Stocks & Wires

The late Russell Sage paid Western Union the compliment of observing that only once in a lifetime might a man hope to buy its stock below $50 a share. Until 1931 Western Union bulls used to make great play with this remark, which indeed held true for many a lifetime ended before that year. Since then there have been frequent opportunities to buy Western Union at prices well below $50. Its first 1937 dip below that price occurred fortnight ago, when, after dropping steadily from a year's high of $83.50, Western Union slid to $49.50. Last week it broke to $43.50.

In the background of this not very alarming slump were a number of developments highly important to Western Union Telegraph Co. One was the process of recovery within the company itself. In 1935 Western Union made $5,258,000 against $2,243,000 in 1934. Last year it made $7,199,120. But whereas operating expenses in 1935 were actually less than the year before, last year they increased $6,706,000, including taxes and interest. Reasons: 1) three successive wage restorations by which Western Union employes received an additional $1,300,000 in 1936; 2) higher costs of materials used in repairs and replacements, the most obvious example being copper wire; 3) $767,000 additional taxes; 4) higher rentals for the 20,968 Western Union offices.

Western Union's 1,872,461 miles of wire carry four-fifths of all U. S. telegrams and Western Union has no worries about getting its share of the U. S. telegraph business. But with costs piling up in 1936 and 1937 Western Union is more than ever concerned that there shall be more & more use of telegrams. This is where the Federal Communications Commission comes in. Fortnight ago when the Commission renewed its inquiry into American Telephone & Telegraph it had the satisfaction of knowing that A. T. & T. had made no less than three reductions in long distance rates since January 1936. Each reduction has encouraged sons, lovers and businessmen to use. the telephone between cities.

Already bothered by the growing ability of air mail to do for 6-c- what a night letter does for 60f, the telegraph companies had to reckon with long distance telephone rates now halved, for example, between Chicago and New York. Their response was to work out with the delighted FCC a new scale of night rates embodying the principle of graduated volume discounts which Western Union's dour Vice President John Calvin Willever (TIME, Nov. 2) has long yearned to extend to every type of telegram. Effective June i, the ten-word night message and 50-word night letter were abolished, a new, 25-word minimum night message introduced which could be sent anywhere in the U. S. for a maximum of 50-c-.

What precipitated the break in Western Union stock last week was a Wall Street rumor that the new rates had not produced as much business as expected. This may have been sad for Western Union but t was far sadder for Postal Telegraph. "CC's accounting of monthly income for 30th companies shows that for the first three months of this year Western Union steadily made more money than it made in 1936, while Postal lost more. In April Doth companies made a poorer showing. Two years ago Western Union's testy Chairman Newcomb Carlton declared that the subject of a merger between the two companies was "very much asleep." Last week the new light shed on the operations of both companies made observers wonder if that subject were not merely playing possum.

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