CAPIRO X

READING

Singer Company, which was founded in 1851, was one of the first companies based in the United States to sell its product throughout the world. Its red “S” trademark was known to stand for quality sewing machines.

In 1986, however, Singer Company announced its intention to spin off to its stockholders its 135-year-old sewing machine business. Although the newly created firm will continue to make sewing machines under the Singer name, Singer Company itself is no longer in the sewing machine business.

The spin-off in 1986 was part of Singer’s strategy to streamline the company and focus its resources on its 18-year old aerospace division. Several years earlier, the company had stated that its plan was to focus on the military electronics market and pay for future acquisitions by selling some of its nonmilitary commercial businesses.

Singer’s aerospace division manufactures flight simulators, electronic-warfare equipment, and navigation and guidance system for missiles and aircraft. In 1985, Singer’s aerospace division contributed 53 percent of Singer’s revenues and 52 percent of its operating profits. Sewing machines accounted for only 24 percent of revenues and 23 percent of profits.

Singer’s decision to spin off the sewing machine business was due in part to the fact that the market for sewing machines was shrinking. Sales peaked at 3 million units during the mid-1970s. In 1985, Singer sold only 2 million sewing machines. Fewer and fewer people had enough time to sew to justify the investment in a sewing machine. In addition, Singer was facing stiffer and stiffer competition from sewing machines manufactured in Asia.