Sidney Harman Is Still a Loud Speaker in Stereo Industry

One of the last major furniture factories on the West Coast sits on Balboa Boulevard, turning out cabinetry for the JBL stereo loudspeakers that come off the assembly line at Harman International Industries.

It’s part of the business empire controlled by Sidney Harman, whose fortune of about $200 million comes from half a century of selling stereo loudspeakers and consumer electronics. Harman, 79, is the well of deep money behind his wife Jane Harman’s gubernatorial run.

Harman International’s sales are expected to hit $1.6 billion this year. Although headquartered in Washington, D.C., with units in four states and six foreign countries, Harman’s biggest operation is in Northridge, where 1,550 employees work in administration or designing and engineering loudspeakers.

Along the way, Harman acquired several other local loudspeaker companies, including Van Nuys-based JBL in 1969 and Chatsworth-based Infinity in 1983. He later consolidated those operations into a campus-like Northridge business park.

Few executives in America can claim, as Sid Harman does, that “I was one of the founders” of an industry, and remain active in it almost 50 years later.

In 1953, when Eisenhower was in the White House and Sid Harman’s future wife was still in elementary school, he and Bernard Kardon began selling receivers on Long Island for the embryonic high-fidelity sound business. A few years later his partner quit, but Harman kept building up Harman Kardon’s name, riding a profitable shift from mono to stereo.

John Atkinson, editor of Stereophile magazine, pegs three seminal figures in the loudspeaker industry: Paul Klipsch, Amar Bose and Sidney Harman.

In the late ‘40s, Klipsch pioneered the use of bass horns in loudspeakers, which gave genuine oomph to the muted sounds produced by the radios and phonographs of the day. In the late ‘60s, Bose came up with a hallmark design in which some speakers fired away from the listener, bouncing sounds off walls to fill a room.

Klipsch and Bose are engineers; Harman is “basically a marketer,” Atkinson said. “He’s very good at thinking and understanding what people will want to buy in five years.”

Harman, who has a doctorate in social psychology, had also run other businesses, among them a mirror factory in Bolivar, Tenn., that drew national attention for an innovative program offering “earned idle time” so factory workers could go home after meeting their daily production quotas.

Vice President-elect Walter Mondale read about this labor experiment, and at his urging, Harman joined the new Carter administration as undersecretary of commerce. He sold off his audio company to Beatrice Foods in 1977 for $100 million, pocketing about half of it.

During his two years in government he met Jane Lakes Frank, then a deputy in the White House, who is 27 years younger than he is.

“I was mildly surprised but not shocked,” recalled Shirley Hufstedler, Carter’s secretary of education. “Sidney has a captivating air about him. When he wants to make a sale, he’s an extremely good salesman. And Jane found him an intriguing being, because he is.”

In a phone interview, Sid Harman recalled, “My friends said, ‘Are you out of your mind? Do you not have a sense of mortality?’ I said I had a profound sense of mortality, ‘and if Janie can’t make it, she won’t make it.’ ”

They married in 1980 and have two teenage children.

Harman returned to the audio business that year by repurchasing most of his company from Beatrice for $55 million, when it was generating about $70 million in annual sales. Capping nearly two decades of rapid growth, Harman International’s sales reached a record $1.5 billion and turned a record profit of $54.8 million in 1997.

Harman built a billion-dollar company in part by aggressively pushing loudspeaker sales to car makers; Chrysler and Mercedes are now his biggest customers, accounting for 16% of his total sales last year. He also repurchased his original Harman Kardon division from a Japanese firm in 1985.

“He has constantly kept his product line fresh and changing, and reads the trends in the marketplace,” said Mark Hassenberg, an analyst with Donaldson, Lufkin & Jenrette Securities in New York.

Harman International sells professional audio components--including speaker systems for concerts used by the Rolling Stones, Pink Floyd and Wynton Marsalis--and provides speakers to Dolby and THX for movie theater sound systems.

It also sells audio products through mass merchandisers, such as Circuit City, and specialty retailers. In addition to loudspeakers, Harman sells amplifiers, CD players and multiroom home theater systems. Its brands include Infinity, JBL, Harman Kardon, Citation, Proceed, Revel, Audioaccess and Mark Levinson--and their prices range from $50 to $50,000.

Most of its growth, though, is due to the car business. JBL speakers are in Lincolns, Infinity speakers in Chrysler, Harman Kardon in BMW and Jaguar; other customers are Mercedes, Toyota, Mitsubishi, Range Rover and Saab. Harman’s annual sales to car makers has mushroomed from $15 million in 1980 to about $600 million today. Chrysler’s Town and Country minivan now comes packaged with 10 Infinity speakers. Roslyn Parker, a saleswoman with David Ellis Chrysler-Plymouth in Canoga Park, said, “If you’re spending $33,000 on a van, you don’t want to have to think about going out and buying a decent stereo.”

Harman sells about $250 of its product per car, and he sees that tripling in a few years. How? Three years ago Harman purchased Becker, a German car radio maker, in a $70-million deal; this allows him to sell digital radios, not just speakers, to car makers. Next year Mercedes will offer a combination Becker radio and global positioning satellite navigation system for about $1,500.

Although Harman International’s profits are rather flat in its current fiscal year, hurt by the Asian economic crisis, analyst Hassenberg expects the auto business to help push the company’s profits to a record $75 million in 1999.

In the years ahead Harman also hopes to pick up sales from the evolution of DVD hardware for computers and television, which offer higher-definition videos from a CD-size disc.

Although Harman International’s overall growth in the past two decades has generally been steady, there have been some bumps. In 1990 Harman International lost $19.8 million, and was top-heavy in debt. Sid Harman dismissed his company’s president and spent more time in California, overhauling the business.

“Sidney’s very bright, but he’s not an easy guy to work for. If people don’t live up to his expectations, he chops them apart,” an ex-Harman executive said. “He’d dip into the industry and be with it for a while, then disappear and stay in Washington. Sidney likes politics. He’d think the company was in good hands, then find out there were lots of problems. So he would come back and dedicate himself.”

Indeed, Stereophile’s Atkinson says that Harman’s management style remains like someone who runs a family business, not a large public corporation. Jane Harman sat on Harman International’s board of directors until she ran for Congress in 1992, and two current board members are political veterans: Hufstedler, from Carter’s Cabinet, and Ann McLaughlin, who served as Reagan’s secretary of labor.

Sidney Harman has made some concessions to age. In 1996, for estate planning purposes, he sold $115 million in stock owned by various family members and his charitable trust. But he is still Harman International’s second-biggest shareholder and his remaining shares are worth $55 million.

This fall Harman plans to step down as chief executive, while remaining chairman, passing the CEO title on to Bernard Girod. But analyst Hassenberg sees no diminishing of his influence: “I mean this in a very affectionate way. Your father is always your father. Sidney Harman is always going to be the Sidney Harman of Harman International.”

Although Jane Harman is doing some private fund-raising, the rewards from her husband’s business success are paying for a significant share of her run for governor. The couple have already lent her campaign $4.25 million; some estimate that her total expenditures will hit $30 million.

“We’re not going to spend anything like $30 million,” Sid Harman said. So what’s his limit? “To quote Abe Lincoln: ‘How long are a man’s legs? Long enough to reach the ground.’ ”