Dow Jones Industrial Average (.DJI), Alcoa Inc (AA): The First U.S. Utility and an Industry Doomed by the PC

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On this day in economic and business history…

The first public gas utility company in the Western Hemisphere — and one of the earliest known public utilities anywhere — was born in a museum on Baltimore’s Holliday Street on June 11, 1816. Museum proprietor Rembrandt Peale awed his patrons that day with a “ring beset with gems of light” fueled by coal gas, and the event planted the notion of lighting the streets of Baltimore in his mind. A week later, Peale obtained government approval for his plan to lay gas pipelines under the streets to light public lamps, and the Gas Light Company of Baltimore was born.

“A History of the Consolidated Gas Electric Light and Power Company of Baltimore,” written in 1928 by Delbert B. Lowe, recounts the origins of this groundbreaking utility and the pre-natural-gas fuel it used:

The gas manufactured by this first company … was made by burning coal in cast-iron retorts, the gas being driven off and conducted away from the retort by a pipe. It was then cooled and stored in gas holders. This gas was used exclusively for over 50 years, or until the introduction of water gas. …

The water gas was made by passing steam over anthracite coal, heated to incandescence. In order to make the gas burn with a luminous flame it was mixed with vaporized oil. It proved to be so much cleaner and cheaper than coal gas that the plant … continued in operation until 1904.

By the 20th century, electric generators and power plants had begun competing with the gas utilities of the world, and the competition pushed the original Baltimore gas utility into a 1906 merger with an upstart electric-power company. From this point on, the integrated utility (eventually renamed Baltimore Gas and Electric) had no real local competition. It continues to provide Baltimore with power and natural gas today as a subsidiary of Exelon Corporation (NYSE:EXC), which merged with BGE’s corporate parent in 2012.

Utilities have come a long way in the two centuries since that first dazzling display of gas lighting in 1816. In 2009, gas utilities in the United States reported nearly $78 billion in total revenue, and the electric-power industry reported more than $350 billion in aggregate revenue that same year.

One big mistake deserves another
The minicomputer era came to an end (years after its natural death) when onetime minicomputer industry leader Digital Equipment Corporation became part of Compaq on June 11, 1998. The $9.6 billion merger, which had been proposed early that year, was at the time the largest such deal in computing history and was intended to help Compaq compete in the highly competitive enterprise-computing arena. CNNMoney noted that the deal “enable[d] Compaq to take advantage of the coming boom in business computing as companies upgrade their equipment ahead of the new millennium.” The new company was to become the second-largest computer-maker in the world, ahead of even Compaq’s eventual acquirer, Hewlett-Packard Company (NYSE:HPQ) .

Compaq never figured out what to do with DEC, which by 1998 was already greatly diminished by the dominance of PCs. Its software, training, disk-drive, microprocessor, printer, networking, and minicomputer lines were all divested between 1992 and the time Compaq came calling with its offer, leaving a company primarily focused on the Internet, including then-popular search engine AltaVista. Within a year, Compaq would sell majority ownership of AltaVista, and this was only one aspect of the difficulties it had in absorbing DEC.

By the time HP and Compaq merged four years later, Compaq execs were publicly acknowledging the failure of their DEC deal, which was entered into without a clear understanding of how DEC would fit into its new corporate structure or how it would contribute to the combined company’s bottom line. If Compaq execs learned their lessons, they didn’t apply them particularly well to the HP megamerger: Within months of completing that deal, the new company’s two (former) halves began squabbling over divisions of responsibility and corporate culture — early evidence of marital strife that would undermine the company’s long-term progress in the fast-changing computer industry of the early 21st century.

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