Everybody wanted to see Advent Corp. lead us into the video revolution. But each of the company's leaders pushed it in a new direction.
March 17, 1981, the day Advent Corp. filed for bankruptcy under Chapter 11, was "just a normal day" for its founder, Henry Kloss. "It didn't register in my mind as memorable," says the 52-year-old, white-haired, somewhat cantankerous entrepreneur. "It wasn't exactly a bolt out of the blue."
The moment Kloss does remember occurred two weeks earlier at a cocktail party for his new company, Kloss Viddeo. About a handred people, most of them members of the consumer electronics press, had gathered at a loft on Manhattan's East Side. It was snowing hard, and Kloss arrived late. Fifteen minutes before he was to give his presentation on Kloss Video, someone announced (prematurely, the group later found out) that Advent, the Cambridge, Mass. -- based manufacturer of loudspeakers and large-screen televisions, had filed for Chapter 11.
The reaction was strangely buoyant. Few of these industry observers were surprised. Advent, the little company they once thought would lead the video revolution of the '80s, had had a history of financial troubles, beginning with a cash crunch that cost Kloss control back in 1975. Over the last six years, they had watched it go through five presidents, three years of losses, and a number of major shifts in product, marketing, and distribution strategies. And some of the people sipping drinks were frankly convinced that Chapter 11 was the company's only chance of sorting itself out. "We knew it was going to happen," says Kloss, who had sold the last of his Advent stock the previous fall.
Of course, not everyone could afford to be as philosophical as Kloss and the press about the latest chapter in what was becoming an epic of a small company's problems. Advent, whose 1980 sales were $30.7 million, owed $3.982 million to a factoring company, $4.2 million to debenture holders, and $6.4 million to creditors. It had almost 2.5 million shares of common stock outstanding.
And Advent's lack of success was difficult for most people to understand. How could a company whose products had been acknowledged as some of the best on the market lose the eight-year technical lead it once had on Japanese and American giants? How could a company that once had dealers so loyal that they offered to ease Advent's cash flow by paying for goods not yet shipped manage to alienate some of them so completely that their own reaction to its filing for Chapter 11 was a yawn? How could five executives with successful track records in other companies fail to turn Advent around? The founder, Henry Kloss, had started two successful Cambridge-based loudspeaker companies, Acoustic Research and KLH, before going on to Advent and Kloss Video. The third president, Peter Sprague, had helped bail National Semiconductor out of trouble back in the '60s when it was a young struggling company in Connecticut, and is now chairman of its board. And the fifth, Bernie Mitchell, had been president of U.S. Pioneer, a consumer electronics company that grew from $2 million to $230 million in sales during his 10-year stay.
Observers have had years to develop theories about why Advent never got off the ground, theories like "bad results come from bad management," "the product was too early for the market," and "they made a series of bad decisions not fatal individually, but collectively very difficult to survive." Advent had problems with money, banks, technology, marketing, and production, but it was weakened most because the visions of inventor-entrepreneur Henry Kloss, wheeling-dealing financier Peter Sprague, and marketing superstar Bernie Mitchell didn't merge.
Henry Kloss likes to think of himself as an entrepreneur, which he defines as someone who turns an idea into a product and then gets it into other people's homes. In the consumer electronics industry, he's known as a bumbling genius type: an MIT dropout who wears stained khakis and sometimes forgets to button some of his shirt buttons. But a dropout who revolutionized small loudspeakers in the late '50s when he designed the acoustic suspension speaker, which was the first of the small cabinet extended-range speakers.
In 1967, he decided he wanted to revolutionize television. The way Kloss saw it, TV technology had settled into an acceptable mediocrity, and for him, that wasn't good enough. The technology for better, larger-screened TVs was available -- about a hundred very expensive models had been made -- and he figured it would take just "a superficial knowledge of electronics and about five lines of algebra" to come up with a design for a set that could be manufactured for the consumer market.
With $400,000 he received from the sale of his share of the second speaker company, KLH, he leased a building, got a phone, and incorporated under the name of Advent, "the coming corporation." He wasn't sure how big or how profitable the venture might be, but he figured it would make large-screen TVs and other consumer products. "High value, better stuff," he says. "I didn't have any plans, except to stay in business through the means of making consumer products. That's the only plan I ever had."
The lack of a long-term strategy didn't hurt Advent at first. Kloss hadn't planned to reenter the speaker business or get into cassette tapes or recorders. But as he saw opportunities in those areas, he took them. Advent produced a relatively low-cost, high-quality, book-shelf-sized loudspeaker. It manufactured a cassette tape deck that was among the first to feature Dolby noise-reduction circuity. It intorduced a chromium-dioxide tape made by Du Pont that had better-than-industry-standard high-frequency sound. Sales rose from $42,140 in 1968 to $16.7 million in 1975. In 1972, Advent raised $1.6 million in a public offering.
But "one little blip can change things," as Henry Kloss says. Revenues and profits from the audio compnents didn't grow as quickly as the costs of developing the projection TV. Expenses were higher than projected, and accounting didn't keep up with the surge of outflowing cash. In the second half of the fiscal year that ended March 29, 1975, Advent incurred a loss of nearly $3 million. Since much of that went toward training people for large-scale production of the projection TV, Kloss saw the outlay as an investment, something akin to a capital expenditure for machines or a building. The resulting red ink didn't bother him much -- he figured that Advent was at the corner, just about ready to turn. But the State Street Bank in Boston felt differently.
