OC Software Makers See Growth Slow as Economy Starts to Bite
Where software makers boosted business last year because of the market, if they do it again this year it’ll be despite the market.
In the past year through March, Orange County’s 15 largest software makers together boosted revenue by 11% to nearly $1.7 billion, up from $1.6 billion in the year-ago period, according to this week’s Business Journal list.
The sales gain came despite a tough time for technology,a year that brought double-digit declines in other industries. And OC’s software makers saw their sales growth rate decline from last year’s 33% clip.
The slower growth is a testament to the overall sluggish economy that has hit nearly every portion of the tech sector. Where only two companies posted decreases in revenue on last year’s list, six companies,including No. 2 Epicor Software Corp.,posted sales declines this year.
The nine other companies on this year’s list showed sales increases,ranging from a meager 2% at No. 10 Quality Systems Inc. of Tustin to 65% at No. 3 Irvine-based Quest Software Corp.
But overall, nearly every company posted lower growth rates than last year. Local employment at companies climbed 2% to 4,102 people, while overall growth in the group stayed flat at 9,822 people.
This year’s list includes a new kid on the block. Industrial design software maker MSC.Software Corp. moved its headquarters from Los Angeles to Santa Ana. Irvine-based Continuous Software Corp., which had ranked No. 11 last year, is off after being acquired by Sweden’s Telelogic AB.
The list includes OC-based software companies and units of other companies that are based locally. The software companies are ranked by sales, or in the case of subsidiaries, by OC revenue.
Costa Mesa-based FileNET Corp. extends its reign as OC’s No. 1 software maker this year after posting $389.8 million in annual sales through March, a 9% gain from the year-ago period.
But this year is shaping up to be tough for FileNET, a maker of document management and other business software. In April, the company said it is laying off 190 workers, or 10% of its workforce, including up to 80 in OC after some big customers put off orders.
Behind FileNET is Irvine-based Epicor Software, a maker of accounting and other business applications, which saw sales decline some 16% to $210 million in the 12-month period. The company sold off a division and has grappled with fewer customer orders.
Epicor recently reduced its revenue forecast for 2001 and now expects sales for the year to decrease around 14% from 2000. The company says it still expects to make a profit in the fourth quarter.
Struggling Epicor just beat out Quest Software for the No. 2 spot. The maker of database management software saw sales hit $199.7 million in the 12-month period, up from $121.1 million a year ago.
The company, which makes software that helps manage big corporate databases, recently came out with products that work with Microsoft Corp. and IBM Corp. databases, which boosted sales.
Still, the company has issued cautionary statements that Oracle Corp.,which makes databases for a majority of Quest’s customers,has started to offer its own management software.
In a recent filing with the Securities and Exchange Commission, Quest said it expects increased “competitive pressures” from Oracle.
“We believe that Oracle will continue to incorporate database management technology into its server software offerings, possibly at no additional cost to its users,” the company said.
MSC.Software, which long has had operations in Costa Mesa, debuts at No. 4. The company saw revenue grow 19% to $178 million in the 12-month period. The company, which grew OC employment by 8% to 325, has said it could augment its ranks by another 20% this year.
Nipping at MSC’s heels is Wonderware Corp., a unit of Britain’s Invensys PLC, with $156.2 million in sales for the period,a 49% increase from the $104.9 million posted a year ago.
Wonderware has been working to control costs since January when executives announced a restructuring. Under the plan, the maker of industrial simulation software reduced its total workforce by about 20%. The company also completed two acquisitions in the past year. Wonderware’s OC employment was off 36% to 255 people.
Irvine PC and videogame maker Interplay Entertainment Corp., which came in at No. 7 on this year’s list, has said it is in talks to be acquired, but has yet to reach an agreement. The company has seen declining sales in the past two years. In 2001, Interplay’s sales dropped by nearly 3% to $103.8 million,a shade better than last year’s 8% decline.
No. 11 MAI Systems Corp. of Irvine and No. 14 CAM Commerce Solutions Inc. of Fountain Valley both posted declining revenue despite increasing employment. For its part, MAI Systems, a maker of software for hotels and resorts, watched its sales decline 25% to $36.8 million as it increased OC employment by 4% to 135 people. MAI’s overall employment grew by 12% to 190.
CAM Commerce, which makes retail and e-commerce software, posted a 29% decline in sales to $19.7 million despite upping its OC employment by 27% to 140 people. Companywide employment at CAM Commerce was flat at 200 people. n
