Itek

From Wikipedia, the free encyclopedia

Itek was a high technology company, specializing in special purpose optical systems, primarily cameras optimized for high altitude operation. It was founded in 1957, and acquired by Litton Industries in 1982. Litton was in turn acquired by the Northrop Grumman Corporation in 2001.

Contents

[edit] History

This article incorporates text from Book Review of Spy Capitalism: Itek and the CIA, by David S. Robarge, Central Intelligence Agency, a public domain work of the United States Government.

The following history of Itek comes from a review of the book Spy capitalism: Itek and the CIA[1] on the CIA web site above. The web site explicitly states that this text is in the public domain.

Itek was founded in 1957 with seed money from Laurance Rockefeller, that famous family’s most adventurous venture capitalist. The company’s name was a phonetic contraction of “information technology,” the sector of the economy that prescient analysts and investors foresaw as America’s future. Itek benefited enormously from their optimism. In just three months, its payroll burgeoned from a handful of executives to over a hundred scientists, engineers, and technicians. After only a year, its revenues and profits soared into the millions. It went public after less than two years in operation, and within 18 months of the initial offering, the price of a share of its stock shot up from $2 to over $200. “Itek was one of the great glamour stocks on Wall Street,” Lewis writes. “At its peak, Itek’s fame rivaled the notoriety, and the price-to-earnings ratio, of the top Internet stocks of the great NASDAQ bubble of the late 1990s.”[2]

Throughout this meteoric rise, readers of Itek’s annual reports could not have known— because the company could not tell them—that its survival depended on a single customer, the CIA. By 1963, Itek’s classified operations produced 57 percent of the firm’s sales and accounted for 75 percent of its pre-tax income. What Itek shareholders and potential investors could not know was that if the CORONA program failed or another spy satellite program promised superior results, Itek probably would collapse. What they did know was that by the early 1960s the company was in sorry financial shape, suffering from a succession of well-meaning but ill-considered boardroom blunders by its president, Richard Leghorn. Trying to free Itek from dependence on secret government funds, Leghorn left it more beholden to the CIA than ever. But, Lewis notes, Itek and the CIA were “like partners trapped in a failed marriage. Although they may have been bitter and resentful toward each other, they were stuck in the relationship— CORONA made sure of that.” [3]

The CORONA program proved its worth, but Itek’s long-term health remained uncertain. Leghorn (with, it should be added, the consent of his compliant board of directors) allocated barely a quarter of Itek’s R&D funds to the division that worked on secret reconnaissance. Instead, he poured money into developing commercial products that were marketed through shaky companies that he acquired. By early 1962, Leghorn clearly had failed at the difficult task of balancing Itek’s lucrative “black” projects with overt corporate acquisitions and commercial sales that provided cover but usually lost money.

Investors knew that something secret was going on behind Itek’s walls, but they had to take on faith the pronouncements that all was well within. Over time, that secrecy became double-edged. At first, it attracted investors, who figured that if the company could not say exactly what it was doing, the work had to be so important that it was sure to make money. “[I]f the business was growing fast, classified, and backed by a Rockefeller, it was a smart investment,” Lewis writes. But when Itek faced a succession of technical, financial, and managerial problems in the early 1960s, that same mystique enabled Leghorn and the directors to hide poor decisions and bad news, and shielded them from the unpleasant questions of shareholders and the public:

Leghorn could charm the financial press and the markets with his talk of an information revolution when Itek’s revenues and profits were steadily rising . . . [but] it was a strategy that failed to hold together under the competitive pressures of the marketplace. Leghorn’s dream about an information revolution was prophetic, but impossible to achieve with the technologies available in his time. The companies he cobbled together were a flammable mixture of patents, possibilities, and products still in development. The marketplace demanded products that could be sold, not dreams.[4]

By this time, far more was at stake than the health of investors’ portfolios, or even several hundred jobs. Itek’s survival had become intertwined with the nation’s security. “Any further deterioration of the company,” Lewis writes, “. . . would probably destabilize it completely. [Then] Itek’s custom-made spy cameras would cease to roll off the assembly lines, and America’s eyes in space would go blind.” The author notes that “At a time when the war of words between President Kennedy and Soviet Premier Khrushchev was raising the stakes in the Cold War, when the United States needed intelligence on Soviet military capabilities more than ever, this was an unacceptable outcome.”[5]

New management, led by former OSS commando Frank Lindsay, got Itek past this troubled phase, but the firm soon got caught in the middle of a battle royal between the CIA, the NRO, and elements of the Air Force over which agency would control satellite reconnaissance. In early 1965, Lindsay stunned CIA managers by suddenly announcing that Itek was withdrawing from its Agency contract. He claimed that the post-CORONA camera design that the CIA insisted on would not work, and that Itek would get blamed when it failed. Director of Central Intelligence John McCone and Deputy Director for Science and Technology “Bud” Wheelon suspected, however, that the Agency’s rivals at the NRO and the Air Force had offered Itek a lucrative deal if it stopped working with the CIA. With so much of Itek’s income deriving from Agency work, they believed, the company could not have backed out unless it had guarantees of other contracts. No definitive evidence to support that allegation has surfaced, and the fact that the pullout damaged Itek irreparably suggests that McCone, et. al., were wrong. Whatever the truth may be, Lewis relies too much on NRO and Itek information and does not include enough material from CIA sources to give a full account.

After this episode, Itek kept building CORONA cameras until the program ended in 1972, but it never won an Agency contract for any follow-on systems. Ultimately, its technical judgment in 1964-1965 proved wrong—a rival firm, Perkin-Elmer, built the post-CORONA camera that the CIA wanted, and it worked superbly.

Itek enjoyed a brief resurgence in 1966-1967. It made some gadgets for the space program and its stock climbed back to $172 a share. But then it fell into a steady decline. Ironically, soon after the signing of the first Strategic Arms Limitation Treaty in 1972, the company had to fire many of the scientists and engineers whose work had made monitoring the agreement possible. By the mid-1970s, Itek stock traded for just $7 a share. Litton Industries bought the firm at a bargain price in the early 1980s, ending its life as an independent company.

[edit] Products

Itek built many of the high technology optical products during the Cold War.

[edit] References

  • F. D. Smith (1972). "History of optics at Itek". Appl. Opt. 11: 2729. 
  1. ^ Jonathan E. Lewis (2002). Spy capitalism: Itek and the CIA. ISBN 0-300-09192-3. 
  2. ^ Lewis, pg 5
  3. ^ Lewis, p. 258
  4. ^ Lewis, pp. 135, 269-270
  5. ^ Lewis, p. 207
  6. ^ Litton's Itek division revealed as supplier of space cameras for first U.S. spy satellites. Business Wire.
  7. ^ The ITEK Panoramic Camera. NASA.
  8. ^ SP-425 The Martian Landscape - Cameras Without Pictures. NASA.
  9. ^ ER-2 Program History. NASA..
  10. ^ Genetrix, WS-461L, and Chaika: Cold War Balloons and Balloon Fighters.

[edit] See also