Tech Firms Are Struggling for Right Answer By CARLOS MARTINEZbr> Staff Reporter Valley tech firms hit hard by a major industry downturn last year, hoping against hope for recovery in 2002, are exploring new foreign markets, developing new products and embarking on aggressive marketing campaigns to spur sales. Having gone from rapid growth to near ruin, many of the San Fernando Valley’s tech firms today are leaner than they were a year ago and trying to remain optimistic about their own prospects in what could be another bad year for their industry. While most companies contacted by the Business Journal expect continued losses this year, they also had plans to minimize the pain. “Nobody really foresaw what would happen, but it gave everyone a chance to do a gut check and reevaluate their business,” said Greg Dare, marketing manager for California Amplifier Inc. in Camarillo. “It’ll be a tough year, but nothing like last year,” Dare said. Cal Amp, which saw a drop in its wireless business when Sprint halted its wireless expansion last year, was able to recover as its satellite components business began to expand when satellite TV subscriptions took off last year. “We were very fortunate in that regard,” Dare said. Sluggish early sales and the decline of the wireless market last year forced the company to cut nearly half of its workforce, going from 706 employees in 2000 to 363 in 2001. It also reorganized, splitting its engineering and sales departments into two units, one for wireless and the other for satellite products. “Before, we had sales people favoring one side over the other and that was hurting us,” Dare said, adding that splitting up the engineering department allows Cal Amp to respond more quickly to customer demands by having fewer people in the supply chain. Like Cal Amp, Camarillo-based Vitesse Semiconductor Corp. also eliminated nearly 300 jobs last year in response to declining revenue and reduced market share. Vitesse says it’s through with staff cuts for now. Company CEO Lou Tomasetta said the firm expects a series of new products to fuel the beginning of a gradual recovery during 2002. “We believe that our large R & D; investments in switch and processor products over the last two years will begin to pay dividends,” he said, adding that through the acquisitions of Vermont Scientific Technologies Inc. and Kalman Saffran Associates, the company plans to further expand into fiber optics and business development software. Vitesse was hit hard by the economic troubles facing giant tech firms like Nortel Networks Corp., IBM, Alcatel, Cisco Systems and Lucent Technologies Inc., customers responsible for 90 percent of Vitesse’s sales. Vitesse finished its fiscal year in September 2001 with a $111.8 million loss on $384.1 million in revenue, compared to $27.9 million in net income on $441.7 million in total revenue the year before. Vitesse, whose core semiconductor business had been taking a beating, pushed further into the broadband and telecommunications business by acquiring Versatile Optical Networks Inc. in June. But the move into fiber optics isn’t likely to improve Vitesse’s bottom line any time soon since the telecom industry isn’t likely to turn around any time soon either, said Lee Branst, an analyst for Caracal Communications in Los Angeles. Among those hardest hit by the tech downturn last year was Chatsworth-based fiber optics maker Luminent Inc., which once again became a wholly owned subsidiary of MRV Communications Inc. last month after being spun off in 1997. The company completed a year of layoffs and severe cutbacks amid a sharp decline in revenue in 2001. Last year, Luminent laid off about a third of its workforce, about 600 employees, to reduce expenses. For the quarter ending Sept. 30 its last one as a stand-alone entity – Luminent reported a $51.3 million loss on $18.8 million in total revenue, compared to a $28.4 million loss on $36 million in revenue a year earlier. MRV officials would not comment, citing a quiet period just prior to its Feb. 12 conference call outlining its year-end results. Branst said most tech firms have had little choice but to cut back on their workforces. “You have to reduce your costs and layoffs are the biggest way to do that,” he said. Moorpark-based software quality assurance firm Quality Logic Inc., which cut half of its staff last year, leaving about 100 employees, said it has an aggressive marketing campaign planned to win back its lost clients this year. “We were dealt a setback in 2001 and now we’re putting a lot of resources into sales and marketing, focusing on our long-term core market,” said CEO James Mater. The privately held firm ended the year with about $12 million in sales, about a third less than it posted in 2000. Mater said the company was wrong to focus so heavily on the dot-com market, which seemingly evaporated overnight last year. Mater said he wants to diversify by exploring markets in Europe and Asia. Diodes Inc. CEO C.H. Chen said the lessons he learned from the tech downturn is to continue to develop products and look for new markets overseas. Diodes, a Westlake Village-based semiconductor-maker, hit by a 30-percent drop in sales during the quarter that ended Sept. 30, is looking to rebound with a series of new proprietary products aimed at improving its market share. “We’ve seen a stabilization of prices and a modest uptrend in orders,” he said, “Given the rather uncertain global economic picture, we continue to keep a tight rein on our cost structure.” But the company’s recovery will depend on the success of its new wafer manufacturing facility being built in China with the help of a $20 million credit extension provided by the Chinese government, Chen said.
