The RCA Reach

Under David Sarnoff, the Army Reserve officer who helped found the firm back in 1919, the Radio Corporation of America grew into a giant largely by feeding on itself: it manufactured radio and TV sets, then created a market for them by beaming programs over its NBC network subsidiary. "The General," 77 and ailing, is still board chairman, but RCA is now run by his son, President Robert W. Sarnoff, 50, who has chosen to move the firm into other fields. The younger Sarnoff, who has already engineered RCA's long-reach acquisitions of Hertz Corp. and the publishing firm of Random House, believes that "it is desirable to broaden our base" even more.

His latest step in that direction is a proposed merger with New York-based St. Regis Paper Co., a deal that has already brought RCA plenty of static from Wall Street analysts. The get-together, involving $630 million in RCA stock, was negotiated by Bob Sarnoff and St. Regis' longtime chairman, Roy K. Ferguson, 74, but still must be approved by directors and shareholders of both companies. If it goes through, the acquisition of the $721.7 million-a-year paper company would put RCA, the 27th largest U.S. firm, as recently as four years ago, within striking distance of the top ten.

Master's Voice. RCA continues to display the technological prowess that characterized its earlier years. The company dominates the color-TV market, largely because of a $150 million investment back in the 1950s in a color system that has since been adopted throughout the U.S. An equally ambitious venture in the computer field, notably the company's Spectra 70 series, looks like a winner after a shaky start. NBC meanwhile, goes on setting one new sales record after another-even though it still ranks slightly behind CBS in the TV viewer ratings.

Once lightly regarded as being merely the boss's son, Bob Sarnoff is now speaking with the master's voice. RCA's president for the past three years and its chief executive officer since last Jan. 1, he has made the company's marketing operations more efficient, reshuffled its management hierarchy and trimmed production and inventories to help combat eroding profit margins. His efforts have paid off. Last year RCA showed profits of $147.5 million on sales of $3 billion. Both figures are running higher in 1968.

More Positives. Wall Street has denied Sarnoff high marks for the St. Regis deal for the simple reason that the paper company has not been growing as fast as RCA has. A stodgily managed firm in a cyclical industry, St. Regis earned $30.3 million last year, a 22% decline from the year before, but has managed to improve profits slightly so far in 1968. Although RCA stock dropped sharply following the merger announcement, Sarnoff insisted that "it's an excellent deal. The positives far outnumber the negatives."

The low-keyed Sarnoff is a curious mixture of the modern and the conservative. The president's office in Manhattan's RCA building is adorned with abstract sculptures by Giacometti and De Rivera, and its occupant takes particular pride in the company's futuristic new logo, which is emblazoned in 24-ft.-high letters near the top of the 70-floor building. Yet Sarnoff seems to be playing the merger game, a favorite pastime of new-breed executives, with an eye more for posterity than for the present. He dismisses St. Regis' problems as the result of "a temporary overcapacity in the paper industry." Adds Sarnoff: "We would rather have a company with a sound growth rate than one of the highflyers, some of which are showing signs of indigestion."

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