Mr. Sage's Mistake

As the present first-class crisis facing U. S. railroads is due primarily to the fact that operating costs are rising while revenues are falling, so another crisis, less publicized but similar, faces U.S. telegraph companies. Last week Western Union, Postal Telegraph and Mackay Radio took the step already taken by hard-pressed railroads--they petitioned the Government for an immediate general 15% rate increase.

Only last June the telegraph companies sharply reduced their night rates. Since then they have tried such expedients as eliminating charges for punctuation. Last week in their petition they admitted what has long been suspected--that these reductions have failed to lure back the business already lost to airmail and telephone.

The present depression has also taken a mighty chunk out of telegraph volume without reducing taxes, wages and rentals which last year helped jump operating expenses $7,000,000 for Western Union alone.

This trend shows all too clearly in the returns of the two big telegraph systems. For the first ten months of 1936 Western Union had a gross of $80,000,000, a net of $5,700,000. For the first ten months of 1937, it grossed $84,000,000, netted $2,900,000, and most of this was made in the first three months when business was good. Postal's record is parallel. In the first ten months of 1936 its land lines grossed $19,000,000 and lost $1,200,000. This year they grossed $19,000,000 and lost $2,725,000.

The holding company which controls Postal and Mackay Radio & Telegraph has been in 77b reorganization since 1935, but Western Union has until very recently been considered one of the bluest blue chips on the stockmarket. In the first quarter this year it made $1,444,000, nearly half-million more than in the same period in 1936. Since then, however, things have gone to pot. For example, Western Union made $769,000 in July 1936, $72,000 in July 1937. Lately the situation has become so acute that, as the companies' petition to the Federal Communications Commission baldly asserts, it threatens to "impair their ability to render a rapid, efficient and nationwide wire and radio communication service."

The late Russell Sage in prescribing how to make a fortune once remarked that only once in a lifetime could a man hope to buy Western Union stock below $50 a share. Many men now living remember it selling at $12.50 in 1932. Early this year it was back to $83.50. Last week. Mr. Sage to the contrary, the same men had all the opportunity they wanted to buy at $26.

This file is automatically generated by a robot program, so reader's discretion is required.