Shopping carts loaded with gadgets speak volumes about technology’s outlook for 2007: holiday gifts could bring tidings of great joy throughout the New Year for local companies.
Computers, portable music players and other devices are expected to keep up the record sales pace of the past couple of years, growing 7% to $150 billion in 2007, according to the Arlington, Va.-based Consumer Electronics Association.
Consumer electronics have led the way for local chipmakers and others as computer sales have been more modest in recent years. But 2007 could see gains for both, with Microsoft Corp.’s recent release of its Vista operating system helping computer sales.
Global technology spending could grow by 6.6% in 2007, according to market researcher International Data Corp.
“There’s every reason to believe it’ll be a better year for PCs,” said UBS analyst Alex Gauna, who follows Irvine’s Broadcom Corp.
More sales of computers and consumer electronics means more demand for chips. Global chip sales are forecasted to reach $273.8 billion in 2007, a roughly 10% rise from 2006, according to San Jose-based Semiconductor Industry Association.
“In baseball you can’t get more than one home run with one hit, but in the stock market you can and in business you can,” Broadcom Chief Executive Scott McGregor said at the recent Lehman Brothers Global Technology Conference in San Francisco.
Broadcom, which has chips in iPods, wireless phones and other devices, is looking for more of the same in 2007: the continued meshing of computers and consumer electronics.
“We want to bring all of this together and allow devices to intermix all of these different kinds of technology to allow people to get access to information of all forms,voice, data, video,and be connected at home, at work and on the go,” McGregor said.
Analysts expect Broadcom, the county’s largest chipmaker, to grow sales by about 10% to $4 billion next year.
Santa Ana-based Ingram Micro Inc., the largest distributor of technology products, is looking for continued growth from consumer electronics, including home entertainment, broadband Internet connections at home and wireless networking.
“The consumer market is going to become of increasing importance to us,” Chief Executive Gregory Spierkel said in a recent conference call. “Even in the past number of quarters, our retail segment actually has been a faster growing segment than the overall average. So I think we’re very well positioned, not just in the coming quarters, but probably over the next many number of quarters there.”
Another 2006 hangover: options.
Local companies are set to be dealing with the issue of stock option grants and whether they were timed for instant gains.
Broadcom faces a potential $1.5 billion in costs to account for stock option grants in the past few years. The company’s probe into the matter continues, with January deadlines from Nasdaq and the Securities and Exchange Commission.
Others dealing with options include Western Digital Corp., the Lake Forest disk drive maker, and Aliso Viejo-based Quest Software Inc.
_________________________________________________________
PERSON TO WATCH: JIM McCLUNEY
For Emulex Corp.’s new boss Jim McCluney, 2007 will be all about realizing potential the company didn’t live up to this year.
Revenue for the three months ended Oct. 1 fell 2% from a year earlier. In the same quarter in 2005, Costa Mesa-based Emulex’s sales grew 43% annually.
Analysts are looking for a rebound, with projected sales growth of 7% this quarter and 32% the following quarter.
After being promoted in September, McCluney starts his first full year in the job with plans to build on two key 2006 acquisitions,Sierra Logic Inc. and Aarohi Communications Inc., both of the Bay area. Emulex, a maker of electronics for storage networks, is entering a potential $800 million market with the acquisitions.
McCluney needs to diversify, said analyst Tam Dell’Oro, president of the Dell’Oro Group in Redwood City. Half of sales of the company’s main product,host bus adapters for linking computers on storage networks,come from EMC Corp. and IBM Corp., she said.
As Emulex’s president and chief operating officer, Mc-
Cluney helped negotiate the recent acquisitions. He’s positioned to add more companies. As of Oct. 1, Emulex had more than $635 million in cash and investments.
McCluney also has big shoes to fill. His predecessor, Paul Folino, now executive chairman, is one of the biggest names in technology here, as well as in politics and philanthropy.
,Dan Anderson
_________________________________________________________
COMPANY TO WATCH: GATEWAY INC.
Irvine computer maker Gateway Inc. goes into 2007 with a new chief executive, profits and growing sales through stores.
But looking over its shoulder are anxious investors. Hanging over its head are nagging questions about whether there’s still room for Gateway in the PC business.
Gateway recently skirted a potential proxy showdown in 2007 by expanding its board to include a dissident investor and an independent director to be named in March.
Chief Executive J. Edward Coleman starts his first full year at the company after joining in September. He replaced Chairman Rick Snyder, who filled in as chief executive since February, when Wayne Inouye left.
Coleman’s challenge: boost Gateway’s sagging business selling directly to businesses, schools and consumers.
“We have much work ahead of us to improve our execution and efficiency, leverage the Gateway brand and position the company so that Gateway lives up to its full potential,” Coleman said.
Then there’s the prospect of an acquisition. Earlier this year, Gateway’s board turned down a $450 million buyout offer of its retail business from Orange County businessman Lap Shun “John” Hui, who also offered to buy all of the company.
Some industry watchers speculate Gateway could be a target of Taiwan’s
Acer Inc. or China’s Legend Group Holdings as a way to boost its business here.
,Dan Anderson
