HARD LANDING
Some Hardware Makers See Modest Rebound After Staff Cuts, Sales Decline
Another year, another decline,but this time with a glimmer of hope.
That’s the case for Orange County’s largest computer hardware makers. The 25 companies on this week’s Business Journal list,ranging from multinationals such as Japan’s Toshiba Corp. to smaller players such as Santa Ana’s I/O Magic Corp.,cut OC employment by 6% to 8,425 jobs this year.
This is the second consecutive year in which OC’s computer industry lost jobs. Some of OC’s largest tech companies saw massive layoffs; others with sizable units here pulled out. Sales at all but eight companies declined.
The tech slowdown, which hit full stride a year ago, spared few. Though OC didn’t bear as much of a blow as other regions in the country, the meek demand for tech products affected the computer memory, personal computer and storage industries here.
Some good news: the hardware industry contracted at a slower pace than last year’s 16% decline. And many of OC’s tech captains are predicting a rebound in sales and local employment in the next year.
This week’s Business Journal list ranks locally based computer hardware makers and companies with operations here by county employment. The list includes makers of computers or ready-to-sell computer components.
The list includes some companies that don’t actually make products in OC but have their regional headquarters here, such as No. 16 KDS USA, a South Korean maker of monitors, laptops and other products that has its U.S. arm in Garden Grove.
Not included are semiconductor makers such as Irvine-based Broadcom Corp. and Newport Beach-based Conexant Systems Inc., which appear on a separate list and faced their own set of challenges in the past year.
Nor does the list capture layoffs by Santa Ana-based Ingram Micro Inc., a distributor of computer products that cut an undisclosed number of workers in the past year.
Ten companies on the list posted job losses, eight added workers and four reported no change. More than half of all the jobs lost came from the top four, which lost 570 people in total. Three companies did not report their employment numbers.
Among OC computer hardware makers that added jobs, most of the gains came from companies in storage and consumer technology such as home networking products.
Once again sitting atop the list is No. 1 Irvine-based Toshiba America Information Systems Inc., which cut its OC headcount by 100 workers. The reduction came as part of Toshiba’s move out of selling business desktop computers to focus on its bread-and-butter laptop business.
A special note on Toshiba: Where most other computer products makers saw sales drop, Toshiba’s revenue was unchanged in the past 12 months.
“We’ve done well,” said Gary Hinricks, director of corporate communications for Toshiba America Information Systems. “When I look at my bonus check, I can say, ‘we’ve done well.'”
The tech industry slump hit OC’s memory makers. No. 2 Fountain Valley-based Kingston Technology Inc., No. 11 Rancho Santa Margarita-based Viking Components Inc. and No. 23 Irvine-based Southland Micro Systems Inc. all cut jobs as they tried to reconcile spending with slower sales. The trio saw computer memory prices fall after a slight uptick earlier in the period.
“It got our hopes up, but we were left at the altar again,” said Stephen Rodriguez, Kingston’s vice president of strategic marketing.
Even so, Kingston continues to expand. The company opened up an office in China and is working to gain market share there.
“There’s no secret we’re expanding our operations in Shanghai,” Rodriguez said. “We only have a limited single-digit market share there and we want a more significant manufacturing presence.”
No. 8 Santa Ana-based SimpleTech Inc. was the lone workforce gainer among memory makers. SimpleTech’s staff grew by 8% after its buy of startup Irvine Networks LLC. Even with the buy, Simple-Tech’s sales declined by half.
Like Toshiba and Kingston in the top two spots, No. 3 Blue Bell, Pa.-based Unisys Corp. held its position. The server and mainframe computer maker cut workers at its Mission Viejo operation, which houses much of the company’s technology research, by 20% or 200 people.
Like other makers of large server and mainframe computers, Unisys saw a drop in demand for its products and its companywide sales fell 16% through March.
A glimmer of light on this year’s list is one that was a black hole in the past: No. 4 Lake Forest-based Western Digital Corp. While the disk drive maker cut its local workforce by 50 people to lower costs, the company increased companywide employment by 25% to 10,000 as sales rose 5% to $2.1 billion. Western Digital bought a Fujitsu Ltd. plant in Thailand.
The company’s past two quarters have been profitable,its first two consecutive profitable quarters in three years.
“The thing that stands out most is turning the whole company profitable,” Western Digital Chief Executive Matt Massengill said in an earlier interview. “Not only the hard drive business,we made new ventures profitable that weren’t profitable.”
The departure of longtime occupant Gateway Inc. is the biggest change to this year’s list. Gateway moved its Lake Forest-based business unit with about 600 workers down to its corporate headquarters to Poway in North San Diego County.
Taking Gateway’s place at No. 5 is Quantum Storage Solutions Group in Irvine, which jumped from the No. 10 spot. The OC operations are a unit of Milpitas-based Quantum Corp. formerly known as Quantum/ATL. Quantum posted a 59% increase in county workers to 531 after the company combined several sales forces here.
OC makers of gear that link data storage devices posted solid gains in employment. No. 7 Aliso Viejo-based QLogic Corp. rose a spot with a 23% increase in headcount. No. 13 Costa Mesa-based Emulex Corp., which just signed a lease for a new 180,000-square-foot headquarters to be built in Costa Mesa, saw a 20% increase in local employment.
While the storage industry contracted in the past year, Emulex and QLogic benefited from a consolidation in the market, analysts say.
“Both Emulex and QLogic are growing faster than the market overall,” said Glen Ingalls, an analyst with SoundView Technology Group Inc. in Old Greewich, Conn.
No. 10 Irvine-based Linksys Group Inc. added more than 100 workers to jump from last year’s No. 15 spot. The seller of networking gear for home and small businesses recently moved across Irvine to a building about four times as big.
Linksys claims a 30% share of retail networking gear sales, said Linksys Chief Executive Victor Tsao. The company’s products are sold at stores such as CompUSA, Radio Shack, Wal-Mart and Staples. The most popular item, Tsao said, is Linksys’ broadband router.
Dropping off the list with Gateway was Canon U.S.A. Inc., which moved some OC operations to its U.S. headquarters in Lake Success, N.Y.
Newcomers to the list include KDS USA with 150 workers in its Garden Grove facility and No. 25 Irvine-based Iogear Inc., which just made the list with 50 workers.
