2200 Northern Boulevard
Pall Corporation is the world's leading supplier of fine filters and other products used for fluid clarification. The company markets its filters in three major areas: health care, aeropower, and fluid processing.
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 the company could not rely solely on the genius of one person--David Pall--the company also 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 four 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 seven 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 remain steady worldwide, manufacturing for each of Pall's product lines was performed 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, not 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 health-care 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 IV. 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 health care 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 also included food, beverage, and household water filters in its health care 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 ten 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 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 EEC, 40 percent of Pall's sales were in West Germany, Italy, and Holland, while ten percent were in Scandinavia.
In each country Pall entered, it used roughly the same strategy. It set up a small sales unit, then expanded 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 eight 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 the blood filtering market, its market 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."
Principal Subsidiaries: Pall Aeropower Corporation; Pall Trinity Micro Corp.; Pall Biomedical Products Company; Russell Associates Inc.; Pall Espana SA (Spain); Pall Europe Corporate Services Ltd. (Great Britain); Pall Puerto Rico Inc.; Pall Industrial Hydraulics Corp.; Pall Trincor Corp.; Nihon Pall (Japan).