Mild growth for some, contraction for others. All the while, more consolidation.
That’s how 2005 is shaping up for local technology companies, which stand to feel the tug of industry trends in the coming year.
“Beneath the surface of an almost boringly moderate (overall technology) growth rate of 6%, 2005 will be a year of enormous turbulence with lots of consolidation and realignment in many sectors,” said Frank Gens, senior vice president of research at market tracker International Data Corp.
Aliso Viejo-based Quest Software Inc., one of the county’s larger software makers, is emblematic of trends on tap for next year.
The company expects to “continue to motor along and meet and exceed the expectations we’ve set with Wall Street,” said Chief Executive Vincent “Vinny” Smith.
At the same time, Quest, a maker of database management software, inevitably will pop up as a speculated takeover target in the wake of Oracle Corp.’s bid for PeopleSoft Inc.
The company long has been seen as ripe for a buyout. Smith, who holds a sizable stake of Quest stock, said he’s intent on going it alone.
For computer makers and their suppliers, PC sales could grow 9% next year, according to a report from Morgan Stanley.
The investment bank recently lowered its growth forecast from 11%.
The computer sector also could be in for consolidation, according to market tracker Gartner Inc., which sees three of the top 10 computer makers exiting by 2007.
That includes IBM Corp., which is selling its PC unit to China’s Lenoro Group Ltd.
Irvine-based Gateway Inc. could survive with cost-cutting efforts and a focus on low-price models.
Chipmakers stand to see a reversal of fortune next year. After projected sales growth of 30% for this year, they could see a 5.5% drop in business next year, according to Phoenix-based Semico Research Corp.
The San Jose-based Semiconductor Industry Association sees sales coming in flat next year.
Slower consumer electronics sales could be a drag on chipmakers.
And many still are wrestling with a sales slowdown that started a few months back.
Company to watch: Jazz Semiconductor
Waiting is the hardest part,at least if you’re Jazz Semiconductor Inc.
The contract maker of chips, formerly part of Conexant Systems Inc., has been waiting all year to sell shares to the public.
But, so far, no offering.
The delay isn’t surprising. Since Jazz’s January filing of plans to go public, three customers,Conexant, Mindspeed Technologies Inc. and RF Micro Devices Inc.,have warned of slower business and crimped profits or losses.
Look for a Jazz offering sometime early next year.
As originally billed, Jazz’s stock sale was projected to draw as much as $150 million, netting millions for Washington, D.C.-based The Carlyle Group, the company’s largest shareholder at 47%. Conexant is Jazz’s next biggest owner at 38%.
,Andrew Simons
PERSON to watch: Scott McGregor
Scott McGregor hasn’t even arrived yet and he’s already casting a shadow here.
McGregor, chief executive of Philips Semiconductors, is set to take over running Irvine chipmaker Broadcom Corp. next month.
He replaces Alan “Lanny” Ross, who himself replaced cofounder Henry “Nick” Nicholas in early 2003.
McGregor is inheriting a company that isn’t “broken, dented or weak,” according to Ross.
But he’ll face his share of challenges.
For the past few months, Broadcom has been grappling with a downturn in demand for its chips in servers and satellite TV boxes.
McGregor knows the feeling: two days after announcing his exit from Phillips in September, he cut the unit’s third-quarter sales forecast.
For server chips, Broadcom has lost out to Intel Corp. and now is focusing on chips for Advanced Micro Devices Inc.’s Opteron processor.
McGregor’s background is in software. Before joining the chip arm of Netherlands-based Royal Philips Electronics NV, he was senior vice president and general manager at server software maker Santa Cruz Operation Inc. and worked at Xerox Corp.’s Palo Alto Research Center and at Microsoft Corp.
,Andrew Simons
