April 13 2004
The top 150 public companies headquartered in the technology capital of the world
collectively showed a profit in 2003.
That news alone isn't enough to bring back Foosball and Friday beer busts to campuses from Sunnyvale to Scotts Valley. But it does spark optimism for the future of the tech industry, the U.S. economy and the cachet of Silicon Valley.
The numbers in this year's Silicon Valley 150, the Mercury News' annual ranking of the area's top 150 public companies, look more promising than in recent years.
Sales grew nearly 11 percent in 2003, the first real growth since 2000. With the recession in 2001, sales at the valley's largest companies fell 18 percent, the first drop since the Mercury News began its survey in 1985. Sales in 2002 rose 5.5 percent, but the rise was largely caused by Hewlett-Packard's acquisition of Compaq Computer and masked an actual decline in sales for most companies.
In 2003, three out of four companies in the SV150 had higher sales compared with only half in 2002. In 2000, 90 percent had sales growth.
Ninety-one companies -- or 61 percent -- reported profits in 2003. That's considerably better than the 36 percent in 2001 -- the infamous year of the dot-com bust -- and the 47 percent in 2002.
Even 2003 started out shakily. With war looming in Iraq, sales fell 1.1 percent in the first quarter from the previous quarter and fell an additional 0.3 percent in the second quarter. But in the third quarter, sales took off, climbing nearly 10 percent. It was spurred by an 8.2 percent rise in the U.S. gross domestic product, the best national growth in almost two decades. Sales for the valley's largest companies grew an additional 6.7 percent in the fourth quarter to more than $80 billion, the highest quarterly sales since 2000.
In the year since the last survey, the market value of the SV150 rose 64 percent to nearly $1 trillion. It is still about half of what it was at its peak, though.
As sales grew and profits were posted, jobs were cut. SV150 companies employed 38,000 fewer workers in 2003, a 4 percent drop from the previous year.
While such powerhouse companies as Hewlett-Packard, Intel and Cisco Systems topped both revenue and profitability charts, the companies with the biggest sales growth give a peek at the driving force behind Silicon Valley's next wave: consumer electronics.
Though business customers were slow to invest in new products and technology last year, consumers gladly opened their wallets for the chance to watch movies on DVD, download music legally, shoot digital video and snap digital photos.
``The age of the digital consumer is finally kicking in,'' said Tim Bajarin, president of Creative Strategies, a technology consulting firm in Campbell. ``Last year was the first year that digital cameras outsold film cameras and that's only going to continue. Of course, what that has done is forced people to buy photo printers for the home, which drives software and ink. And it's driving the demand for the next generation of storage.''
That's good news for Sunnyvale's OmniVision, a newcomer to the SV150 and a company that's probably not a household name among consumers. But consumers snapped up products with OmniVision's chips inside, chips that allow cell phones and handheld computers to display photos.
In 2003, OmniVision's sales grew 204 percent and it reported a profit of $41.3 million. Following close behind was Lexar Media, maker of portable USB drives. Lexar sales jumped 137 percent and it posted profit of about $40 million. And SanDisk, known for the memory cards that go into digital cameras, reported a 99 percent increase in sales and a profit of almost $170 million.
In years past, the 10 companies with the greatest sales growth usually lost money. In 2003, that group collectively made $913.7 million in profit, up 278 percent from a combined profit of $241.7 million in 2002.
The personal computer, which drove the technology industry during the late 1990s, is a maturing market, said Eli Harari, president and chief executive of SanDisk.
But consumer electronics such as cell phones, digital cameras and handheld computers are in the midst of a transformation as wireless technology and digital content hit the mainstream.
``The most exciting thing for us is the cell phone,'' Harari said. ``In the next three to five years, it will become the primary consumer electronics device and not just for giving you communications. The ability to have broadband data will not only allow you to capture images and wirelessly transmit them but it will also allow you to download content such as music and listen over your cell phone.''
The all-in-one phone is not too far away. Phones with built-in cameras have reached affordable levels. And even high-end phones, such as Handspring's Treo, with a camera and Palm software built in, is an affordable option for on-the-go professionals who see value in a $400 gadget.
More data moving in and out of the phone means a greater demand for storage. Harari is gearing up to meet the demands of the digital revolution.
Camera phones have the potential to replace today's digital cameras, if they can produce a photograph of similar quality.
Raymond Wu, OmniVision's executive vice president, said the company, which makes the sensors that convert light to electrons, plans to introduce the next generation of sensor architecture, which will create better resolution for cameras on portable multifunction devices.
``It means the quality will improve,'' he said. But to get there -- and to keep pushing the limits of technology -- OmniVision needs a talented workforce, a Silicon Valley workforce. OmniVision's experience may provide a hint of job growth in the valley, suffering after waves of layoffs.
``We keep hiring people,'' he said. ``We're always looking for the best.'' The company is still small with 160 employees worldwide. But of those, 120 are based in Silicon Valley, with the others scattered among China, Taiwan, the United Kingdom and other parts of Europe.
``The R&D is here; sales are here,'' he said. ``Product marketing, financials and operations are all here, too.''
Harari, at SanDisk, said the jobs that add value to the company are in Silicon Valley.
Silicon Valley remains a central hub in the global economy, he said, and having a strong presence here is critical to the company's success.
``These are unbelievably exciting times for Silicon Valley,'' he said. ``The pace of innovation, the Internet going wireless, the mobility. The ideas that people here have are just unbelievable.
``When I recruit students, I tell them that when I started in semiconductors in 1973, I thought everything to be discovered had been discovered, that the golden age was over,'' he said. ``Now, I'm telling the new guys that are graduating from college how lucky they are. As much as the last 30 years were great, the next 30 will be even greater.''
Source: Silicon Valley.com
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