The $6.28 billion merger of General Electric Co. and RCA Corp. brings full circle an unusual relationship between the two companies that dates back to RCA's founding 66 years ago.
Just as foreign competition was cited as a reason for the two electronics giants to merge today, it spurred President Wilson to encourage GE to bring RCA to life back in 1919.
In those days, a foreign company, British Marconi, dominated the emerging "wireless" market and sought to acquire exclusive rights to a powerful new generator developed by GE for wireless transmissions.
Appreciating the national-security implications of advanced radio technology in foreign hands, Wilson instructed Franklin Delano Roosevelt, then undersecretary of the Navy, to tell GE to terminate negotiations with the British.
Quickly, the Navy moved to create a consortium to take over American Marconi -- the subsidiary of the British company -- to assure that this major advance in the development of wireless would stay in U.S. hands. The result was Radio Corp. of America. The company's largest shareholder was General Electric. The company's chairman was Owen Young, a GE corporate counsel who later became GE's chairman. Later, AT&T, Westinghouse and United Fruit (which wanted to track crop status in the Caribbean) also joined.
But the visionary and driving entrepreThe Navy rushed to keep the wireless in U.S. hands. A consortium took over the American subsidiary of British Marconi, and the result was Radio Corp. of America. General Electric was its largest shareholder. neurial force behind RCA was David Sarnoff -- a young Russian immigrant who became a national hero when, for three days in April 1912, he was the sole communications link between the United States and the ships trying to rescue survivors of the Titanic disaster.
Sarnoff, who said he had "hitched his life to the electron," grandly envisioned the concept of a Radio Music Box, with radio transmitters beaming in the finest of music classics into people's homes. In many respects, he was the key creator of the broadcasting business.
RCA, working with GE, began selling crystal radio sets by the thousands in 1922; it moved into broadcasting with its own radio stations the next year. Sarnoff convinced GE to launch the National Broadcasting Co., arguing that a radio network would encourage radio sales.
In 1929, RCA purchased the Victor Co., launching it into the record business and thus acquiring what eventually would be one of the best-known logos in the world: Nipper the dog, with his head cocked at the Victorola, listening to "His Master's Voice."
The next year, Sarnoff became RCA's chairman.
A few months later, however, the Justice Department filed an antitrust suit against RCA, and in 1933, GE agreed to divest itself of its interest in the radio giant as part of a settlement.
That ended the formal ties between GE and RCA, and they quickly became competitors in the electronics high technology of the day. One link remained: the three-toned musical signature of NBC consists of three notes: G, E, C -- for General Electric Co.
With the legacy of its founder-genius Thomas Edison, and successors such as Charles Steinmetz, GE continued to dominate the lighting, light bulb and generator industries.
RCA plunged ahead with its ambitions to provide pictures over the air -- television. Observing, "Now we add sight to sound," Sarnoff unveiled the first public exhibition of television at the 1939 New York World's Fair. He also announced that NBC would launch a television programming service.
During the war, both companies became vital defense contractors, providing critical communications components to the services while GE developed its special skills in aviation and engines. GE and RCA cultivated strong reputations for state-of-the-art research and development -- GE with its historic Schenectady, N.Y., labs, and RCA with its David Sarnoff Research Center in New Jersey.
In the postwar years, RCA pioneered color television and reached a billion dollars in annual revenue by 1959. The company moved into satellites, semiconductors and defense electronics.
Both companies, impressed by a fast-growing company called International Business Machines Corp., poured hundreds of millions of dollars into developing mainframe computers in an effort to be a part of the data-processing revolution. Both efforts failed totally, with hundreds of millions of dollars in write-offs in the 1970s.
Sarnoff, known as The General, became the elder statesman of broadcasting, and exerted a heavy influence over his corporate creations until his death in 1971.
However, RCA began to act like a conglomerate -- straying into such areas as carpeting, auto rental, publishing, greeting cards and financial services. Profits slumped. NBC, once the dominant network, slid to last place in the television audience ratings and its earnings sagged.
In 1981, RCA brought in Thornton Bradshaw, the president of Atlantic Richfield Co., to turn the company around. He did, largely by divesting many interests to focus on electronics, communications and entertainment.
The stock price quadrupled and earnings increased by more than 800 percent.
On the other hand, GE, though also a diversified company, didn't enjoy some of the historic growth it had experienced in the past. It became more of a solid state company that a growth company.
John F. Welch, named GE's new chairman in 1980, was expected to shake up the establishment company and did. Last week's merger with RCA signals that the company GE helped create nearly 70 years ago will become a key to GE's growth as it takes on a new generation of foreign competition.