2200 Northern Boulevard
East Hills, New York 11548
Telephone: (516) 484-5400
Fax: (516) 484-5228
Web site: http://www.pall.com
Incorporated: 1946 as Micro Metallic Corporation
Sales: $1.77 billion (2004)
Stock Exchanges: New York
Ticker Symbol: PLL
NAIC: 333999 All Other Miscellaneous General Purpose Machinery Manufacturing
Pall Corporation is the largest manufacturer of filtration, separation, and purification products in the world. The company markets its products in four major industries: healthcare, pharmaceutical, fluid processing, and aerospace. According to the company, fluids are processed by a Pall product over 60 million times each day across the globe. Approximately 40 percent of company sales stem from operations in Europe.
Pall Corporation traces its origins to the formation of the Micro Metallic Corporation by David Pall in 1946. During World War II, Pall, a Canadian-born chemist, worked on the Manhattan Project, a covert operation in which the American government sought to develop the first atomic bomb. Pall, then 27 years old, helped design a filter to separate uranium 235 from uranium 238. He and his colleagues developed the filter to separate the raw uranium material from the heavier, less stable uranium by sintering—heating to just below melting point—powdered stainless steel and producing a very fine screen. Pall and his company, renamed the Pall Corporation in 1957, remained focused on developing filters for special tasks, and, as technology in other fields emerged, new markets opened up for the company's filters.
In 1950, Pall brought his neighbor, a certified public accountant named Abraham Krasnoff, into the company to help with administration and finance. Krasnoff's organizational skills along with Pall's scientific genius resulted in a successful organization.
In 1958, Pall began developing filters for the aircraft industry. Its first filters were for the American Airlines fleet of Boeing 707s, the technicians for which had resorted to operating their landing gear manually after finding that impurities were causing the hydraulic landing gear system to malfunction. Next, Pall developed a filter for purifying jet fuel. The company soon became the leading supplier of aircraft filters, and in the 1960s and 1970s Pall filters were used on most major military aircraft, including helicopters and fighter jets.
In fact, by the late 1970s Pall had become overly dependent on military and defense industries, and the company sought new markets for its fine filter technology. During this time, Pall was able to provide the emerging semiconductor and biotechnical industries with the finer filters needed in their manufacturing processes.
According to Abraham Krasnoff, who became the company chairperson in 1989, Pall preferred to service niche markets, where manufacturing needs were very specialized and challenging. Accordingly, Pall eschewed the production of filters widely used by individual consumers, such as gasoline or oil filters for cars. Furthermore, once Pall's development of a certain technology was complete, the company usually jettisoned its business in that area. For example, in 1988, Pall sold its compressed air dryer business as well as its facility that produced gas mask filters, as they both became technologically and financially mature units.
Recognizing that Pall Corporation could not rely solely on the genius of one person, David Pall, the company focused on building a research and development department. Referring to David Pall, Krasnoff told Industry Week, "You can always succeed a good manager, but you can never succeed a genius." Therefore, Krasnoff and Pall set about assembling an impressive array of scientists who would help develop fluid clarification products. Pall spent only about 4 percent of its sales on research and development, compared to the budgets of some of its chief competitors, such as Millipore, which allotted more than 7 percent of sales. The company was able to keep its costs down by focusing solely on fluid clarification, unlike Millipore and other companies, which had diversified their interests and therefore required a wider array of researchers.
Another of Krasnoff's organizational strategies was to assemble a team of scientists known collectively as the company's Scientific Laboratory Services, or SLS, to help test, advise, and communicate with researchers. Krasnoff told Financial World that SLS was "a bridge between the leading edge customer and our own marketing and research people."
In order to ensure that supplies and prices remained steady worldwide, manufacturing for each of Pall's product lines took place in at least two Pall facilities. The size of each facility was limited to no more than 450 employees, fostering a sense of team spirit and familiarity.
Much of the steady growth Pall experienced, measuring about 17 percent annually through the 1980s and into the 1990s, was accomplished through internal growth rather than through acquisitions. Pall focused on building new factories and creating subsidiaries throughout the world. Pall faced international competition but maintained its edge in several markets and managed to dominate almost every niche it carved out for its subsidiaries.
In the early 1990s, Pall's healthcare products division was the fastest growing segment of the company. In 1992, with sales of $331.6 million, the division represented almost half of Pall's sales and 60 percent of its operating expenses. It included filters for direct use with hospital patients to provide protection against contamination and infection through blood, breathing, or IVs. Blood filters in particular were a high growth area in the first part of the decade, with sales estimated to reach $260 million, or 26 percent of total sales, by 1995.
Pall's leukocyte filters treated with gamma rays were used to filter out white blood cells, which caused the rejection of platelets during the multiple transfusions necessary for organ donors and recipients, AIDs patients, and those undergoing chemotherapy. David Pall led the team that developed the blood filter, which proved a vital part of the system used for processing whole blood at blood collection sites.
Other Pall healthcare products included filters to use in diagnostic devices and filters for the manufacture of contamination-free pharmaceuticals, biopharmaceuticals, and biologicals. Moreover, Pall produced electronic instruments for use in testing the filters before and after use. Pall's operations also included food, beverage, and household water filters in its healthcare segment. Products in this market included filters for the final filtration process of beer, wine, and bottled water and filters used in the production of high fructose corn syrup. Pall entered into an agreement to apply its dynamic microfiltration systems to a series of dairy product applications of Ault Foods of Toronto, Canada.
The company's Aeropower division accounted for sales of $204.7 million in 1992. This division produced fluid clarification filters used to clean hydraulic, lubricating, and transmission fluids for both military and commercial aircraft. Other industrial customers included manufacturers and end users of fluid power equipment and bearing lubrication systems for steel, aluminum, and paper mills and the automobile and aerospace industries. Furthermore, Pall's filters were used by manufacturers of on-and off-road vehicles and construction equipment and machinery for moving earth, as well as having applications in agriculture machinery, oil drilling and exploration, mining, metal cutting, and electric power generation.
Military sales accounted for only 10 percent of Pall's sales in 1990, down from 25 percent ten years earlier. During the Persian Gulf crisis involving Operation Desert Shield and Operation Desert Storm, however, military sales went up when Pall supplied $26 million worth of filters to keep sand out of helicopter engines. Furthermore, Pall entered into an agreement with FMC Corporation, a defense and military systems contractor, to provide an industrial air purification method (called Pressure Swing Absorption or PSA) to FMC for most military applications in North America, including foreign military sales. Pall anticipated that this would build a strong base for military sales, which the company expected to slowly increase despite the downsizing of the military occurring in the early 1990s.
The fluid processing market, with sales of $148.8 million in 1992, included service to manufacturers of electronic components, liquid crystal displays, magnetic tape, electric power, film, fiber, chemicals, petrochemicals, oil, gas, paper, steel, and other products in which filters are needed for removing contaminants or particles. Pall worked with several world-renowned scientists to develop new products in this market segment, especially the area of semiconductor technology. Although this was a mature market, research and development was opening new applications for Pall.
Pall's only business is filtration and the technologies that are complementary to it. The result of our nearly 60-year focus on filtration is an accumulated wealth of scientific knowledge, diverse application experience and a vast technology and product portfolio. This has made Pall the largest and broadest-based filtration company in the world. We bring all of our experiences and resources to bear for the benefit of our customers. When our customers succeed, Pall succeeds. And so, we will continue to follow the guiding principles that have brought us to where we are today. This means we will strive to do more for customers than others in our field. And, we will always do what's right for them and for those who put their trust in us.
Pall's international operations provided about two-thirds of its revenues in the early 1990s. In the mid-1960s Pall had acquired a small English metalworking company run by Maurice Hardy. This initial investment in Hardy's company was Pall's jumping-off point for further overseas expansion. By the time England became a full member of the European Common Market more than a decade later, Pall Europe was generating sales revenues of $9 million. Despite duties imposed by the European Economic Community, 40 percent of Pall's sales were in West Germany, Italy, and Holland, while 10 percent were in Scandinavia.
In each country Pall entered, it used roughly the same strategy, setting up a small sales unit, then expanding to include technological and engineering support. It then added distribution to its services. Krasnoff maintained that Pall did not establish foreign facilities to take advantage of lower labor costs, telling U.S. News & World Report in 1988 that the three most important rules he had learned about operating overseas were, "Hire competent locals, use competent locals, and listen to competent locals."
In 1991, Pall's sales growth in Europe was at 18 percent, and its growth in Asia reached 31 percent, while its growth in the United States that year was only 8 percent. By 1993, Pall was generating about two-thirds of its revenues from foreign markets and had subsidiaries in Brazil, Spain, Germany, France, Singapore, Canada, Japan, Korea, and other nations and was considering further expansion in Japan and the rest of the Pacific Rim. Pall projected that by 1995, as much as 75 percent of its sales could be generated abroad.
In the early 1990s, Pall faced intense competition from the Japanese, particularly in the blood filtering market. While Pall controlled about 50 percent of that market, its share was threatened by Asahi, a Japanese chemistry conglomerate worth billions of dollars, and Terumo, a medical equipment manufacturer. Nevertheless, Pall was able to beat these Japanese firms to market with its improved leukocyte filter.
In 1993, Pall looked forward to international growth, particularly in the high-tech areas of ultrafiltration (molecular separation) and dynamic microfiltration. To this end, the company sought to form alliances with global operations rather than to acquire them. According to CEO Maurice Hardy, who replaced Krasnoff, a company must have "a multinational and, later, a global operating strategy." Hardy died of cancer in July 1994, leaving Eric Krasnoff at the helm as chairman and CEO.
Under the continued leadership of Krasnoff, Pall focused on expansion and diversification in the mid-1990s. The company relied on high-end separations to fuel its growth well into the 2000s. It also made several key acquisitions and launched several new products as part of its growth strategy. In 1995, Pall announced the development of a filter used in HIV-related blood filtration. Two years later, the firm acquired Gelman Sciences. In 1998, Rochem, a German filtration systems manufacturer, was added to the company's arsenal. In 1999, Pall secured a $6 million water purification contract with the Pittsburgh Water and Sewer Authority. During that year, the United Kingdom began to require the removal of white blood cells—leukocytes—from all blood and blood products after nearly 30 people died from Mad Cow disease. Shortly thereafter, Austria, France, Ireland, Malta, Norway, Poland, and Canada adopted the requirement that blood products go through the process called leukocyte reduction. In 2000, Germany followed suit. As a result, Pall landed a $6 million blood filtration contract from the German Red Cross Transfusion Center.
Pall entered the 21st century on solid ground. Strategic alliances, acquisitions, and research and development were cornerstones in the firm's long-term strategy. The company partnered with QIAGEN NV and Stedim SA in 2001. During 2002, Pall purchased the Filtration and Separations Group of U.S. Filter Corp. Whatman HemaSure, the blood filtration arm of Whatman plc, and the BioSepra Process Division of Ciphergen Biosystems Inc., were added to Pall's coffers in 2003 and 2004, respectively.
During this time period, Pall began to make some internal changes. The company adopted the CoRe Cost Reduction program, which was expected to generate savings of nearly $20 million in 2005. Pall also began to realign its business segments in 2004. It restructured into three operating companies: Pall Life Sciences, which included the medical and biopharmaceuticals business; Pall Process Technologies, the combination of microelectronics and general industrial interests; and Pall Aeropower, which integrated the company's aerospace and machinery and equipment holdings.
By 2005, it was evident that Pall's efforts over the past several years were paying off. Both revenue and income were on the rise, and the company appeared to be on solid financial ground. Founder David Pall—a holder of 181 U.S. patents—died in 2004, leaving behind a company that was far different from the small firm he founded in a New York garage in the 1940s. Indeed, with nearly 60 years of history under its belt, Pall had grown into a formidable competitor in the purification, filtration, and separations industries. Its good fortune in the recent decade left it well positioned for success in the years to come.
Medsep Corporation; Pall Acquisition LLC; Pall Aeropower Corporation; Pall Biomedical, Inc.; Pall International Corporation; Pall Puerto Rico, Inc.; Pall PASS US, Inc.; Russell Associates Inc.; Gelman Sciences, Inc.; Pall Austria Filter GmbH; Pall (Canada) Ltd.; Pall Europe Ltd. (United Kingdom); Pall France S.A.; Pall Deutschland Beteiligungs GmbH (Germany); Pall Deutschland Holding GmbH & Co. KG Partnership (Germany); Pall Italia S.R.L.; Gelman Ireland Ltd.; Pall Netherlands B.V.; PLLN C.V. Partnership (Netherlands); Pall Norge AS (Norway); Pall Espana S.A. (Spain); Pall Norden AB (Sweden); Pall (Schweiz) A.G. (Switzerland); Argentaurum A.G. (Switzerland); Pall Filter (Beijing) Co., Ltd. (China); Pall Asia International Ltd. (Hong Kong); Nihon Pall Ltd. (Japan); Pall Filtration Pte. Ltd. (Singapore); Pall Korea Ltd. (South Korea); Pall India Private Ltd.; Pall New Zealand; Pall Corporation Filtration and Separations Thailand Ltd.
CUNO Inc.; Millipore Corp.; USFilter Corp.
"Filtration, Separations and Purification Company Acquires Division of Ciphergen," Biotech Business Week , December 27, 2004.
"Filtration, Separations and Purification Company Acquires Euroflow," Drug Week , February 25, 2005.
"Germany Mandates Blood Filtration," Membrane & Separation Technology News , October 1, 2000.
Hardy, Maurice, "Going Global: One Company's Road to International Markets," Journal of Business Strategy , November–December, pp. 24–27.
"His Business Knows No Borders," U.S. News & World Report , March 7, 1988, p. 52.
Hord, Christopher, "Pall's Krasnoff Heads Quiet Diversification," Long Island Business News , May 30, 1994, p. 15.
Kanner, Bernice, "Blood Simple," Chief Executive , April 1999, p. 30.
"Pall Names Krasnoff Chairman and Chief," Wall Street Journal , July 12, 1994, p. B10.
"Purely by Chance," Long Island Business News , June 30, 2000, p. 5A.
Slutsker, Gary, "To Catch a Particle," Forbes , January 23, 1989, pp. 88–89.
Teitelman, Robert, "Focused Functions," Financial World , July 11, 1989, pp. 54–55.
Tillier, Alan, and Claire Poole, "U.S. Filter Sells FSG to Pall," Daily Deal , February 15, 2002.
—Wendy J. Stein
—update: Christina M. Stansell