2000 will go down as a transition year for Orange County’s largest public companies, which saw the heady growth of 1999 start to give way to the economic uncertainty that’s now reigning in 2001.
According to this week’s Business Journal list, the county’s 50 largest public companies posted a modest increase in sales and reported a collective net loss as they saw declining profits and extraordinary charges eat into their performance.
When compared with the 50 largest public companies on last year’s list, this year’s group posted a 5% revenue gain, to $110.7 billion.
“The growth barely beat the inflation rate,” said Kurt Stabel, chief investment officer at Corona del Mar-based Street Asset Management LLC.
The percentage growth is short of the 8% increase the top public companies posted in 1999. Even so, the OC companies set a new revenue record in 2000, posting the highest aggregate sales figure in the 11-year history of the Business Journal list. The list ranks the largest companies by sales for the most recent four quarters ended on or nearest Dec. 31.
The public companies fared better when their 2000 numbers are compared with their own year-ago figures, as opposed to those of the companies on last year’s list. This year’s group posted an 8% increase in sales vs. their own year-ago numbers.
The 50 companies on the list had an aggregate loss of $580 million, largely due to $746 million in special charges at No. 2 Orange-based Bergen Brunswig Corp., and to red ink at a handful of technology companies. In the year-ago period, the companies on this year’s list had a profit of $1.8 billion, while the top 50 companies on last year’s list reported $2 billion in profits.
Seven companies on this year’s list reported 2000 losses of more than $100 million each. Of those, five were technology companies, including No. 7 Newport Beach-based Conexant Systems Inc., No. 22 Irvine-based eMachines Inc. and No. 19 Aliso Viejo-based buy.com Inc.
Some of the biggest companies on the list saw sales slip last year. Among them: No. 4 Aliso Viejo-based Fluor Corp., No. 8 Lake Forest-based Western Digital Corp., No. 5 Irvine-based First American Corp. and No. 10 Anaheim-based CKE Restaurants Inc.
“OC companies are much smaller,” Stable said. “Nationally, smaller companies were hurt first last year, and that was transferred to larger companies.”
(In coming weeks, the Business Journal will follow this week’s list with two more, capturing the next 100 public companies based here.)
While the economic slowdown really started to bite in the first quarter, OC companies have been facing a squeeze since the middle of 2000. Eleven companies on the list posted drops in sales last year, while 13 companies suffered losses.
As sales growth declined and losses increased, some companies have trimmed workers or held the line on hiring in the past 12 months. The top public companies employed 40,801 people in OC,up 7% from their own numbers a year ago but virtually flat when compared with the number employed by the companies on last year’s list, which counted 40,530 OC workers in 1999.
This year’s list counts four newcomers: No. 18 Irvine-based Intersil Holdings Corp., a chip maker that moved to OC from Palm Bay, Fla., last year; No. 27 Anaheim-based DDi Corp., a contract electronics maker that went public a year ago; No. 32 Orange-based Sybron Dental Specialties Inc., a dental products maker that was spun off in November; and No. 40 Santa Ana-based Simple Technology Inc., a memory products maker that went public in the fall.
Three other companies grew into the top 50: No. 44 Irvine-based Newport Corp., a maker of production equipment for chips and networking gear that saw 2000 sales increase 75% to $253 million; No. 46 Costa Mesa-based Emulex Corp., a maker of computer adapters and hubs that saw 2000 sales surge 101% to $204 million; and No. 48 Santa Ana-based Corinthian Colleges Inc., a for-profit college operator that saw sales grow 35% to $202.5 million last year.
Some of the companies missing from the list are last year’s No. 29 Wynn’s International Inc. and No. 41 Irvine-based PairGain Technologies Inc. Both were acquired.
Irvine solidified its standing as OC’s top corporate address. It is home to 18 of the companies on the list, up from 17 in 1999. Newport Beach again ranked second, with eight headquarters, down from nine last year. Aliso Viejo, which was home to five companies on last year’s list, had four corporate headquarters this year. Costa Mesa had four big public companies, the same as last year. Anaheim had four, up from two in 1999. Overall, South County, including Newport Beach, is home to 31 companies, while 18 companies have their bases in North County cities.
While technology companies had a tough year, they still were among the fastest-growing companies here. Conexant Systems grew sales 21% to $2 billion last year, which moved the company from a No. 10 ranking in 1999 to No. 7. Irvine-based Broadcom Corp. posted a 117% growth in sales to $1.1 billion, taking the company from No. 25 to No. 14, the biggest jump on the list. Newcomer Intersil had a 38% surge in sales to $797 million, while buy.com managed a 32% gain to $787 million.
“While 2000 was good for some companies, it will be a challenge for those companies to maintain the growth rate,” Street Asset’s Stable said.
Computer product distributor Ingram Micro Inc. of Santa Ana repeated as the county’s biggest public company by sales, registering $30.7 billion in 2000 revenue, a 9% increase from 1999 and a comfortable $7 billion cushion over the next-largest company, Bergen Brunswig. Ingram also posted a 24% gain in profits, which hit $226 million.
Also maintaining its ranking was No. 2 Bergen Brunswig, which saw sales increase 5% to $23.2 billion. This could be Bergen’s last appearance on the list, as the drug distributor is set to be acquired by AmeriSource Health Corp. of Valley Forge, Pa., pending regulatory approval.
No. 4 Fluor Corp. of Aliso Viejo dropped a notch after selling off a unit and seeing sales fall 12% to $9.97 billion. In 1999, the company’s revenue also was down, by 11% to $12 billion. PacifiCare Health Systems Inc. of Santa Ana rose a spot to displace Fluor.
Irvine-based title insurer Fidelity National Financial Inc. dropped a notch to No. 6, replaced in the No.5 spot by rival First American.
The 15 largest companies all count annual sales of $1 billion or more. Last year, 13 companies had sales of more than $1 billion.
If 2000 was a transition year for OC public companies, 2001 is shaping up to be a trying one. Last year, the companies weren’t able to post profits on higher sales, albeit sales that grew at a slower pace. The challenge for many companies this year will be to grow sales and make money against a slow-growth backdrop.
“I don’t see how sales are going to grow when people are predicting marginal gain in the GDP,” Stable said. “I would be surprised to see a 5% top-line growth for companies.” n
