It’s crazy how relevant the fortunes of the personal computer business are becoming to Orange County again.
Not long ago, OC became known as “Broadband Alley,” with Newport Beach-based Conexant Systems Inc. and Broadcom Corp. of Irvine duking it out in a heated rivalry.
Indeed, chips have ruled here for the past few years, ever since the demise of Irvine computer maker AST Research in the 1990s and Advanced Logic Research’s 1997 acquisition by Gateway Inc.
And don’t forget that Japan’s Toshiba Corp. stopped making laptops here a few years back.
Now, after Gateway moved from Poway to Irvine last year, the tie to the PC business has become evident again. Gateway joined another local company tied to PCs, Lake Forest-based disk drive maker Western Digital Corp.
But the PC business never is easy. Now is no exception, according to El Segundo-based market researcher iSuppli Corp., which said once-hot mobile computer sales are slowing.
“Mobile PC growth is decelerating because many companies already have taken the opportunity to migrate numerous users from desktop PCs,” iSuppli said in a recent research note.
The situation isn’t dire. Even though mobile PC sales might be decelerating, they’re still slated to grow by 10% this year,slower than the 21.4% in 2004, but not bad.
Western Digital,long a leader in drives for desktop computers,launched a line of mobile drives last year. The company made mobile drives before, back in the early 1990s. But Western Digital exited the market by 1997 amid competition from IBM Corp. and Toshiba, which made drives for their own portable computers.
These days, “captive” producers,IBM and Toshiba,aren’t the only game in town. Hewlett-Packard Co. and Dell Inc. buy most drives for portable computers now.
In a slim-profit business, margins on mobile disk drives are higher than those for desktop computers, making it appealing to Western Digital.
The more moderate growth projection for mobile PCs is in line with word from Gateway in January. The computer maker said it expects sales for the current quarter will come in below what Wall Street analysts earlier had expected.
The company also said it expects to break even or lose money in the quarter.
Even so, Gateway said it’s seeing stronger sales of computers at stores. Chief Executive Wayne Inouye has made selling via big electronics stores,and closing Gateway’s own stores,a key plank in his turnaround strategy.
Vision Makes UK Buy
Irvine-based Vision Solutions Inc., a maker of software that recovers lost data, recently acquired Britain’s OS Solutions, a maker of software that manages computer disk performance.
OS is a maker of so-called “high availability” software, industry lingo for software that helps to write data to disks more efficiently.
This market “continues to evolve and new requirements have developed to more carefully preserve data, increase performance and maximize system resources while keeping them highly available,” said Nicolaas Vlok, chief executive of Vision Solutions.
Financial details of the deal weren’t disclosed. Vision employs about 150 people in Irvine.
This is the first major move for Vision since the end of a hostile takeover drama last year.
Toronto-based rival DataMirror Corp. dropped its bid last May to buy Vision’s South Africa-based parent, Idion Technology Holdings Ltd., after two years of trying.
DataMirror gave up trying to buy a majority stake in Idion and has sold its shares in the company to South African investor VenFin Ltd. and other institutional buyers. The stock sale ended a drawn-out battle that spanned two continents and got nasty at times.
Broadcom Options
It’s going to be interesting to see how the market responds to new accounting rules requiring companies to expense stock options.
Take Broadcom,in the company’s recent annual report, it noted “the adoption of (those rules) will have a significant impact on our reported results of operations, although it will have no impact on our overall financial position.”
Treating stock options as expenses would have cost some $677 million last year and resulted in a loss, Broadcom said. The chipmaker would have lost about $395 million last year instead of posting a $207 million profit.
The Securities and Exchange Commission is working on rules to govern stock option expensing.
But even a cursory glance at Broadcom’s balance sheet shows a strong company. Cash at the end of the fourth quarter was $858 million, compared to $558 million in the same quarter a year ago.
Cash, of course, is perhaps the most important thing to a company. And for a company such as Broadcom,still heavy with non-cash expenses like goodwill amortization and stock option compensation plans,looking at the cash balance might be a better gauge of its business.
