No. 6 – BROADCOM CORP.
Headquarters: 5300 California Ave., Irvine
Employees: 7,407; 2,021 in OC
Business: chipmaker
Market value as of April 1: $16.4 billion
2009 revenue: $4.49 billion, down 4%
2009 net income: $65 million, down 70%
Year in review: Broadcom emerged from the chip downturn, the worst since 2001, relatively unscathed.
2009 sales were off 4% from a year earlier. Net income took a 70% hit.
The company, which makes chips for computers, networking gear and consumer electronics, finished the year relatively strong-ly as demand began to recover and companies began to replenish chip stockpiles.
Last year, Broadcom made inroads and began slow and steady production on chips for cell phones called baseband chips.
The company is starting to see revenue from its 2008 design wins with the two top cell phone makers, No. 1 Nokia Corp. and No. 2 Samsung Group.
Broadcom has continued to make small buys and strategic investments. It paid $123 million for Petaluma’s Teknovus Inc. in February and $178 million for Silicon Valley’s Dune Networks Inc. in December.
The company also took part in $25 million funding of San Jose chipmaker Tilera Corp. last month.
Last summer, Broadcom made a hostile $912 million bid for Costa Mesa’s Emulex Corp., a maker of electronics for data storage networks, and was rebuffed after an extended negotiation.
What’s ahead: Chief Executive Scott McGregor is bullish on Broadcom’s growth prospects. He said last month he expects the company to surpass the chip industry’s sales growth—estimated at 15% to 25%—this year on strong consumer demand for cell phones and TVs.
The company will continue to pump out more combo chips, which pack multiple functions into one chip, and maintain its dominant share for a chip that has Bluetooth, wireless networking connectivity and FM radio abilities for cell phones and smartphones.
Expect Broadcom to benefit by having the high-end chips in Apple Inc.’s latest toy—the iPad. Craig Berger, an analyst at FBR Capital Markets LLC, estimates that some 50 million Broadcom chips will be sold to Apple this year.
The chipmaker is slowly emerging from the long shadow of its founders’ legal issues with stock options backdating, as former finance chief Bill Ruehle and cofounders Henry Samueli and Henry Nicholas saw the securities fraud charges against them thrown out in December. Nicholas saw unrelated drug charges against him dropped. The justice department is weighing an appeal of dismissals of the options cases.
Wall Street’s take: Investors are bullish on Broadcom—shares are up 65% in the past 12 months on a recent market value of $16.4 billion.
Last month Goldman Sachs & Co. analyst James Schneider upgraded the company’s stock to “buy” from “neutral” and raised his stock price target to $40 per share, up from a previous target of $32.
Schneider said he sees Broadcom growing market share for cell phones chips by more than 13% by the end of 2011, up from about a 3% or 4% share in the fourth quarter of last year.
Analyst Berger sees Broadcom’s Ethernet networking chips selling better this year as companies resume spending on technology.
Strong Asian demand for PCs should also help Broadcom’s sales.
—Sarah Tolkoff
No. 7 – BECKMAN COULTER INC.
Headquarters: 5300 N. Kraemer Blvd., Brea
Employees: 12,400; 1,700 in OC
Business: Medical testing, research products maker
Market value as of April 1: $4.4 billion
2009 revenue: $3.3 billion, up 6%
2009 net income: $147 million, down 24%
Year in review: Beckman Coulter Inc. wrapped up its $780 million deal for the medical diagnostic unit of Japan’s Olympus Corp. last August, giving it more market share in Europe against competitors Siemens AG of Germany and Roche Diagnostics, a unit of Switzerland’s Roche Holding Ltd.
Beckman pulled off financing for the deal by reworking and expanding a credit line and selling bonds in the wake of the financial meltdown. It did so without a downgrade to its investment-grade credit rating.
The company also completed a move from its longtime home in Fullerton to neighboring Brea as part of a consolidation.
Beckman, which makes instruments used by hospitals and laboratories to run tests for doctors, sees more than 75% of its revenue from reagents and other supplies used on its testing instruments that need to be frequently replenished. Beckman also makes money from leasing testing machines to customers.
What’s ahead: Beckman said in February that it expected a 2010 profit of $313.7 million to $324.4 million, in line on the higher end with analysts’ expectations of $320.9 million. It projected sales of $3.8 billion to $3.9 billion, exceeding Wall Street’s projection of $3.78 billion.
On a recent conference call, Chief Executive Scott Garrett said that Beckman would be introducing products that should improve its instrument sales.
In the past, Garrett has said that Beckman could benefit from healthcare reform because its hospital customers would gain patients with health insurance, which covers most medical testing.
Wall Street’s take: Beckman’s shares have been strong and steady. They are up about 25% in the past year with a recent market value of $4.4 billion, despite a stumble in late March.
Shares fell after the company said issues with a profitable heart test could affect its 2010 financial results.
The company said that it expected to limit the heart tests on some machines.
Beckman is planning to issue updated guidance in view of the testing matter in April, it said.
Analyst Isaac Ro of Leerink Swann, a Boston-based investment bank, has a “market perform” rating on Beckman, as earnings could be muted by reinvestment and the integration of Olympus, as well as ongoing issues with hospital spending.
—Vita Reed
No. 8 – QUIKSILVER INC.
Headquarters: 15202 Graham St., Huntington Beach
Employees: 7,650; 850 in OC
Business: clothing maker
Market value as of April 1: $667 million
Revenue for 12 months ended Jan. 31: $1.98 billion, down 12%
Loss for 12 months ended Jan. 31: $2.7 million, versus loss of $398 million
Year in review: Quiksilver spent 2009 reworking its crippling debt and waiting out the worst downturn for surf-inspired clothing makers in recent memory.
In late 2008, Quiksilver unloaded struggling ski maker Rossignol in a $50 million fire sale to Australia’s Macquarie Group Ltd.
and Rye, N.Y.-based Jarden Corp. The company was left with about $1 billion in debt, much of it from its 2005 buy of Rossignol for $560 million, an acquisition Chief Executive Bob McKnight called “a mistake.”
He led a series of life-saving financial deals last year, including a $150 million, five-year loan from France’s Rhône Group LLC and reworking European and U.S. debt. The Rhône deal includes $25.6 million in warrants allowing it to buy 20% of Quiksilver.
The company cut about 300 jobs last year, bringing its total layoffs to 700 in the past two years. By the end of 2009, Quiksilver reported better-than-expected quarterly results—including a profit—giving hope to some on Wall Street that the worst is behind it.
What’s ahead: Quiksilver faces an improving but competitive market for clothes inspired by surfing, skateboarding and snowboarding.
There’s some indication shoppers are returning to action sports clothes, which were abandoned during the recession for urban, gothic and trendy and cheap clothes known as fast fashion. But much of the sector’s early bounce may be going to hipper rivals such as Costa Mesa-based Volcom Inc.
Quiksilver also faces a bigger challenge in clothes for teen girls and young woman, a segment hit hard by the fast fashion trend. Quiksilver has made subtle tweaks but hasn’t chased trends. Instead, it’s waiting for tastes to come back its way. Whether that happens in earnest this year or next is the question. Sales seen falling 5% this year, better than last year’s 12% drop.
Wall Street’s take: Quiksilver’s shares have seen runup as a back-from-the-dead play. They’re up some 300% in the past 12 months to a market value of about $667 million. Investors drove up Quiksilver further in March after solid quarterly results and an outlook for the current quarter in line with expectations. Some still are cautious. Quiksilver has heavy long-term debt and faces tough competition, according to Mitch Kummetz of Robert W. Baird & Co. He has a “neutral” rating on the company’s stock. Another, Claire Gallacher of Capstone Investments, calls Quiksilver a “buy” on signs of improving sales at stores.
—Michael Lyster
No. 9 – SUN HEALTHCARE GROUP INC.
Headquarters: 18331 Von Karman Ave., Suite 400, Irvine
Employees: 35,876; 189 in OC
Business: Nursing home operator
Market value as of April 1: $425 million
2009 revenue: $1.8 billion, up 3%
2009 net income: $38.7 million, down 65%
Year in review: Sun continued to operate in a quiet fashion in 2009, not making any major deals except for acquiring Allegiance Hospice Group Inc., a small hospice company in New England, in October for an undisclosed sum.
Also in October, the Justice Department said a pair of Sun business units, Harborside Healthcare and HHC Nutrition Services, agreed to pay $1.4 million to resolve charges of taking kickbacks from a supplier. The department alleged that Harborside, which Sun bought in 2007, took kickbacks from San Francisco-based McKesson Corp. and affiliate MediNet in exchange for Harborside purchasing medical equipment from them.
What’s ahead: Sun has said it expects its 2010 profit to come in at $40.5 million to $43.2 million and revenue to come in at $1.93 billion to $1.95 billion, based on the assumption that there would not be a Medicaid rate increase.
Analysts expect Sun to make $41.9 million on revenue of $1.9 billion this year.
Sun and its competitors, for now, have also seemed to emerge untouched by newly enacted healthcare reform when it comes to how they get paid, although they will face more regulations.
And analysts who follow the sector expect that Sun and other nursing home companies could face challenges from a pending Medicare overhaul.
Wall Street’s take: Sun shares are up about 19% during the past 12 months in what’s been considered a fickle market for nursing homes.
Susquehanna Financial Group, based in suburban Philadelphia, initiated coverage on Sun in late March with a “neutral” rating. In a report, the firm was cautious, saying that the nursing home sector “faces significant headwinds. States are struggling financially in the face of the economic downturn, which is pressuring Medicaid reimbursement. Further, Medicare implemented a modest price cut for fiscal 2010.”
—Vita Reed
No. 10 – CORINTHIAN COLLEGES INC.
Headquarters: 6 Hutton Centre Drive, Suite 400, Santa Ana
Employees: 15,000, 750 in OC
Business: vocational school operator
Market value as of April 1: $1.7 billion
Revenue for 12 months ended Dec. 31: $1.5 billion, up 29.3%
Net income for 12 months ended Dec. 31: $120 million, up 279%
Year in review: Corinthian Colleges Inc. saw record growth in 2009, spurred by the unemployed looking to boost their education.
For the three months ended December, Corinthian saw revenue rise 30% from a year earlier to $414.3 million.
Net income was $39.4 million, up 160%.
The number of students at its schools rose 22% to 93,152.
“The recession has helped increase our growth momentum,” said Chief Executive Peter Waller.
Corinthian runs more than 100 campuses in the U.S. and Canada offering degrees in healthcare, criminal justice and other areas. Last year it completed a $365 million acquisition of San Francisco-based Heald Capital LLC, parent company of Heald College, after clearing antitrust hurdles at the beginning of the year.
The company also recently saw some shuffling among its top executives. Peter Waller, former president and chief operating officer, took the reins from former chief executive Jack Massimino, who’s now executive chairman.
What’s ahead: With national employment hovering around 10%, Corinthian expects to add students, especially for online classes.
The company has worked to cap enrollment in certain cities, where students will have fewer op-portunities for success on the employment front.
For the March quarter, Corinthian forecasts revenue at $470 million to $480 million, a 36% to 38% increase compared to a year earlier.
Wall Street’s take: Analysts predict further growth for the debt-light Corinthian.
“(Quarterly) results beat our estimates as persistence and revenue per enrollment were higher than expected,” said Andrew Fones, an analyst with Switzerland’s UBS AG.
Some expect the education stocks to start to cool as Congress debates regulations proposed by Department of Education.
If the rules are passed, Corinthian students could lose access to federal education loans.
—Michael Volpe
