The pace of office automation has been greatly accelerated by the new photocopying devices designed to cope with the growing pressure of ever-mounting paper work. "Photocopier" has become a magic word in Wall Street and has contributed to the creation of several star performers, including American Photocopy, Xerox Corp. and BBM Photocopy, which climbed from 8 to 60 for a 700 per cent appreciation in less than a year because of its new "photocopier" based on the electrostatic principle!

BBM Photocopy (now Bohn Business Machines) has experienced a sharp decline along with other speculative issues.

It is, of course, not just the glamour, but the past excellent growth record as well as the equally promising growth potential which have been responsible for the tremendous investor enthusiasm for photocopy stocks. For one thing, sales of office copying machines and accessories rose 500 per cent over the past decade. For another, their sales are expected to double again in the next five years.

Basically speaking, most photocopying machines or "photocopiers" are based on the photographic principle. They use the action of light to reproduce images, with their methods varying, depending upon the process employed.

Broadly speaking, we have the following five basic photocopying processes in use:

1.Thermo Fax process—The simplest and most widespread process used was developed by Minnesota Mining & Mfg. Which depends not on photography, but on the use of heat. Infrared rays heat carbon or metallic particles on the original, which in turn burn their image on specially treated paper.

2.Transfer-diffusion process—This process is used by American Photocopy, Sperry Rand's Remington Rand, and others, and is more closely akin to photography, except that no lens is used. In this process, the original is placed next to a "negative" translucent sheet and light passed to expose the "negative." Then, faced against a sensitized positive, the negative runs through a chemical solution.

3.Dye-transfer process—This process is similar to the transfer diffusion process except that the negative is coated with a type of dye. It prints upon ordinary, untreated paper, much like a rubber stamp. This process was developed by Eastman Kodak's Verifax which can reproduce five to seven good copies from the dye-coated matrix or negative.

4.Diazo process—According to this process, paper to be copied is placed directly over a sheet coated with diazonium salt, and the two are exposed to ultraviolet light. Then the copy is developed in the fumes from a strong alkaline solution. This process is utilized by Charles Bruning and Ozalid (General Aniline & Film) for heavy-volume copying at low cost.

5.Electrostatic process—This process is also called xerography because it was developed by Xerox Corp. for its xerography machines. Here a camera is used, much as in the conventional photostat method except that the picture is taken on a positively charged metal plate. The plate then is sprinkled with a finely ground, negatively charged powder, which sticks to the printed areas.

The electrostatic process appears to have significant advantages over other methods despite its complexity and expensiveness. Copies can be enlarged or reduced in size by manipulating the camera. It provides very faithful reproduction. It is extremely fast.

In order to compete with others, each process is striving for innovations or improvements. For instance, the transfer-diffusion process has just licked one bugaboo: the need for hand application of chemical solutions by operators. The chemicals now come premixed in disposable cartridges; devices built into the machines empty and refill the developing trays at the flick of a switch.

While all photocopying methods are in continuous process of development, the greatest research effort is going on in the electrostatic reproduction field. Under licensing arrangements with either Xerox Corp. or RCA, a half-dozen firms are seeking means of simplifying and reducing the cost of electrostatic copiers to bring them within the range of small-scale users.

Among the leading photocopy issues, Xerox Corp. and American Photocopy appear favorably situated. Good acceptance of Xerox' new 914 photocopier has bolstered the stock. With a large percentage of its outstanding shares held by institutional investors, only a small floating supply of stock is available. American Photocopy's Electrostat desk-top copying device is also in good demand.

Closely related to photocopy stocks are photography stocks which are also very much in market favor these days.

On October 14, 1960, a small photographic firm, Chicago Aerial, demonstrated at the Shoreham Hotel, Washington, D.C., its new devices in the field of rapid photographic processing. Among them was its oscilloscope recording camera, said to be a major step in extending oscilloscope instrumentation to areas beyond those pioneered by picture-in-a-minute still cameras.
 
There is a distinct possibility for commercial applications of Chicago Aerial's new process of developing, virtually instantaneously, black-and-white motion picture films.

In mid-December 1960 Eastman Kodak announced the development of a system that takes from five to six seconds to expose, develop, fix and prepare a motion picture film for viewing. According to Kodak, modifications in the system could produce pictures in a tenth of that time.

Right now, Polaroid possesses the only commercially available system of processing films instantly. The hefty quotation accorded Polaroid by the market reflects the company's unique position in still films. Polaroid recently introduced a faster 10-second-development film, with a picture-in-a-minute color film reportedly on the way.

Marketwise, even high-flying Polaroid has been dwarfed by a fledgling, New Orleans-based Kalvar Corporation, which was offered at $20 a share in 1958, rose to as high as $850 in 1960! The skyrocketing of Kalvar over the counter was primarily due to its patented new dry photographic process which employs ultraviolet light and heat to develop it images.

Kalvar has a strong patent position in its field; it has a monopoly on the use of polymer plastic in photography. IBM has been paying Kalvar substantial monthly fees for research designed to improve Kalvar's process in direction of interest to IBM.

Another stock which capitalized on its new photographic process was Technical Operations which rose sharply from the 15-16 level to as high as 92½ in 1961 on the strength of its developing dry process. Technical Operations is the largest publicly held noncaptive research-and-development company in the United States and participates in computer programming and Koda-chrome film processing, besides its developing dry photo process. As for this process, it was seen as probably having significant effect on the entire photographic industry because it reportedly eliminates the use of liquid chemicals in developing pictures from exposed film by utilizing heat.

With the spectacular market action of the above photographic stocks fresh in mind, investors have naturally become enthusiastic about exploring new situations which might repeat the performance.

Late in December 1960 a small stock named U.S. Photo Supply rose dramatically from the 22 level to reach the 85 level in a few months for one of the most sensational stock market gains of recent years. The risks inherent in such speculative issues, however, are too great for the average investor, as indicated by the subsequent dramatic decline of the U.S. Photo Supply stock to the equivalent of a 7½ level.

A recent issue that is very appealing but extremely risky is Pavelle Corporation, organized to exploit an English-invented color printer which is said to provide an inexpensive color film processing device to commercial photofinishers who otherwise could not afford the higher-quality but substantially more expensive competing color film processing equipment.

Another attraction is Pavelle's color paper which, because of its use of specially synthesized chemicals, is said to be superior to its competing color paper (now accounting for 99 per cent of the total market) in simplified processing. Whereas it takes its chief competitor seven chemical baths and four washes to complete its processing, the Pavelle paper is said to need only four baths and three washes.

Another interesting photographic situation is the newly-going public Panacolor, Inc., which has developed the Panacolor Process. While competitive processes are required to use a color positive film stock for color prints, the Panacolor Process used black-and-white color-separation negatives for producing a full color release print from inexpensive film stock. While the process commonly in use today is called the "layer" process, because it involves a film having three separate layers which are sensitive to lights of different colors, the Panacolor Process, according to the Prospectus, involves separating the color of the negative into three positive color separations. Black-and-white negatives are then made from these color separations and used in reproducing the color images on a black-and-white print stock. Thus, the colors are recombined to form an accurate reproduction of the original.

The Panacolor process is initially applicable to color movie film-processing because of the company's tie-up with  M-G-M.

Investor interest in photographic stocks is certainly understandable, for photography is undoubtedly the country's No. 1 hobby. Americans have spent more on photography than on any other leisure-time activity, even boating or bowling. In 1960 American camera fans were estimated to have spent more than $830 million for new cameras and accessories, which more than tripled the figure of ten years ago. In the past five years, amateur photography sales have grown twice as fast as the Gross National Product.

The largest single item responsible for the popularity of amateur photography is its fast-moving technological innovations which have made it possible for anybody to produce a sparkling family photo without knowing anything about cameras.

Eastman Kodak is the world's sales leader in photographic products. Behind Kodak are Germany's Agfa (a division of Farben-fabriken Bayer), Ansco (a division of General Aniline Sc Film), England's Ilford, Belgium's Gevaert and Italy's Ferrania. Despite their sharp advance in market quotation in recent years, most European photographic stocks are still selling much cheaper than domestic stocks of comparable quality. Take, for instance, Gevaert. As of July 19, 1960, the stock was selling at 22.1 times 1959 earnings or 14.6 times cash flow against Kodak's 39.5 times earnings or 29.6 times cash flow. On top of that, Gevaert has compounded at a growth rate of 11 per cent annually against Kodak's 6 per cent.

Most of the leaders in the photography industry have important stakes in other fields. Eastman Kodak, for instance, has only 30 per cent o£ its sales in photographic products. Fairchild Camera & Instrument has important commitments in defense electronics, semiconductors and graphic arts. Minnesota Mining is a major factor in at least half-a-dozen fields, though its recently acquired Reeves Camera is second to a few in the photography industry.

Favorably situated is Bell & Howell which has occupied a prime position in the photographic, electronic and specialty business machine industries.

Especially significant is its recent entry into the rapidly growing amateur color film field with du Pont. Demand for color film has been doubling every five years, with its total U.S. market estimated at $100 million on the wholesale level. The volume done by the color photofinishing industry is even larger than film sales, amounting to about $150 million wholesale every year. Bell & Howell will establish a special film processing service.

Bell & Howell is not expected to achieve significant penetration of the color film market until 1963 when its earnings from that direction are likely to equal or even exceed total present photographic earnings.

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