The story begins in 1891 with Karl Elsener, owner of a company that made surgical equipment. He founded the Association of Swiss Master Cutlers, to supply pocket knives to the Swiss army, who at this time were using German-made ones. It took Elsener five years to come up with what he called the "Soldier's knife" (known today in Switzerland as the "Offiziersmesser"). With suggestions from an engineer friend, Jeannine Keller, the original model had a wooden handle, and came with a blade, screwdriver, can opener, and a punch. It was actually made available to the army before 1896, but Elsener was not happy with the device, and eventually was able to put blades on both sides by using a special mechanism using a single spring for both blades. This allowed him to also add a corkscrew.
Elsener's company, Victorinox, was the single supplier of multi-function pocketknives until 1893. A company in the French-speaking area of Switzerland called Paul Boechat & Cie began to market a similar product. The company was later bought by its general manager, Theodore Wenger, and the company name changed to Wenger. By 1908, the Swiss government decided to split the contract for knives between the two companies, partly to appease German and French-speaking factions in the country, and partly to stimulate competition (and lower the prices of the knives). The two companies came to an agreement over marketing, with Victorinox using the phrase "The Original Swiss Army Knife" and Wenger using "The Genuine Swiss Army Knife". The following year (1909), the Swiss army began decorating the knives with the Swiss national symbol (a white cross). Victorinox uses a shield with bilateral symmetry around the cross, while Wenger uses a slightly rounded square with quadrilateral symmetry. The Swiss army uses knives with a simpler bilaterally-symmetric shield.
Victorinox switched to stainless steel blades and tools in 1921. It is believed Wenger did so as well around the same time, but company sources are inconclusive about the exact date. The knives were sold in PX stores on US army bases from 1945 to 1949. In fact it is believed that the term "Swiss Army Knife" was coined in English by American G.I.s during World War II, because they couldn't pronounce the Swiss name "Offiziersmesser".
Today, Swiss army knives contain a multitude of tools, including: several blades, a bottle-opener/screwdriver/wire stripper, can opener/small screwdriver, tweezers, toothpick, corkscrew, phillips-head screwdriver, nail file, scissors, saw, hook, magnifying glass, ballpoint pen, fish scaler, pliers, keychain, USB flash memory, digital clock, digital altimeter, LED light, laser pointer mp3 player, and a brass spacer in the official army model, which allows assembly of the SIG 550 and SIG 510 assault rifles (with the screwdriver and reamer extended, the knife becomes a restraint to the firing pin during the lock assembly). Wenger has a special model which contains all the tools they make. The device is nearly twice as wide as it is long, and retails for around $1,200.
The knives are also available in many other colors besides the traditional red. Black, blue, white, pink, camouflage, phosphorescent yellow and many others, in both opaque or transparent. Also metal and wood cladding. The model actually used by the Swiss army is in fact aluminum, and not red at all.
On April 26, 2005, Victorinox acquired the Wenger company, becoming again the single supplier of knives to the Swiss army. The company intends to keep the Wenger brand alive for knives sold to consumers.