Why Steinway Is Likely to Be Sold to a Hedge Fund Manager
npr.org
npr.org
Two sentences stick out: "There's a devoted factory workforce where you still count as a "new guy" after 16 years."
and
"[at Steinway] the person who does that has been trained for ten years."
If I'm a person looking just at squeezing every last drop of money out of a company, long-term consequences be damned, this is the very first thing to ditch. If you're still a new guy after 16 years, you're an expensive new guy. Let's hire someone who costs, say, 50% and does the work 60% as good as the older worker. Cut costs, and hope that you can keep revenues high for awhile and bring costs down. Then shortly you have a multi-billion dollar company that you paid $500M for. Then, like any "good" hedge fund guy, sell and ditch it before you have to deal with any long-term consequences.
I accept that (say) a chocolate manufacturer or people who make network cards, or even hifi components, your strategy might work.
The process really is amazing.
From it I remember a guy who goes to Tacoma a few times a year to look at Sitka spruce really carefully, another who guards their hand planes, which they can't get anymore, stuff like that. I also have a friend who's a concert pianist and who's quite obsessive about tuning, voicing, regulation, and her (Model C?) sounds absolutely amazing.
The one I did had it's strings cut out, the outside was sanded down to wood, bits and pieces were strewn all over Poland. I got to know an expert piano repairman/tuner from the local conservatory and he gave me a mountain of tips&tricks to work off, without that I would have never managed the job. That was a fun project. And not just a little bit dangerous, tuning up a fair sized piano from scratch is a delicate job. You really don't want to unevenly stress the frame and find out what it is like when 13 tonnes of tension is released all at once.
There are clips on youtube.
Additionally, the reporter says the the real estate where the office/factory is, is extremely valuable (implying that such asset isn't priced in correctly in the value of the stock - god knows the book value of the land/real estate, a market sale can generate a considerable one-off dividend).
I'm predicting someone will scoop up the company, develop the real estate, and attempt to relocate the entire company to a new cheaper facility somewhere nearby. But Steinway will most likely lose something special in the process of moving either through attrition or morale or just plain ol' disrupting the assembly line and the company will never be the same afterward.
I was reminded of the story of the Vienna Sausage factory in Chicago, our most famous brand of Chicago hot dogs. They moved to a new facility and instantly had a quality problem with their hot dogs. Luckily, it was tracked down:
"The reason, which they only figured out while chatting about the old days, was Irving who didn’t make the move to the new plant, but who had wheeled the hot dogs from the manufacutring room to the smoke house. The thing was that this took a while and served as a cooling period because it took 30 minutes to do the walk through the twisting factory. There was no Irving at the new plant – there was no need – and it was Irving’s trip was the secret ingredient. So they built a new room to leave them in and cool and that new addition was to recreate teh effect of Irvings walk."[1]
[1]: http://inreblog.com/2008/12/19/in-re-irving-the-secret-ingre...
I worked for them during this transition after they acquired an iPad app I made (http://etudeapp.com).
It is my understanding that much of their unique quality comes from over 100 patents, many of which are over 100 years old [1].
Presumably a competitor could buy the patents and make significant improvements to their design.
Part of the Steinway brand is built on tremendous marketing savvy, generation after generation. But the technology remains unparalleled. As a professional pianist, I wouldn't use anything else for a recording.
Don't get me wrong, I would love for Yamaha, Fazioli or the others to make the market more competitive. But nothing compares to a Steinway in terms of sound quality and balance throughout the registers.
All the first-class piano technicians I know agree.
[1] http://www.ilovesteinway.com/steinway/parts/steinway_patents...
Edit: IvyMike and ryanhuff brought my attention to the 20 year maximum term of patent. It is surprising that Steinway's competitors still are unable to match the quality of sound. Perhaps their technicians are better?
Isn't the maximum "term of patent" 20 years or less?
Not necessarily. Patents only need to describe enough to be enforceable, they don't have to include any of the subtle details which are necessary to make things tick. A famous example of this was all the patents filed by the famous German pharmaceutical & chemical giants in the USA to protect their cutting-edge processes: the patents worked very well to protect their IP, and then WWI came and the salivating competitors got the German patents seized - and couldn't figure out how to do the things, because the patents had left out critical details.