Business activities of Teletype Corporation were now growing rapidly and with good profit. The capital structure of 10,000 shares was wholly inadequate, so by a 15-to-1 stock dividend the capital structure was raised to 150,000 shares, and dividends on an annual basis of $12.00 were paid.
The successful development of apparatus for different applications useful in the telegraph field was largely due to the close cooperation between the research-development and the manufacturing departments of the organization. Howard Krum had expert engineers and designers in his department, Kleinschmidt brought his leading engineers and designers from the Long Island City plant, and there was a definite spirit of cooperation all around.
To quote again from the Fortune magazine story:[10]
As the years up to 1925, when the Kleinschmidt-Morkrum merger took place, were wanderings in a profitless desert, so the years from 1925 to 1930 found the teletype in a land of milk and honey. Mr. Morton, however, was inclined to think that a company which had only two or three major customers is not strongly placed. Furthermore (and by the spring of 1930), at least one of those customers was actively in the market as a Teletype purchaser. This buyer was Colonel Sosthenes Behn, whose International Telephone & Telegraph Co. includes Postal Telegraph at home in addition to many communication and manufacturing companies abroad. With Colonel Behn wanting to buy and Mr. Morton wanting to sell, negotiations rapidly proceeded to a point at which Mr. Morton, at least, thought the deal was almost concluded. But while Mr. Morton and the Colonel were discussing the prospective acquisition, into the Colonel’s office walked a man who has no other place in this story except that he happened to interrupt at this moment. As this gentleman was introduced, he asked whether Mr. Morton were related to Joy or Paul Morton. When Mr. Morton admitted that they were his father and uncle, the man turned to Colonel Behn and said in jest: “Better watch your step. That’s a smart family.” Only Colonel Behn knows whether he gave that remark any weight, but the point is that the negotiations suddenly collapsed, and that the visitor’s remark about the smart family still lives vividly in Mr. Morton’s memory.
This setback was not a setback at all to such a negotiator as Mr. Morton. Two months later, in May, 1930, you find him walking into the office of Clarence G. Stoll, vice president of Western Electric, A. T. & T.’s manufacturing subsidiary. This time there had been no preliminaries. Mr. Stoll rose from his desk and said: “Good morning. What can I do for you?”
“Do you want to buy Teletype?”
“Is it for sale?”
“Yes, at a price.”
“All right. Let’s get down to business.”
They got down to business on the spot, and they remained at it for three solid days in Mr. Stoll’s office. The agreement as reached called for A. T. & T. to pay off the preferred stock of Teletype, 13,979 shares callable at 105, and to give one share of A. T. & T. in exchange for each common share of Teletype. The A. T. & T. shares were worth about $200, so the price came to upwards of $30,000,000—plus, of course, the $1,467,795 for retiring the Teletype preferred.
It should be noted here that this deal to take over Teletype on a share-for-share basis was exclusive of foreign patent rights but did include patent rights in Canada and Mexico.
The sale to Western Electric was closed on September 30, 1930. Mr. Stoll of that company was made president. Howard Krum continued on as vice president and was a leader in developing a number of commendable devices, including a system for transmitting messages in scrambled, untranslatable code form and receiving such scrambled code in perfect message form. Mr. Morton was retained as consultant. Edward Kleinschmidt made an arrangement to do development work for the new organization in a laboratory of his own, assigning all inventions to the Teletype Corporation (see [page 50]).
After Kleinschmidt left Teletype, his assistant, Albert H. Reiber, carried on as head of Research and Development for a short while before his untimely death. In the meantime, Walter J. Zenner had advanced and, in 1935, became Department Chief and later Vice President in Charge of Research and Development. Under Zenner’s direction a number of new devices in the teleprinter field were developed, including ultra-high-speed tape-perforating and tape-controlled transmitting devices, as well as a high-speed stock ticker operating at 900 characters per minute (introduced in 1964) to replace the earlier Morkrum-Kleinschmidt ticker which operated at 500 characters per minute. Some 94 patents were issued in his name, which have contributed greatly to the growth of the Teletype Corporation.[11]
On May 15, 1940, Howard Krum and Edward E. Kleinschmidt were both honored by The Franklin Institute and awarded the John Price Wetherill Medal, each one “For his Part in the Development of a Successful Electrically Operated Duplicate Typewriting Machine Now Known as the Teletypewriter,” (Quoted from the medal certificate.)
Teletype Corporation’s new Model 33 Automatic Send-Receive SetPicture through courtesy of Teletype Corporation