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CORRIDOR—101 Tech Firms Set Fast 50 Pace

Tech firms from the 101 Technology Corridor again dominate Deloitte & Touche’s annual list of fastest growing technology firms in the five-county Los Angeles area. The ranking of the Los Angeles area’s top 50 won’t be known until the personnel services firm holds its annual awards dinner in September at the Skirball Center. But firms from the Valley and the 101 Corridor make up 26 of the 50 finalists, many of which continued to grow last year despite the downturn in the tech sector. The key to avoiding all the pitfalls of some of their competitors, the firms say, has been having a larger number of clients rather than relying on a very few large ones and a focus on customers in California and Asia, whose economies have not been hit as hard as others. The list is one of 22 Deloitte & Touche uses to highlight the fastest growing technology firms in the U.S. To qualify, companies must have been in business for a minimum of five years, not be a subsidiary or division, and have 1996 revenues of at least $50,000 and 2000 revenues of $1 million or more. Last year’s No. 1 entry, Calabasas-based Digital Insight Corp., figures to make another bid for the top spot by more than doubling its revenue from a year ago. In 2000, Digital Insight reported a net loss of $60 million on revenue of $54.4 million, compared to a 1996 net loss of $700,000 on revenue of $1.6 million. “We have a diverse client base and our orders have remained steady,” said Kevin McDonnell, CFO for Digital Insight. Like other area firms in the Fast 50, Digital Insight has sustained its growth because many of its customers are in California where the tech downturn Silicon Valley notwithstanding has not been as drastic as in other parts of the country, he said. Gary Dickey, a partner in Deloitte & Touche’s Technology and Communications Group, said this year’s group of nominees shows how companies can continue to grow despite a slowing economy. “It says that in difficult economic times, these companies have continued to exhibit entrepreneurial expertise, energy and talent,” Dickey said. Which is not to say the companies on Deloitte & Touche’s list have not been affected by the economy. Dickey said the highest rated companies have growth rates that are much lower than those of a year ago. Revenue for Camarillo-based Interlink Electronics Inc., ranked 41 last year, for instance, grew by 21.4 percent from 1998 to 1999, but slowed to 17.2 percent between 1999 and 2000. Newbury Park-based Semtech Corp., ranked 31 last year, saw a slight decline in its revenue growth, from 34.2 percent in 1999 to 32.3 percent in 2000. Thousand Oaks-based Xircom Inc., ranked 33 in last year’s list, also saw a decline in revenue growth, from 34.8 percent in 1999 to 14.5 percent in 2000. “The slowest-growing company on the list last year had a percentage that is a little higher than it is this year,” Dickey said. Westlake Village-based semiconductor-maker Diodes Inc. is also among the finalists, in its first year on the list. Diodes’ revenue grew to $118.5 million from $56 million in 1996 for a 63-percent revenue increase. C.H. Chen, president and CEO of Diodes, said the company’s inclusion on the list proves it is becoming an institution in the tech industry. Chen said the company has continued to grow despite the downturn in the semiconductor industry due to its strong relationships with customers and through its acquisitions. Last year, the company acquired a factory in Kansas City and increased its sales in Asia. Others making the list were Thousand Oaks-based biotech giant Amgen Inc., Calabasas-based Tekelec and Calabasas Hills-based THQ Inc., all of which showed sharp growth over the past five years. Semiconductor and electronics manufacturers dominated the list. Semiconductor maker Semtech, for instance, is among the fastest growing firms, with its 2000 revenue of $256.7 million up from $173.8 million a year earlier. The company’s transition from a military vendor to a developer of high tech communications software and equipment for high tech firms in California and Asia is the key to its growth, said Jack Poe, chairman and CEO of Semtech. The company’s focus on semiconductors used in popular consumer products like computers and cellular phones, along with test equipment and medical devices, has pushed its revenues higher, Poe said. Analysts say too many semiconductor firms focusing on telecom firms building broadband networks took a hard hit when the bottom fell out of broadband and telecom markets last year. Likewise, remote control and mouse-maker Interlink has kept up its growth through strong sales in a niche market. The company has increased its revenue from $13.5 million in 1996 to $33.9 million in 2000, much of it due to strong sales in Asia which provided about half of its revenue. Interlink CEO Michael Thoben III credits his company’s ability to consistently expand its product line, ranging from computer mice and cable TV set top boxes to electronic signature-capturing devices and computer touch pads. The company’s customers, about half of which are in Asia, also include Sony, NEC and Toshiba. Camarillo-based Power-One Inc., a maker of power supplies like AC/DC converters and voltage power switchers for PCs and other electronics, is also among the Fast 50 finalists, jumping to $511 million in sales last year from $75.4 million in 1996. But Andrew Huang, an analyst with CIBC World Markets Inc., said Power-One’s growth stemmed from the boom of the telecommunications business. But this year as its largest customers, Cisco Systems Inc., Nortel Networks Inc. and Nokia Inc. cut back, Power-One’s sales have dropped too and continue to decline. Last quarter, for the first time in three years, the company posted a net loss $80 million, due in part to a $110 million restructuring charge, which included an $85 million write-down for devalued inventory. Alberta E. Hultman, executive director of the Los Angeles/Santa Barbara Council of the American Electronics Association, insisted many area firms have continued to grow despite the economic downturn but not all of them. “These are companies that have solid, innovative products that keep them in the forefront of that sector,” she said. “Last year was a good year still for some companies, but I don’t think that’s going to happen again this year.”

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