, and a Kansas City, Kansas, bank, Anchor Savings Association, as well as insurance interests. Baldwin's business was so heavily weighted toward financial assets that in 1973 the Federal Reserve ordered the company to divest certain assets not related to financial services or musical instruments. Thus in 1974 Baldwin's electronics subsidiary was spun off to 33 employees backed by Charles Crocker, a San Francisco venture capitalist. The company was renamed BEI Electronics Inc.
As an independent company, BEI Electronics expanded on a number of fronts. In 1975 it developed a 21-bit optical encoder used in weather satellites. BEI Industrial Encoder was formed in 1977. In 1979 the company developed the Star Selector Servo Subsystem used in the Hubble Space Telescope. During the 1980s BEI Electronics developed a linear gap displacement transducer and the radiation-hardened optical encoders for the Galileo Space Probe. By now the company had emerged as a clear leader in encoder technology. Its space system experience was second to none, with its encoders having been used on the Gemini and Apollo missions, Galileo, the Hubble Telescope, and weather satellites. BEI encoders would later be employed on the Mars Observer missions, Spacelab, and the International Space Station. The devices were used to rotate satellite antennas, solar panels, control line-of-sight stabilization, attitude control, robotics, and shuttle arms. Also in the 1980s BEI Electronics developed a dual-ended quartz tuning fork that was employed in a gyro for use in missile guidance systems. Defense contracts soon became a major part of the company's business, in particular through the sale of the Hydra-70 rocket, which was relatively cheap, priced at $1,000 or less per rocket, making it an attractive training mission ammunition.
BEI Electronics quickly became overly dependent on its military business, so that when the company made an initial public offering of stock in 1989 it was greeted with little enthusiasm by investors, who worried that the company was too exposed to defense spending at a time when cutbacks were expected in military spending in the aftermath of the Soviet Union's collapse. The Gulf War resulted in a resurgence in rocket sales, but it was clear the BEI Electronics needed to find more commercial applications for its sensor products.
In the early 1990s BEI Electronics began an effort to diversify, initially through acquisitions, picking up Litton Encoder and Itek Encoder in 1990, which in the process eliminated its major U.S. competition. Also in that year, BEI Electronics acquired four of six divisions of Systron Donner Corp., adding the Duncan division, involved in position sensor technology; the Inertial division, makers of inertial reference and guidance components using new quartz sensor technology; the Edcliff division, which made pressure transducers; and the Sylmar division, producer of fluid controls and advanced cryogenic cooling systems for imaging sensors. Perhaps the most important acquisition in the Systron Donner purchase was the quartz technology from the Inertial division, which had the potential to transform measurement products in a way similar to what quartz had done to timekeeping. Quartz sensor technology would find a wide range of applications in miniaturized sensors. In late 1991, in a further attempt to move away from the defense industry, BEI Electronics also formed a new healthcare division, BEI Medical Systems, to take further advantage of the company's medical business. For some time its components for positioning and motors had been used in medical applications by other companies. Now BEI Electronics hoped to use these technologies to develop its own products.
To help facilitate the shift away from the defense business, Crocker took over as president and CEO of BEI Technology in October 1995 following the retirement of Peter G. Paraskos. At this stage, the company was composed of three operating units: Defenses Systems, which produced the Hydra-70 rocket and associated avionics; Sensors and Systems, which produced sensors and engineered subsystems for commercial, aerospace, and military applications; and Medical Systems, which offered proprietary instruments and supplies for medical diagnostic and some surgical procedures. While the latter two divisions were on the ascendancy, it was clear that the company's defense business was becoming increasingly less attractive and Crocker began taking steps to exit the Hydra-70 rocket business in 1996. In the meantime Medical Systems continued to expand by acquisitions, buying OvaMed Corporation, which included subsidiaries Saratoga Medical and Fibertonics, involved in products for minimally invasive infertility and endoscopic procedures. Sensors and Systems succeeded in transferring its missile guidance technology, which employed quartz tuning forks in a gyro. The company's GyroChips were first used by Cadillac in 1996 to detect fishtailing and prevent the loss of traction, and a large number of carmakers soon followed suit.
Spinoff in 1997
Unable to find a buyer for the rocket business, Crocker simply shut it down and then took steps to split the remaining two divisions as a way to enhance the value of each. In June 1997 BEI Technologies, Inc. was formed to take over the Sensors & Systems division, the shares of which were distributed to BEI Electronics. BEI Electronics then changed its name to BEI Medical Systems Company. Shares of both companies now traded on the NASDAQ.
BEI Technologies was especially aggressive in selling the GyroChip to automakers. Sales of the sensors in 1998 totaled $20.2 million and grew to $54.4 million in 1999. BEI also was looking for further opportunities to take advantage of its other technologies. It expanded internationally in 1998 by acquiring Ideacod, a French company that manufactured electronic sensors used in factory automation. In 2000 it formed a new subsidiary, OpticNet, Inc., dedicated to the development of fiber optic components for the telecommunications market, using BEI's MEMS process capability. In the previous two years, BEI had made significant investments in the development of MEMS for a number of applications. In 2001 BEI acquired from Boeing Co. the Digital Quartz Measurement Unit and the MIGITS (Miniature Integrated GPS/INS Tactical Systems) product lines, which had been co-developed by BEI's Systron Donner division. Systron Donner in 2002 would split into two units, devoted to automotive and inertial products.
The demand for BEI's GyroChip sensor in the automotive industry was the most important factor in the company's steady growth in sales. Revenues improved from $159.4 million in 1999 to $219.2 million in 2000. More than $53 million of that increase came from GyroChip sensors sold to automakers. In 2001 revenues increased 9 percent to $239 million. The sale of GyroChip sensors grew by more than $31 million, making up for a drop in sales to industrial customers, in particular the semiconductor capital equipment industry. A soft economy hurt BEI in 2002, leading to a 22.3 percent decrease in sales to $185.6 million. The company rebounded in 2003, with revenues totaling $213.7 million. Once again the sale of BEI GyroChip sensors to domestic and foreign automakers was the key factor, growing from $94.7 million in 2002 to $199.2 million in 2003. Ironically, BEI also was finding a use for GyroChip sensors in military aircraft, for which the technology was originally developed. In the foreseeable future, the company's fortunes were very much tied to the success of this one technology.
Principal Subsidiaries: BEI Sensors & Systems Company, Inc.; SiTek, Inc; BEI Ideacod, S.A.S.
Principal Competitors: CTS Corporation; Robert Bosch GbmH; Rockwell Automation, Inc.
- "D.H. Baldwin Tuned Up for Fifth Straight Gain," Barron's National Business and Financial Weekly, April 17, 1972, p. 36.
- Ginsberg, Steve, "BEI Spins Off Medical Care from Missiles," San Francisco Business Times, July 11, 1997, p. 1.
- Henry, John, "From Music to Motion Control, Company Now Masters Space," Arkansas Business, April 23, 2001, p. 1.
- Moore, Brenda L., "BEI Could Rally If Rollover Rating Buoys Sales of Car-Stability Sensors," Wall Street Journal, May 24 2000, CA2.
- Savitz, Eric J., "Rocket and Roll," Barron's, September 11, 1989, p. 15.
Source: International Directory of Company Histories, Vol. 65. St. James Press, 2004.