The Story of Amphenol: 1932-1958
Imagine a company that was founded in 1932.
It would be mostly independent up until 1981. It would acquire, then be acquired, then neglected, and then change hands twice in two back-to-back leveraged buyouts.
Then imagine this same company’s total shareholder return, since going public for the second time in 1991, has exceeded that of both Microsoft and Apple as of today.
What company would you think of? What product or service could you imagine would stand the test of such an enormous amount of time and still be able to outperform two incredible businesses that were only founded in the mid-1970s?
(Hint: it’s not tobacco.)
The company is Amphenol, a maker of electronic connectors and cables that has been riding the tailwinds of electronification since its founding.
Preferred Shares recently did a podcast on the early history of Amphenol. We touched on the major highlights: the founder, the early products, and a few of the key moments as the business evolved over time. But because we don’t usually go longer than an hour, we did not have time to cover all the details I had accumulated in my research.
This post is going to be Part I of my own telling of yet another amazing company and its founder, Arthur J. Schmitt. I’ve got financials, charts, anecdotes, referenced historical articles, and lots of cool advertisements from the 1940s through the 1980s. I hope you stick with me to enjoy all the details.
Arthur J. Schmitt
Arthur J. Schmitt (“AJ”) was born on June 14, 1893, the third child of Henry W. and B. Elizabeth Schmitt. During his youth, AJ enjoyed sports (particularly baseball) and attended the St. Ignatius High School run by the Jesuits. At an early age he enjoyed building and tinkering. He made several wagons for himself and his siblings out of crates attached to baby-carriage wheels.
As a 17-year-old in 1910, AJ would leap from home-made wagons to home-made cars. Or rather a propeller car. AJ stripped down a used car to its chassis and attached an airplane engine and propeller to the front. AJ’s “Wind Machine” could travel 50 mph on straightaways in an era where the speed limit was 15 mph on boulevards.
WWI
In his early 20s, AJ would work at a variety of firms. He learned how to be a draftsman. He worked at a meat packing company in the Chicago stock yards and then was a machinist at Bucyrus Erie Company. In 1916, AJ took a job in Memphis at the Sterling Milling Company—he became a manager after just two years. And although AJ was exempt from the draft for WWI because Sterling produced flour, a food essential, he still resigned from his job to join the Army.
AJ wound up at Camp Jackson, SC to become an artilleryman. While there, he continued to educate himself. Most importantly, he began to learn about and experiment with radios. Thankfully, AJ was not shipped overseas and was discharged at the end of the war on December 21, 1918. He then returned home to Chicago.
AJ’s Return to Chicago
AJ didn’t have any plans after being discharged, but he did know he was still interested in radio. And although he was a good mechanic, he also knew he didn’t know much about electricity. So naturally he became a journeyman electrician.
The popularity and use of radio increased dramatically in the 1920s. Arthur began to experiment and began building his own radio sets. He even went so far as to make the individual parts of the radio for himself, such as the condenser and receiver, even though these could be readily purchased. In the process of experimentation, AJ frequently worked with Bakelite material because “the cabinet that received the [vacuum] tubes was made of Bakelite, a relatively new plastic, which was brittle and difficult to work.”1
“Its chemical name was phenol. The odor that Bakelite produced when heated was like carbolic acid because it was a combination of phenol and formaldehyde, also a strong disinfectant. Crystalline phenol was used to make plastics; the aqueous solution was carbolic acid. Plastics of that day and for many years thereafter were known as phenolics.”2
The radio sets in the early 1920s made use of Bakelite in two ways: to receive the vacuum tube and also as the housing cabinet. Bakelite was still a relatively new plastic under the chemical categorization of a “phenol”, and thus many referred to plastics of this era as “phenolics”. This new phenolic was used in radios and other new electronic devices because it was a fairly good insulator for electricity. However, it was brittle and a challenge to work with and shape.
After experimenting with radios, Schmitt discovered that Bakelite could also be molded to form a socket for electrical power connection. Thus, he founded a business in 1923 with a friend, Walter Horn. They put $5,000 into the business and named it “Walnart Mfg. Co.”—a combination of their names. The company began making sockets for radio tubes with Bakelite as the insulating material.
AJ would next succeed where other manufacturers had failed before. He developed a process where he could stamp Bakelite in a die press. AJ also developed a method for punching—in a single go—the Bakelite front panel for holes for the various radio dials and buttons. When compared to the other competitors that were drilling these holes for the enclosure, Walnart Mfg. Co. out-produced them all by a 10:1 ratio.
AJ’s partner Walter would sell out his interest in the firm to Arthur, who then merged the company in 1928 with the Continental-Diamond Fibre Company of New Jersey. A few years later in 1932, AJ left the company after business slumped because of the Great Depression and after being sued for his firm’s inability to fulfill the conditions of the merger.
American Phenolic Corporation
Although he was out of a job, AJ continued to experiment with the goal of making an even more superior molded socket. In August 1932, he filed a patent for a new radio socket made from a single piece of insulating material of phenolic resin molded into the desired form. The new socket was stronger and more efficient. It was also commercially successful despite being having a higher price than competing products.
In November 1932, AJ incorporated the American Phenolic Corporation in Chicago to make his new sockets. Customers of the company would eventually shorten the ungainly name to “Amphenol”. Most importantly, with this patented socket, Amphenol would follow two policies that remain more less in place to this day:
“First, it marked a decision to concentrate on the manufacture of electronic components rather than elaborate assemblies or systems. Second, it charted a course of ‘no compromise’ with quality. Most of all, a reputation for know-how and the ability to solve the most difficult engineering problems emerged from Arthur Schmitt’s efforts never to turn down an order, no matter how challenging.”3
In 1936, Amphenol introduced two new products: the 75 series uniform microphone connector and a lock-in socket for radio tubes. Both products became the industry standard. RCA became an enormous customer—they wanted 10,000 sockets per day. Despite initial capacity being only 250 per day, Schmitt successfully reorganized production to meet the incredible demand. Fellow Chicago-based company Shure, which made microphones, became a customer of Amphenol’s connectors and cables.
Later during a fortuitous trip through Europe, AJ learned that German manufacturers were using a different kind of plastic for their radio sets. The plastic was low-loss and had a lower power factor than anything used in America. It was polystyrene, a far better insulator than the Bakelite Amphenol was using for its products.
Thus, AJ bought a Heinrich Horst extruder (a small plastic-film machine) along with polystyrene plastic samples and brought them back to America to experiment with. Back in America, AJ developed a process of molding polystyrene beads for coaxial cable. Although the coaxial cable had been patented in the late 19th century, no firm had been able to produce it in mass quantities. With this breakthrough, Amphenol was the first company to commercially produce coaxial cable. This new cable would be very important as electronics in the country moved from lower frequencies (radio) into an era of higher frequencies (radar and television).
World War II
Similar to many other companies, WW2 was an enormous growth driver for Amphenol. For example, aircraft were now starting to fly above 30,000 feet. At this altitude, condensation formed in the traditional electric cables which rendered them non-insulating. Thus, the military came to Amphenol to design a more rugged cable that could function at such altitudes. Amphenol became the sole maker of coaxial cables for the first two years of WWII and would produce virtually all the coaxial cables used by American aircraft.
Amphenol’s connectors also were important for the war. Connectors enabled faster production and assembly of planes, tanks, and boats. For aircraft, connectors allowed modular production and repair. A wing of an aircraft could be replaced without full rewiring and resoldering. Amphenol would produce an estimated 62% of all the connectors used by the aircraft manufacturers during WWII. The company was also an unknowing participant in the Manhattan Project—its coaxial cables were chosen for the atom bombs because they were the best.
Financial Performance During WWII
Amphenol’s annual revenues in 1939 were $535,000. Revenues grew 80-fold to $42.8 million in 1944.
To further illustrate Amphenol’s massive growth during this time, below is an Amphenol ad from the June 1943 issue of Aviation. The ad shows the percentage increase in just Amphenol’s A-N connector shipments. “A-N” was an abbreviation for Army-Navy specifications. In 27 months—from the beginning of 1941 to March 1943—these shipments increased by a cumulative 13,572%.
Amphenol Goes Public in 1945
With the war nearing its end in 1944, AJ started preparing to take the company public. He knew the transition to peacetime operations would be almost as challenging as the explosive growth the company experienced during the war. It was an ideal time to take advantage of the still-high valuations the stock market was ascribing to publicly traded businesses.
On January 15, 1945, Amphenol announced it had raised $1.5 million from the sale of convertible debentures along with the sale of 345,000 shares in the company (out of a total of 400,000) at $10 a share. All the common shares came from Arthur J. Schmitt and the company received none of these proceeds. Shares would trade over the counter and on some of the minor regional exchanges.
A funny moment arose during the process of putting together the prospectus for the Securities and Exchange Commission. One of the requirements was to list the earnings of top personnel. When AJ was reviewing the documents, he noticed that Dan Bittan, an Amphenol sales rep, had earned $256,000 in 1945. AJ had only earned $75,000 as CEO. AJ sarcastically asked Bittan, “Wanna swap jobs?”
At the initial offering price of $10 per share, American Phenolic had a market cap of $4 million (or ~$72 million in 2025 dollars). For 1944, operating profit was $3.4 million, net profit was $939 thousand, and earnings per share was $2.35. Thus, the company had a P/E ratio of 4.3 based on the prior year’s earning. The likely reason for such a low multiple is most investors knew revenues and profits for Amphenol—and nearly every other company—would decline during the transition from war to peacetime.
The timing for taking money off the table was almost impeccable. AJ was just one more example of a founder who knew his business and knew the markets. Fellow founder Reuben Fleet had also sold out his remaining interest in Convair for similar reasons, although Fleet sold much earlier in 1941 at the height of the war. The stock market would swoon in second half of 1946 as the negative effects from the transition to peacetime began to be felt.
Post-WWII
After WWII ended, revenues and profits did decline. A better description would be “fell off a cliff”. From an all-time high of $42.8 million in 1944, revenues shrunk to $5.2 million in 1946. An operating profit of $3.4 million in 1944 turned into a $988 thousand loss for 1946. This was the first loss ever in the entire history of Amphenol to date.
With this as a backdrop, Amphenol’s focus in 1945 was to salvage as much as possible from canceled government contracts and to repurpose the large quantities of raw materials sitting in their inventory. One Amphenol employee recalled the experience of this challenging time4:
One of the creative ways Amphenol dealt with its excess inventories was to temporarily get into the toy business:
“With its supplies of plastic powder, the company turned to the production of toys. ‘One of the things we made most of was a child’s potty,’ says Woods. ‘It didn’t represent a lot of money, but we got rid of scrap material.’”5
New Markets and Changes to Distribution
During the post-war period, Amphenol would turn its attention to the emerging growth of radio and television. Two big Amphenol products were its Blue Ribbon connectors for telecommunications and antennas for television sets. (See my post below if you’re curious about the TV stock boom after the end of WWII).
The Post-WWII Television Stock Boom
David Sarnoff, the President of Radio Corporation of America, in 1930 wrote a full-page article for the New York Times in which he described the various evolutions of “electrical entertainment”. From printing press to phonograph, from …
Amphenol’s revenues would continue to grow as the Korean War heated up. By 1950, Amphenol had 8,000 unique products for sale. By 1953, Amphenol had over 9,000 unique products for sale. Thus, to ensure that all customers, big and small, could have quick access to its products, especially for short production runs, Amphenol embarked on a big change in how it sold to customers: establishing 100 industrial distributors in major areas throughout the country.
Bill Rous was in charge of setting up the new distribution system. He was keenly aware how Amphenol’s largest customers might be upset about losing priority to smaller customers. Rous warned AJ about the likely complaints he’d receive and they came up with a general response for AJ to use:
“We agreed to a general reply he would make, and [AJ] held to it totally. Sure enough, he heard from old friends at Boeing, Grumman, Motorola—you name ‘em. Some threatened to drop us, but he asked them all for a six-month grace period, promising that if the program didn’t work we would make amends and see they were taken care of.
Robert Svoboda was one of Amphenol’s unsung heroes. His implementation of the program as head of the Distribution Department was flawless. Within 90 days we knew we had a winner, and AJ began to receive the kind of calls he relished. The same people who had complained now said he had produced a program which was the best thing to hit the components industry.”6
1954: Responding to Increasing Military Demands
In 1954, Amphenol unveiled its sixth major product line, a significant innovation that addressed the increasing demands of the military. The Navy’s carrier-borne aircraft had been experiencing increasing problems “caused by penetration of the connectors by hydraulic fluids and cleaning agents such as carbon tetrachloride.”7 The military needed “hermetically sealed” components. Amphenol stepped up, yet again, to solve the challenge of one of their most demanding customers.
Amphenol’s ingenious solution involved a technique called “potting”, which used thiokol to effectively seal the connectors. This breakthrough offered multiple compelling advantages: it provided greater electrical reliability across a wide range of temperatures and humidity, enabled weight- and space-saving construction, significantly improved the connectors’ ability to withstand severe vibration, and ensured increased reliability when exposed to common aircraft substances like fuels, solvents, and lubricants. Furthermore, this advanced solution came at a lower cost compared to existing standard or mechanically sealed connectors. This is yet another example of Amphenol’s ability to respond to technological demands.
At the end of 1956, Amphenol’s annual revenues had increased to $27.3 million. Yet “things were getting fiscally tight” according to Amphenol’s controller at the time. The company needed additional capital to continue its growth. Thus, the company filed another prospectus in August 1956. It sold 100,000 new shares to the public at $17.20 per share. Amphenol also was able to list its shares for trading on the NYSE for the first time. Finally, it changed its name to Amphenol Electronics Corp.
1957: Amphenol’s 25th Anniversary
1957 marked Amphenol’s 25th Anniversary since its founding. The company now had 2,000 employees, seven manufacturing plants, and a catalog boasting over 25,000 different parts. Additionally, 1957 also marked the dawn of the Jet Age with the first flight of the 707 jetliner. The new plane made extensive use of Amphenol’s products that had been developed for the military. This would prove to be the beginning of a significant growth segment for Amphenol as Boeing’s 727 would use about 1,600 individual electrical connectors in each plane, the largest number ever used in a commercial aircraft at the time.
During the anniversary year, Amphenol also: (1) acquired Danbury-Knudsen; and (2) entered the U.K. market. The Danbury acquisition was important as this gave Amphenol exposure to the radio frequency (RF) and microwave segments within electronics.
Then, in 1958, Amphenol engaged in its largest acquisition ever. It would merge with the George W. Borg Corporation, a maker of automobile clocks, electronic instruments, and strangely enough, deep pile fabrics.
Thanks for reading and continue on to Part II of my deep dive into the history of Amphenol…
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Disclaimers for this Substack
The content of this publication is for entertainment and educational purposes only and should not be considered a recommendation to buy or sell any particular security. The opinions expressed herein are those of Douglas Ott in his personal capacity and are subject to change without notice. Consider the investment objectives, risks, and expenses before investing.
Investment strategies managed by Andvari Associates LLC, Doug’s employer, may have a position in the securities or assets discussed in any of its writings. Doug himself may have a position in the securities or assets discussed in any of his writings. Securities mentioned may not be representative of Andvari’s or Doug’s current or future investments. Andvari or Doug may re-evaluate their holdings in any mentioned securities and may buy, sell or cover certain positions without notice.
Data sources for all charts come from SEC filings, Koyfin, and other publicly available information.
Schaefer, Arthur J. Quest for Leadership: The Arthur J. Schmitt Story (Chicago, IL: Cathedral Publishing Company, 1985), 46.
Ibid., 47.
Ibid., 54.
Ibid., 101.
Ibid., 102.
Ibid., 116.
Ibid., 118.