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Friday, Mar 29, 2024

Downturn Forced Company Makeovers

Downturn Forced Company Makeovers By CARLOS MARTINEZ Staff Reporter A funny thing happened to a quiet stretch of the Ventura 101 Freeway between the San Fernando Valley and Ventura in the late 1980s. It became home to a handful of technology companies that made computer and telecommunications equipment and components. By the late 1990s, the so-called 101 Tech Corridor was in high gear as it became the home of nearly 300 technology companies making everything from tiny computer chips to high-end satellite components. With sales growing amid the dot-com and tech boom, these companies had high hopes of becoming major players in a fast-growing industry. But when the market hit the skids in 2000, few were prepared for the biggest slide in the industry’s history. Today, the number of corridor companies is down to 199 and most of those left are still reeling from the down market, with some seeming on the verge of collapse. But amid the rubble, there is optimism coming from the companies as they reconfigure or otherwise try to reinvent themselves for promising new markets as the tech sector begins to rebound. The character of the Tech Corridor companies has changed as the companies that once supplied telecom giants like Nortel, WorldCom and AT & T; are now supplying the small markets of local telephone and telecommunications networks and corporate enterprise networks just to survive as they move to explore other areas of potential growth such as Ethernet, wireless and even information technology products and services. Recent optimism along the corridor has been tempered, however, by the high costs of doing business in areas such as worker’s comp insurance as well as increasing competition from abroad. “Southern California is still not a place for companies to bring in more workers or expand,” said Daniel R. Blake, director of California State University Northridge’s San Fernando Valley Economic Research Center. “But you still have a lot of potential for improvement.” The growth of Ethernet networks, for instance, or internal networks used by companies to communicate and transfer data in house, along with the growing wireless communications market is giving corridor companies good reason for hope. Rohit Shukla, president of the Los Angeles Regional Technology Alliance, said the wireless sector along with IT and Ethernet are the bright spots for local companies hoping for a rebound. “There will always be a technology market and companies are now seeing the potential of these new markets,” he said. The growing popularity of video-equipped cell phones along with personal digital assistants or PDAs as well as laptops with wireless network connections are giving rise to a new wireless market. “Everyone these days is talking wireless and the demand is out there and it’s starting to grow,” said Ryan J. Blair, CEO of Camarillo-based Sky Pipeline Inc., a wireless broadband provider. Still modest demand But even as sales for wireless chips for cell phones, computers and other related equipment is beginning to grow for some local companies, it remains modest for the moment, said Paul Pucino, chief financial officer for communications equipment-maker Tekelec Inc. in Calabasas. “There is steady growth in the overall wireless market, but it’s slow and it continues to grow,” Pucino said. Many experts like Alan Mauldin, an analyst for TeleGeography Inc., said companies are still strapped for cash and many are slow to purchase new technologies just yet. While the wireless industry used to be generally made up of companies which made radio frequency and microwave telecommunications components and equipment in the 1980s, the field has since grown to include cell telephones, wireless laptops and wireless enterprise and broadband networks. These changes helped develop lots of small tech firms while leaving others by the wayside. The growth of these firms has been stymied in part by the slow acceptance of some technologies as well as the ongoing economic downturn. The continued proliferation of internal networks or Ethernet networks in recent years has helped spur growth for many companies, but it wasn’t until recent improvements in speed and programs that allowed greater automation of inventory and supply chain that Ethernet became seen as a growing necessity for small to medium-sized firms, said Butch Barksdale, president of Van Nuys-based IT firm SIA Inc. “People that didn’t have computers now want to get wired into a network,” he said. With new and easy-to-use software, companies are upgrading or expanding their networks to automate the ordering process in anticipation of need, as well as to track products coming in or out while adjusting to seasonal demand, among other things. “It’s too competitive out there to do things the old fashioned way of waiting for shelves to empty before you order. You have to automate and anticipate,” said Dave Jollota, chief operating officer for Quality Logic Inc., a Moorpark-based quality assurance and IT firm. Ethernet growth Growth in that market has helped some local firms improve their battered bottom lines. Perhaps none more so than Camarillo-based Vitesse Semiconductor Corp. which lost $883.5 million last year, but has more than doubled its sales in Ethernet so far this year. Smaller firms like Internet Machines and Ixia have also moved forward with high-end products for the Ethernet market as some of their other segments struggled. Another bright spot for the technology sector is the IT market which is slowly gaining steam thanks largely to the incessant attacks on networks by Internet viruses and worms since the beginning of the year. IT firms are growing at roughly 4 percent locally and nationwide as companies crippled by attacks or simply in fear of new ones are again spending IT dollars to safeguard their networks. All the major IT firms in the Valley say their sales are improving over the last few months, primarily led by concerns over viruses. But other firms are looking to upgrade their systems and networks giving IT providers reason for optimism for continued growth into next year. Calabasas-based National Technical Systems recently announced $1.5 million in contracts with Verizon for service and equipment purchases, while still other local IT firms showed increased overall sales in service and equipment in the past month. Higher priority The shift comes as companies give IT a higher priority than in the past, says Quality Logic’s Jollota. Companies now realize that compromised networks mean lost revenue, said Jollota. But as these shifts take place, local cities have seen their newly built large business parks remain largely empty as the tech boom ended sooner than they expected. Oxnard alone built three large business parks with more than 1 million square feet in the 1990s which is now largely empty. “We can’t just sit and wait for companies to come to us anymore,” said Jim Jevins, economic development consultant for Camarillo. “We’re out there talking to them and dealing with them to get them to come to Camarillo.” While these Tech Corridor cities get little tax money from tech firms, they mostly benefit from the additional spending and sales tax revenue generated by an influx of new workers, Jevins said. Jevins like his colleagues in Thousand Oaks and Oxnard, are no longer targeting large firms to move to the Tech Corridor, but are instead focusing on small firms of less than 100 employees. “You get a few of those and it adds up,” he said. It was just 10 years ago that the area began its boom with technology firms moving into the area in droves. These firms were mostly made up of companies that made telecommunications equipment like power supplies, servers, routers, circuit boards and high-speed chips. Today, the Tech Corridor’s ranks have thinned, as a number of companies have gone by the wayside. Among them were Internet Dynamics, Digital Savant, ACT Networks, Broadband Highway, Layer 2 Networks, Search 1-2-3, Tremor Entertainment and scores of others. But as the technology downturn unwinds, growth will return to the Tech Corridor companies that have managed to survive, say experts. “We’ve seen the bottom,” said Vitesse CEO Lou Tomasetta. “and now we’re looking for the top.”

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