‘Resurrection’ Projected for Sector in 2004
By ANDREW SIMONS
Technology companies are looking to swim a couple of laps in 2004 after wading into the recovery pool in the past year.
2004 stands to be the first year the technology rebound gets into full swing, according to industry watchers. But don’t be looking for a return to the late 1990s. After the severe downturn of the past few years, caution is set to reign.
“A ‘tech resurrection’ will occur in 2004, as worldwide spending returns to solid positive growth,” according to a report from market researcher International Data Corp. “But the industry emerging from the market downturn of the past three years will not resemble the industry of the past 30 years.”
Among the predictions for 2004:
n Businesses that put off technology spending will be forced to upgrade. Spending by businesses on networking gear and other technology could grow 5.4% to $2.4 trillion in 2004, according to market tracker Gartner Inc.
n Consumers, in a recovery mood, likely will throw down money for gadgets.
n Innovations,such as wireless networking,could flourish, including more public places where people can connect to the Internet via laptops and other portable devices.
n Outsourced technology services increasingly will be handled by offshore contractors. The value of technology services provided to U.S. businesses from offshore could double to $16 billion next year and triple again to $46 billion by 2007, according to IDC.
Next year’s recovery stands to play out in chips.
Semiconductor sales are seen rising 19.4% to $194.6 billion next year, according to recent figures from the San Jose-based Semiconductor Industry Association.
The prediction bodes well for OC chipmakers, most notably Irvine-based Broadcom Corp. The chipmaker has indicated its interest in making a big acquisition,possibly large enough to double its size. Broadcom also is due to make a decision on its chief executive search, which has been under way for a year.
Look for more possible chip deals,especially among companies that once were part of Newport Beach-based Conexant Systems Inc.
Watch Jazz Semiconductor Inc., the Newport Beach-based chip making plant that once belonged to Conexant. The company, owned by Conexant and majority shareholder The Carlyle Group of Washington, D.C., is set go public in 2004. The public offering could be a big one.
Personal computer sales should keep rising in 2004. In the third quarter alone, worldwide sales jumped 40% from the year earlier, according to IDC. Consumers and business are buying more portable computers, which could bode well for Irvine-based Toshiba America Information Systems Inc., a computer maker that’s part of Japan’s Toshiba Corp.
Look for OC software makers to do well in the coming year, too. Irvine-based Quest Software Inc. is coming off solid third-quarter results in which pro forma net income was up 43% from a year earlier to $6.3 million, while sales were up 16% to $73.3 million.
“The company goes into the fourth quarter feeling it is in a stronger position than it has been in a couple of years and is setting up for a very good ’04,” said Vinny Smith, Quest’s chief executive, in a conference call with analysts.
Company to watch: AVAMAR TECHNOLOGY
It’s been a while since an Orange County startup hit a home run. The last one: Access360 Inc.’s 2002 sale to IBM Corp. for an estimated $200 million.
One prospect to watch next year: Irvine-based Avamar Technologies Inc.
Avamar makes software that lets companies easily back up large amounts of data without “tying up the pipes” of storage networks. The company says its software is a cheaper, more efficient way for banks, government agencies and others to backup data.
The company recently closed a $5 million credit line. In all, Avamar has raised $35.5 million in venture funding, including a $13 million round in April.
After that much funding, investors typically start looking for ways to cash out. Last year, Avamar pulled in Chief Executive Kevin Daly, who once headed Quantum Storage Solutions Group, part of Milpitas-based Quantum Corp.
Daly headed up ATL Products Inc. when it still was part of Anaheim-based Odetics Inc. and oversaw the company’s blockbuster public offering in 1997 and subsequent buy by Quantum.
,Andrew Simons
PERSON to watch: HENRY T. NICHOLAS III
It’s been nearly a year since Henry “Nick” Nicholas shocked Broadcom Corp.’s world by stepping down from the company he once personified.
After spending the past year with his family, is Nicholas ready to re-emerge with an investment or other venture?
It’s hard to imagine the hard-driving Nicholas sitting around for another year. He still owns a big chunk of Broadcom, plus stakes in other businesses and real estate. One source who knows Nicholas said he’s been busy.
“If you’re curious about what he’s working on, just check the flight log at John Wayne Airport,” the source said, alluding to Nicholas’ jet travel.
There is a lot of speculation out there. Maybe Nicholas is looking into another technology venture. Perhaps he’s dabbling with some ideas in the hospitality industry. Maybe he’s spearheading an effort to bring a professional football team back to Southern California.
Ask Nicholas himself and he’ll tell you he’s just chilling out at home with the wife and kids.
,Andrew Simons
