Tough Tidings

From its start in 1851, Western Union built a reputation as America's fastest and trustiest messenger. The company constructed the first transcontinental telegraph line in 1861, introduced telex messages in 1958, created Mailgram service in 1970 and began operating the first domestic satellite communications system, Westar, in 1974. But now Western Union's electronic pulse is barely perceptible. The company said last week that it lost $58.4 million in 1984 on sales of $1.1 billion. Coming on top of a $59 million deficit in 1983, the news fanned speculation that Western Union may be unable to survive. "Its future is bleak," says Michael Kennedy, a telecommunications analyst for the Gartner Group research firm. "This is a company on the verge of bankruptcy."

Western Union has gambled its future on EasyLink, an electronic mail service that zips messages between users of computers. So far, however, the two-year-old EasyLink has been the company's biggest cash drain, consuming more than $110 million in 1984 alone. The electronic mail business suffers from a surplus of competing services, including Federal Express's ZapMail and GTE's Telemail. Few, if any, are making money.

Yet EasyLink is only one of Western Union's woes. Some of the company's traditional businesses, notably telegrams and telex, remain profitable but have come under pressure from new rivals like in-house corporate message networks. In seeking other opportunities, Western Union has gone off in an unwieldy number of directions. Its ventures have ranged from making mobile- telephone equipment to building ground stations that beam messages to satellites.

The foundering corporation, which has gone through three chief executives in the past year, is making painful efforts to right itself. Says Chairman Robert Leventhal, 58, a Navy commander in the Viet Nam war: "Every expenditure is being carefully scrutinized." The company cut its 14,000- employee work force by 1,500, while managers and most union workers took a 10% pay cut. To raise badly needed cash, the firm is trying to sell off unprofitable businesses.

Some Wall Street observers expect EasyLink to catch on and rescue Western Union. Many others, though, think the company will eventually have to merge with a corporate giant such as General Motors, which could benefit from direct access to Western Union's worldwide message-sending capabilities.