The Los Angeles Times from Los Angeles, California • 67

I flosAnfleteaSIhnefl Apr. 29. 1979-Pirt VI 3 Oak Industries Deeply Rooted in Own Equipment i 1 mm wm ii'Oikmi Vw'' Fast -Growing BY BARBARA BRY Tlmn ItaH Writer ESC0NDID0-0ne problem with California is that it is difficult to work during all the beautiful weather, says Everitt A. Carter, chairman and chief executive officer of Oak Industries Inc. Despite the sometimes langorous climate, Oak, which recently moved its corporate headquarters here from chilly Crystal Lake, 111., has been expanding rapidly.

Just a little over two year3 ago, its over-the-air pay TV started broadcasting in Los Angeles. Today, with about 156,000 subscribers, its National Subscription Television division is the largest in the country and is adding about 12,000 new customers a month. And Oak plans to expand even more by entering the Phoenix market in July and Miami-Ft. Lauderdale in the fall. At the same time, Oak is moving ahead with its acquisitions program.

Last week, the company announced that it will pay $36 million in stock for Tesdata, a McLean, manufacturer of computer diagnostic equipment and developer of performance evaluation systems. And Oak's technology division has introduced such new products as the touch-in-panel switch used in microwave ovens. Earning per share suffered between 1975 and 1977 as the company incurred start-up costs associated $25 security deposit and $18.95 per month. The decoder is unique in that it can be turned on and off from a central computer which keeps track of every decoder's location. Thus, it is easy to deal with non-paying subscribers.

In addition, the decoders are designed so that they only work where they are installed and cannot be transferred to a new location. Oak spent $11 million to get started in Los Angeles. The system became profitable 16 months after going on the air. Oak does its own programming, a practice it plans to continue in other markets, so that it can tailor shows to meet subscribers' desires. A major coup was disclosed by the recent announcement that Sears, Roebuck Co.

will now market and install National Subscription Television (NST). So far, Sears accounts for about one-fourth of sales. Oak estimates that there are 3 million television homes in Los Angeles capable of receiving its signal. Oak is aiming for about 450,000 households or 15 of the market. In Los Angeles, Oak faces competition from American Subscription Television of California which is owned by private investors and Clarion Corp.

of Japan. The service, which started regular programming in November, now has 20,000 subscribers. Since the Federal Communications Commission only allows one pay TV channel in markets which have fewer than five regular stations, Oak will have a built-in competitive advantage in the new markets which it enters. Only Los Angeles, Chicago and New York would currently be permitted to have two pay television stations. Even if this rule were to change, Carter contends that being first is a major advantage.

"Because of the extraordinarily high gross margins, the leverage factor of additional subscribers is rather pronounced," says Raymond F. Jan-sen, a research analyst with Blyth Eastman Dillion Co. Inc. With 100,000 subscribers, NST should bring in annual revenues of $22.8 million, he says, and add 40 cents per share to current earnings TV PROGRAMMING Movies, sports events and specials are the major fare received by the 156,000 National Subscription Television customers in Los Angeles for a fee of $18.95 a month. Times photo by Steve Fonttnlni SIDELIGHTS of A Should Have Used Master Charg Bank of America boasts assets of nearly $95 billion but for a while earlier this month that claim could have been subject to doubt.

On April 9 the bank's legal department sent a $50 check to the state Court of Appeals in San Francisco as a filing fee in a case. About 10 days after the check was cashed, it was returned to the court stamped "not sufficient funds" the check had bounced. When the court clerk informed of A's legal department of the situation, he was told that the bank certainly did have 50 bucks in its own account, and he was instructed to run the check through again. "I can't," he said, "the check has been stamped 'Do Not Resubmit." An embarrassed bank employe was sent down the street to the court to retrieve the check with $50 cash in hand. A bank sleuth determined that the check had bounced because of "a mechanical error." Northrop Does Its Bit Northrop Corp.

may be one of the few companies where concern for the energy situation has shown a drop in interest a 0.8 drop, to be precise. That's the interest rate employes of the giant aerospace firm save on credit union loans to buy new cars with Environmental Protection Agency ratings of 20 miles per gallon or better. Northrop's credit union charges 10.8 annual interest on loans for gas guzzlers and only 10 for fuel-stingy models. Since the program began in January of 1978, 700 employes have opted for small-car loans nearly 20 of all such loans made during the period. China Doll Clothes Farrah Fawcett-Majors and Flash Gordon have dumped their Hong Kong tailor in favor of one in China-sort of.

Pay TV OAX INDUSTRIES AT A GLANCE Business: Oak operates subscription TV services and manufactures equipment used in cable TV and over-the-air pay TV. Results: Year ended Dec. 31: 1978 Revenues $192.2 mil. Net per share $1.45 4th quarter ended Dec. 31: 1978 Revenues $54.99 mil.

Net per share $0.44 1977 $151.1 mil. $0.39 1977 $36.9 mil. $0.07 Common Stock Current Price $27.00 NYSE Range $14,375 to $32.00 Shares outstanding: 3.6 mil. Return on shareholders' equity. 11.9 Dividend: $0.35 Employes: 9,359 (based on 4.2 million shares).

At the 200,000 customer level, the revenues double to $45.6 million, but earnings almost triple to $1.16 per share-be-cause there is no additional overhead. Oak is divided into two parts. Oak Communications includes National Subscription Television; the CATV division which manufacturers about 60 of industry sales; and Heller-Oak Communications Finance a joint venture with Walter E. Heller International Corp. which provides financing to the Communications industry.

Oak Technology produces materials, components and controls for a variety of electronic, industrial and consumer markets. Growth for this part of the company is expected to be slower than for Oak Communications. The company's traditional components business is very mature with low growth and low profit margins. But, the materials group grew from less than $5 million in sales in 1970 to about $60 million last year. To insure that it does not lose it technological advantage, Oak plans to increase its spending on research and development from 3 to 5 of sales.

The company also is starting a "think tank" which will not be product oriented. will go up or down is like evaluating an Albrecht Durer woodcut on the basis of how much money will be saved by not having to paint that section on the wall behind where the artwork is displayed. Does the professor really believe that "renters are unambiguously harmed" by cleaner air? As a renter I certainly don't feel I'm being harmed and I don't know anyone else who does either. True, my rent has been steadily rising for years, but never once has my landlord cited cleaner air as a reason. To accurately analyze the monetary benefits of cleaner air, one would have to be able to measure such parameters as the extra productivity of workers due to less smog-induced eye irritation and coughing, or the decrease in freeway accidents due to fewer drivers being irritable and having headaches.

These are difficult factors to measure, but some are harder yet. I don't know what economic benefit should be attached to those rare occasions when you can stand on the beach in Venice and see the San Gabriel Mountains, but it must be worth something. LINDSAY CHANEY Santa Monica Letters to the FluncUl Editor ibsoli ke kept brief paeeiblc and are tubjeet te eeneeasatioa. Network Makes with its entry into the pay TV market. Unlike cable, which requires a high capital investment to install the lines, over-the-air requires only a transmitter.

Cable and over-the-air most likely will not compete in the same markets, Carter explains. "Where cable is required, viewers can't get a signal off the air. And where you don't need cable, it is uneconomical for them to try and compete," he says. The company's goal has been to integrate forwards or backwards wherever possible to avoid being squeezed between raw materials suppliers and end users. Thus, Oak also manufacturers the decoder box which unscrambles TV signals for a subscriber.

"Pay TV was an outgrowth of our interest in the design and production of equipment for cable television," Carter says. "Because of our knowledge and expertise in this area, we were approached about designing a system for over-the-air. After looking into it, we decided that we wanted a part." Oak holds 51 of Chartwell Communications, which owns Channel 52 in Los Angeles. During the day, the channel broadcasts regular programming. Starting at 8 p.m., the special programs-movies, sports events and specials-begin, which only subscribers of ON with an Oak decoder can receive.

Customers pay a one-time installation fee of $39.95, a refundable our products to them," said. a spokesman Does Goodyear Know? The Air National Guard in Washington, D.C., has placed an order for a fleet of unusual aircraft that, it says, have no strategic or defensive purpose. Pie-in-the-Sky Co. of San Mateo, an appropriate name for a firm dealing with Washington, has sold 30 of its $700 miniature helium-filled tethered blimps to the guard which plans to use them as an advertising gimmick for its enlistment program. The 13V6-foot-long blimps, bearing the message; "Join the Air National Guard," will be seen in the skies over state fairs, auto races and other public gatherings around the country later this year.

Song Ends on Sour Note The trouble with truth in advertising is that some people believe it. Take the case of Toyota's TV commercial for its Corolla model which ends with the statement: "The world's best-selling car and you can get it for a Well, it didn't take long for a consumer to take Toyota at it word. Last week a woman walked into a Toyota showroom in East Hartford, sang "Happy Birthday" and asked the dealer for the keys to her free car. "Nice try," the dealer said, "but you left out the $3,748." The woman departed without pressing the matter but when word of the deed was mentioned on NBC's "Today" television show, so many people decided to imitate her prank that many Toyota dealerships around the country sounded like they were hosting the Mormon Tabernacle Choir. "It certainly indicates that people do pay close attention to our advertising," a Toyota executive commented.

Ron S. Heinzel are now emerging as excessive. All this should assure adequate funds for investment and exploration. If more incentives are needed, let's try those more consistent with the anti-inflation effort the obverse of deregulation: Gradual curbs on oil imports, rescission of some of the tax breaks for U. S.

oil company operations with OPEC, and overall price and income controls. MAX MONT Los Angeles Headline Challenged Regarding "Steel Profits Rocket Help Vital" (Outlook, April 15): Domestic steel producers have long contended that the governments of Japan, Germany and others subsidized their producers, enabling them to "dump" their steel at prices substantially below the U. S. market After years of appeal to Washington, the Treasury Department agreed a year ago to a "trigger" price mechanism enabling a domestic producer to seek damages from foreign producers who dumped their steel The article headlined "Steel Profits Rocket 6,000, Help Vital" is misleading because many readers look only at the headline and do not read the story to learn that the rocketing to 6,000 in 1978 brought the indus Mego International, New York, which manufactures lookalike dolls of Farrah, Flash and the Fonz, has shut down its doll costume plant in Hong Kong and opened one in China's Guangzhou province. A company spokesman said the move was made because of the larger labor force available in China.

And the cost per costume is about half that in the British Crown Colony, a substantial saving considering the 25 million costumes Mego makes each year. Terms of the agreement signed late last year called for Mego to supply the Chinese government with 100 industrial sewing machines and to train 100 workers to operate them. In return, China provided the plant and promised to buy the sewing machines from Mego at a future date. The workforce at the plant, which opened last month, will be expanded by 100 persons later this year, Mego said. The company hopes to use the plant as a wedge into the doll market in China.

"We'd be delighted to sell Life in Valley we might expand the cover." territory we Publisher Copeland says: "I'm too busy making this magazine work to consider additional publications. But if I did start another one it would be just one for the San Gabriel Valley" which he knows well from his association with Highlander Publications. Is there room for two magazines to succeed in the Valley? "I feel there is," Big Valley editor Yeager says, "but I see one emerging as the voice of the Valley. And I think we will be the one." Copeland says: "I think only one will make it ours." LETTERS li ji The Slicks Finally Discover PAY TV PROSPERS Everitt A. Carter, chairman and chief executive of Oak Industries, headed the firm's move into pay television.

Times photo by Art Rogers U.S. Is Of fering Wrong Incentives to Oil Companies Continued from First Page about a newsman reportedly targeted by Peoples Temple survivors and a scathing piece rating local television news anchormen. But the bulk of the stories are softer, such as profiles on Dodger outfielder Reggie Smith, a Chatsworth resident, and on Dick Whittington, disc jockey and Valley restauranteur. Yeager says the magazine plans to step up its investigative pieces soon. Other articles in the family oriented publication include one on ballooning, a summer fashion spread, the 20th anniversary of Cal State North-ridge, and guides to local parks, bookstores, antique shops and pizza parlors.

San Fernando Valley magazine, on the other hand, tends to be a bit more sensational. In addition to a monthly investigative story, the magazine has featured articles on hot tub parties, local spiritualists and buried treasure in the Valley. Big Valley's publisher, Mrs. Boeck-mann, noted that her competitor once ran a guide to X-rated motels in the Valley. "You'd never see an article like that in our magazine," she remarked.

Told of the comment, San Fernando Valley magazine editor D'au Vin retorted: "I can believe THAT." Ms. D'au Vin likens the two Valley publications to New West magazine and Los Angeles magazine. "Ours is meaty like New West; theirs is like L. A. magazine mostly fluff." Big Valley editor Yeager is less than impressed with San Fernando Valley magazine's lineup of celebrity columnists which includes comedian Sandy Baron, consumer advocate David Horowitz and sports writer Bud Furillo.

"They're more like semi-ce- lebrities than celebrities," Yeager says. "Hell, Sandy Baron hasn't said anything funny in 10 years. If we decided to go the celebrity route we'd hire somebody like Woody Allen." San Fernando Valley magazine does appear to be more celebrity oriented than its competitor. Each edition features a personality on the cover and an accompanying article. Those recently honored include An-gie Dickinson, Johnny Carson and Bob Hope.

Big Valley's May edition sports actress Susan Anton on the cover but until then, the only big Hollywood name to adorn its cover was Benji, the movie pooch. But San Fernando Valley magazine editor D'au Vin makes it clear she's not putting out a fan magazine. "We feature a TV or motion picture personality on the cover each month because it's known in the industry that if you do, you increase sales by 5 to 10. Only three pages are devoted to the cover story," she said. "The meaty material is in the departments.

For example, we don't do TV reviews or articles on the new television season. Instead, we would do a piece on the innovative approach to TV writing." Both publications believe their main mission is to change the public image of the Valley. Ms. D'au Vin puts it this way: "We have a mentality to overcome. Intellectually, the Valley is the center of Los Angeles.

Those Rolls (Royces) you see driving over the hill from Coldwater and Laurel canyons contain successful people who live and work here. They only go over the hill to see their public relations people in Hollywood. Successful people who are retired are living in Beverly Hills and Bel Air but those in their 30s and 40s are living here." Mrs. Boeckmann states her goal more succinctly: "We want to show the rest of the world we're not a bunch of hick farmers." Each publisher questions the other's circulation claims but if the figures are correct, San Fernando Valley magazine has a slight edge with a total circulation of 31,000 compared with 30,000 for Big Valley. And San Fernando Valley magazine seems to be picking up advertisers at a faster rate.

Both publications aim for a ratio of 55 editorial matter and 45 advertising. San Fernando Valley has grown from 70 pages in its first edition to 102 in April. Big Valley has grown from 94 pages initially to 96 in April. Each has a staff of seven, plus assistants and freelance writers. Both firms claim they are now in the black.

Regarding expansion plans, Mrs. Boeckmann says: "We couldn't do the same thing elsewhere because we're not as familiar with other areas but try only a 9.6 return on equity, placing it 38th in a list of 41 major industries with an average return on equity of 15.9. For many years 'steel' has been consistently at or near the bottom in this category. Small wonder that funds for capital investment are so hard to come by. The article might have, more accurately, pointed out that the 6,000 jump in 1978 profits was primarily due to Bethlehem Steel's loss of some half billion dollars in 1977, mostly because of the closing of obsolete plants and from flood damage.

For the most part the report was timely and informative. The public needs to know the problems facing the steel industry, which must be kept strong and viable in light of the world's troubled condition. T. L. KISBAUGH Laguna Hills Unharmed by Clean Air As many of his brother economists so often seem prone to do, Prof.

Ar-man A. Alchian (Many Pay for a Few to Benefit From Cleaner Air, Outlook, April 22) indulges in the absurdity of trying to place a strict dollar value on something that does not lend itself well, if at all, to that kind of analysis. To judge, as he does, the benefits of clean air in terms of how land values "Are Huge Oil Profits Windfall or Reward?" (Outlook, April 22) is a good overview story, but it doesn't go far enough. Consider this paradox: The upward thrust of oil prices (fueling general inflation) has been largely determined by the Organization of Petroleum Exporting Countries, which fixes prices through operating as a cartel and violating the Sherman Antitrust Act While sharing in the illegal gains of OPEC, the U. S.

oil industry also demands relief from allegedly unfair restrictions on the price of oil from American wells. President Carter sanctions their claims flouting his own guidelines and loading an onerous new round of inflation on the hapless consumer by deregulation. All in the name of a mythical free market. As plaintiffs in a pending civil suit, the International Assn. of Machinists and their attorneys have amply demonstrated that OPEC is a conspiracy within the meaning of the Sherman Act and is indeed liable for penalties under the Foreign Sovereign Immunities Act in so far as it affects U.

S. internal commerce. The vast holdings here of some OPEC countries are subject to remedial court judgment. Your story proves that the earnings position of the oil industry is already enviable. First quarter 1979 profits.