Thales S.A. - Company Profile, Information, Business Description, History, Background Information on Thales S.A.

173, Boulevard Haussmann
75008 Paris Cedex 08

Company Perspectives:

Strategic Vision: global + dual = growth + profit

There are no firewalls between defence markets and the global economy. The global scale of the Thales Group's commercial operations, and the unique multi-domestic development model of its defence business, bring the benefits of globalisation to customers in all sectors.

Technologies with both commercial and military uses have come to play a pivotal role, both strategically and economically. The Thales Group's dual technology capability is one of its most significant competitive advantages in today's market for total security solutions.

History of Thales S.A.

Thales S.A., formerly known as Thomson-CSF, is one of the world's leading providers of advanced electronic systems and equipment for the defense and commercial aerospace and other industries. The company's operations are structured into three main divisions: Aerospace, Defense, and Information Technologies and Services (ITS). Defense is the company's largest segment, representing 58 percent of the company's sales. The company develops radar, missile, and other electronic warfare systems; avionics systems; tactical mobile and defense communication networks; integrated naval combat systems; optronics systems, including detection, guidance, and other optronics warfare systems. Many of the company's defense systems find application in the Aerospace market as well; the company's avionics systems, including flight control and navigation, as well as air traffic management, are developed for both military and civil aviation markets. The company also develops simulation and training systems. Thales's Aerospace division is the European leader and one of the top three worldwide. The company's third division, ITS, generates 24 percent of company revenues. Drawing on its expertise in the Defense and Aerospace markets, Thales develops mobile communications systems, electronic security and payment systems, and other information technology systems. Thales is also the world leader in development of sound and image broadcasting systems. Much of the company's ITS division was acquired through the 1998 acquisitions of certain components of France's Dassault and especially in the 2000 acquisition of the United Kingdom's Racal Electronics. This latter acquisition also has helped transform the company into a truly global—Thales likes the term "multi-domestic"—company, with industrial operations in more than 30 countries and more than half of its 57,000 employees located outside of France. Nonetheless, the company remains firmly wedded to Europe, which accounted for 60 percent of sales in 2000. The difficult-to-enter U.S. market generated only 10 percent of the company's sales. Yet the formation of a joint venture with Raytheon Company in 2001 promised to help build Thales's presence in North America. The company is led by Dennis Ranque and trades on the Euronext Paris stock exchange, with a secondary listing on the London stock exchange. Thales was formerly majority-owned by the French government and by former sister company Thomson Multimedia. The French government was expected to reduce its stake in Thales to below 33 percent by the end of 2001.

Electronics Pioneer at the Turn of the 20th Century

One of the jewels in France's industrial crown, Thales began its operations in 1893 as the Compagnie Française Thomson-Houston. This company was formed to export the patents and processes developed by the Thomson-Houston International Corporation, itself founded in Connecticut in the United States by Edwin Houston and Elihu Thomson in 1879. The French company initially served as a sales and marketing arm for its U.S. parent, which focused especially on the development of tramways and other types of electrical infrastructure systems.

Compagnie Française Thomson-Houston operated as a subsidiary to the Thomson-Houston International Corporation until its parent merged with Edison General Electric to form General Electric (GE) in 1903. At that time, Compagnie Française Thomson-Houston was bought out by a group of French investors, who retained the Thomson-Houston name and an agreement that gave the young French company access to GE's technology, patents, and licenses. Thomson-Houston maintained close ties with GE until after World War II, developing a licensing relationship that ended only when political tensions between France and the United States mounted in the 1950s.

Thomson-Houston began expanding in the 1920s, extending its operations beyond industrial infrastructure to include a variety of diversified applications of electrical technology, including home appliances and radio broadcasting and reception. One of the company's earliest diversification moves came in 1920 when it acquired heating and kitchen equipment manufacturer Usines du Pied-Selle. By then, another prominent French company, which was to play a prominent role in Thomson-Houston's later history, had begun business. Created in 1918, the Compagnie Générale de Télégraphie Sans Fil (CSF—literally, the "wireless telegraph company") had started in business. Alongside Thomson-Houston itself, CSF was an important force behind the development of France's own wireless, broadcasting, radio, and other electrical technologies.

Thomson-Houston joined with the Société Alsacienne de Constructions Mécaniques to form Alsthom in 1928. The company's move into radio and the beginnings of the television industry began at the end of the 1920s, when it bought up Etablissements Ducretet in 1929. In the mid-1930s, Thomson-Houston strengthened this activity with a new acquisition, that of Etablissement Kraemer, added in 1936. Increasingly, Thomson-Houston's diversification brought it into competition with GE, which was also establishing itself as one of the world's top home appliance and radio and television companies (GE had joined with AT&T and Westinghouse to form RCA in the 1920s, introducing the first television in 1939).

The years leading up to World War II were lean ones for Thomson-Houston, however, and the company lacked the funds—and a strong government industrial policy—to pursue a vigorous expansion. The outbreak of World War II put a stop altogether to Thomson-Houston's activity. The Nazi invaders maintained in operations only those parts of the company necessary for its own occupational and military needs; the rest of the company was idle. Following the war, however, Thomson was to become one of the main proponents of France's industrial and economic recovery.

French Industrial Jewel in the 1960s

Following the war, the French government turned to Thomson-Houston and others to rebuild the country's shattered infrastructure. Technological developments made during the war years, particularly the use of electrical systems and electronics in aviation and other military applications, placed Thomson-Houston at the center of the French government's desire to establish France's technological independence. Thomson-Houston soon became one of the country's leading defense systems and armaments developers, while also joining in the development of the country's nuclear power industry.

Meanwhile, the recovering economy soon gave way to a vast economic boom, starting what became known to the French as the "30 glorious years." The rising wealth of the country sparked rising consumer interest in a new wave of electrical home appliances. Thomson-Houston began developing its home appliance division as well.

By the early 1950s, Thomson's expansion placed it at the center of new political conflicts between the United States and France, while also setting it more and more in direct competition with GE. As Thomson (the company dropped the second half of its name in the 1950s) took on a growing role as part of France's military and technology effort, while also seeking to expand its role in the consumer products market, the company was forced to end its long licensing relationship with GE in 1953. The now fully independent Thomson was in a better position from which to compete in the booming markets for both consumer electrical appliances and industrial and military applications of its electrical and electronics systems technologies. An agreement with Pathé-Marconi represented a new step in Thomson's involvement in the production of televisions, as that market took off in France at the end of the 1950s.

During this time, the French government, eager to shore up its waning position in its colonial possessions, while also committed to remaining a major player as an international military and diplomatic power, stepped up its funding for military and defense-related spending. With the backing of the French government, Thomson was able to enter a new era of expansion, both in its defense- and aerospace-related operations and its consumer products activities. With a strong balance sheet, Thomson began eyeing larger acquisition targets.

In 1966, the company acquired a leading French consumer appliance manufacturer, Hotchkiss-Brandt. The acquisition, which resulted in a change of the company's name to Thomson-Brandt, also brought Hotchkiss-Brandt's own strengths in the defense and automotive sectors. Yet this name change was to last only two years. In 1968, Thomson-Brandt acquired defense specialist CSF and regrouped its defense operations with those of CSF to form the Thomson-CSF subsidiary. This merger sparked a new period of aggressive growth—and financial problems—for the company.

Nationalization and Reorganization: 1970s-80s

The 1970s saw Thomson's continued expansion and diversification into a variety of new areas, including telephone switching components and systems. Other new areas included medical imaging and even semiconductors. Meanwhile, the company went on a buying spree, picking up a number of new businesses and markets, including operations in Africa, Asia, and the Middle East. The economic difficulties of the era, sparked by the oil embargo of 1973, nonetheless brought some relief to the company, as Middle East countries turned to France—which set itself in contrast to the United States with more pro-Arab government policy—and to Thomson for military and defense orders. At the same time, Thomson could depend on a steady stream of orders from the French government itself to maintain a strong cash flow.

This cash flow was unable to shore up what had become something of a leaky ship by the early 1980s. A number of the company's business areas had long been losing money—only the company's government contracts had given the company liquidity. Thomson-Brandt revealed itself as a bloated, top-heavy company with an extremely inefficient management. Indeed, despite being a subsidiary, Thomson-CSF had continued to operate as an independent company, with its own chief executive, all but ignoring its parents. This situation had been allowed to continue throughout the 1970s because of Thomson-CSF's extreme importance to the French military and defense program.

That importance was underscored at the beginning of the 1980s when the arrival of the new Socialist government, led by François Mitterand, announced its intention to nationalize key French industries. Thomson-Brandt found itself under new ownership in 1982. Named to lead the company was Alain Gomez, who previously had helped restore the financial health of the Saint Gobain industrial conglomerate. The parent company was given a new name, Thomson S.A., while Thomson-CSF remained its more or less autonomous subsidiary.

When Gomez took over, Thomson was bleeding heavily, losing more than $275 million in 1982 alone. Gomez soon forced out the president of Thomson-CSF, placing control of the subsidiary firmly under the parent company's control for the first time. Gomez also led Thomson on a massive restructuring, shrinking the company's bloated management and cutting away a number of diversified operations to return the company to a strong core of defense electronics and consumer electronics. Among the operations shed at this time was Thomson-CSF Téléphone, losing more than $100 million per year, which was traded to Alcatel (then known as CGE) in exchange for that company's own military and consumer electronics businesses. The 1983 deal, described by Fortune as "the most important industrial restructuring in postwar France," proved a prime example of the French government's much criticized willingness to assert its influence over the country's industries.

In 1984, Thomson attempted to acquire rival German electronics and consumer appliance maker Grundig. That effort was blocked by Germany's antitrust authority. Instead, Thomson picked up smaller Telefunken, gaining access to the then restrictive German consumer electronics and appliance market. Thomson then undertook a controversial streamlining of Telefunken's operations, maintaining little more than the Telefunken brand name and its marketing network. Despite this episode, Thomson's restructuring had placed it back on the road to health, and by 1985, the company was once again turning a profit.

Growing opposition to France's nationalization policies led the government to rethink its "experiment" and in 1987, Thomson, along with a handful of other companies, was privatized. The French government nonetheless retained majority control of the company. Soon after, Thomson, which had attempted to build up a semiconductor business with the 1984 acquisition of money-losing Mostek, began to disengage from that sector, spinning off the business as ST Microelectronics. The company sold off its semiconductor operations in 1997.

By then, however, the company had made new moves toward becoming one of the world's leading consumer electronics companies. After acquiring the consumer electronics business of Thorn EMI in 1987, Thomson acquired the entire consumer electronics division from GE—including the RCA brand—becoming overnight the largest seller of televisions to the U.S. market and one of the largest in the world. The company sold off its consumer appliance division in 1992, concentrating on its Thomson SA consumer electronics operation and its Thomson-CSF defense group.

Independent Electronics Giant in the 21st Century

Thomson-CSF boosted its defense operations in 1989 with the purchase of MBLE of Belgium and Signaal, based in Denmark but a division of the Dutch firm Philips. The company also picked up fellow French defense electronics firm TRT.

During the 1990s, Thomson-CSF faced a new challenge as the close of the Cold War resulted in a tightening of the worldwide defense market. In response, Thomson-CSF began building up its civil electronics wing—adapting its technologies to the civil aviation and aerospace sectors especially. By the mid-1990s, Gomez recognized a need to place the company closer to its customers in order to secure its place in the global marketplace. As such, the company was reorganized, with management decentralized to concentrate on local markets, forming the basis of what the company called its "multi-domestic" operation. This reorganization was credited with protecting the company's balance sheet during the political turmoil that marked its emancipation at the end of the decade.

In 1996, the French government announced its intention to complete Thomson's privatization. An initial deal, to sell the company to Lagardère Groupe and Matra, which in turn had agreed to transfer the newly named Thomson Multimedia consumer electronics group to Korea's Daewoo, was struck down amid great controversy. Thomson's privatization only came in 1997, when the group accepted Alcatel and Dassault as major shareholders—alongside the government's continued 48 percent holding. The deal involved a transfer of parts of Alcatel and Dassault's defense and aerospace operations to Thomson-CSF. By then, however, Gomez had stepped down from the company's leadership.

The appointment of Dennis Ranque as the company's CEO and chairman in 1998 marked the start of a new era for the company. In 1999, the now independent and publicly listed Thomson-CSF went on a buying spree, enhancing its multi-domestic policy by acquiring ADI of Australia, ADS of South Africa, Sextant-in-Flight Systems of the United States, and Avimo, an optronics company with operations in Singapore and the United Kingdom.

The year 2000 marked a turning point for the company. In that year the company acquired Racal Electronics of the United Kingdom, giving it the number two position in that country's defense and aerospace electronics market. The acquisition prompted the company to adopt a new name, Thales, after the Greek philosopher and mathematician, at the end of the year. At that time, the company announced its formation of Thales Raytheon Systems, a joint venture with the U.S.-based Raytheon, to develop air defense systems, which began operations in 2001. At the same time, the French government announced its intention to reduce its holding in the company to below the 33 percent mark, meaning it would no longer have a minority block on company decisions. As it entered the new century, Thales emerged as one of the world's top three defense and aerospace electronics systems companies and expected to remain a force to be reckoned with on a global scale.

Principal Subsidiaries: ADI (Australia); Thales Cryogenics (Netherlands); African Defence Systems (Pty) Ltd (ADS) (South Africa); Thales Atm; Thales Optics; Thales Information Systems (Russia); Thales Optics (Japan); Thales Cryogenics; Thales Optronics (Netherlands); Diehl Avionik Systeme (Germany); Thales Navigation; Eurodisplay; Thales Optronics; Fibre Form (U.K.); Forges De Zeebrugge (Belgium); Thales Identification Systems (U.S.A.); Thales Isr; Thales Technologies & Services; Thales Raytheon Systems; Thales Training & Simulation (U.S.A.); Thales Electron Devices; Thales Electron Devices (Germany); Thales Components (Spain); Thales Air Defence; Thales Atm; Thales Avionics Electrical Systems; Thales Avionics (U.S.A.); Thales Communications; Thales International (Venezuela); Thales Airborne Systems; Thales Systemes Aeroportes; Thales Communications (Italy); Thales Systems & Services (Germany); Thales Communications (Brazil); Thales International (South Africa); Thales International (Switzerland); Thales Idatys; Thales Identification Systems; Thales Industrial Services; Thales International (Chile); Thales International; Thales Optics; Thales Missions & Conseil; Thales Naval (U.K.); Thales Naval France; Thales Information Systems; Trixell; UDS International; UMS; Thales Université; Thales E-Security (U.K.).

Principal Divisions: Aerospace; Defense; Information Technologies and Services.

Principal Competitors: Alliant Techsystems Inc.; BAE SYSTEMS; BellSouth Corporation; The Boeing Company; Bombardier Inc.; Diebold, Incorporated; ECC International Corp.; European Aeronautic Defence and Space Company EADS N.V.; FLIR Systems, Inc.; General Dynamics Corporation; Harris Corporation; Honeywell International Inc.; InteliData Technologies Corporation; ITT Industries, Inc.; LaBarge, Inc.; Litton Industries, Inc.; Lockheed Martin Corporation; Lucent Technologies Inc.; Matsushita Electric Industrial Co., Ltd.; Mitsui Group; Motorola, Inc.; Nokia AS; Nortel Networks Corporation; Northrop Grumman Corporation; Raytheon Company; Reflectone, Inc.; Robotic Vision Systems, Inc.; Rockwell International Corporation; SBC Communications Inc.; Siemens AG; Sony Corporation; Uniden Corporation.


Additional Details

Further Reference

Barkin, Noah, "Thales 2000 Profits Beat Estimates," Reuters, March 14, 2001.Echikson, William, "Why Thomson's Strategy Faltered," Fortune, November 29, 1993, p. 34.Gallard, Philippe, "Thomson revient dans la course," Expansion, January 7, 1999.Gallard, Philippe, and Marc Nexon, "Thomson a résisté à tout, même à une privatisation ratée," Expansion, October 9, 1997, p. 76.Masters, Charles, "Can Jospin Sell Off Without Selling Out?," European, July 17, 1997, p. 25.Nicoll, Alexander, "France to Reduce Thales Stake," Financial Times, May 20, 2001.Tully, Shawn, "The Pentagon's French Connection," Fortune, December 9, 1985, p. 137.

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