Technicolor is a name that calls to mind the glory days of Hollywood. The company was founded in 1915 and is credited with pioneering color motion picture film-processing technology. The Technicolor logo has been emblazoned on such classics as "Gone With the Wind," "Ben Hur" and "Lawrence of Arabia."
But behind the venerable name is a company that remains a mystery outside the tightknit Hollywood community. Technicolor Inc.'s North Hollywood headquarters and film-processing facility--the largest of its kind in the world--are carefully guarded from outsiders' eyes. Although the company is best known for its film services, videotape is now Technicolor's most important business. In its current fiscal year, two-thirds of Technicolor's projected revenues of $725 million will come from converting feature films onto videocassettes.
Technicolor entered the video business in 1981, and it is now one of the world's two biggest producers of videocassettes--in a virtual dead heat with archrival Rank Organisation PLC of Britain in video production, as well as film processing.
Technicolor's impressive growth in video has helped justify the hefty $780 million paid to buy Technicolor in 1988 by Carlton Communications PLC, the British film and television services concern. Carlton acquired Technicolor from Revlon Chairman Ronald O. Perelman.
Analysts say the acquisition can now be regarded as a success, in large part because Technicolor has propped up Carlton's recession-plagued equipment-and-facilities rental businesses. "Technicolor has probably been one of their best businesses over the past couple of years," said Hamish Dickson, an analyst at Hoare, Govett Ltd. in London.
Although Carlton doesn't break out Technicolor's results, Dickson estimated that Technicolor this year will account for 55% to 60% of Carlton's profits. In its fiscal year ended Sept. 30, 1991, Carlton reported the U.S. equivalent of $57 million in net income on sales of $943 million, according to Value Line.
Still, when Carlton entered the picture, Technicolor had been through several changes in management and trouble was brewing. With a limited number of features made each year, film processing was viewed as a stagnant business, and video growth had begun leveling off. Attempts by Technicolor to diversify into such businesses as one-hour photo labs and videocassette recorders failed miserably.
