Tied to global supply chains, Orange County tech companies have been hit especially hard by the coronavirus epidemic.
“The usual Chinese New Year shutdown ended up being extended through the entire month of February, which is an inopportune time for us, given that it’s essentially our fourth quarter and year-end,” said Michael Burdiek, chief executive of vehicle software and telematics provider CalAmp Corp. (Nasdaq: CAMP).
The Irvine-based company for now has called off travel to China, where it still has a “significant amount of production,” Burdiek told the Business Journal last week.
“We had a fair amount of backlog encumbered with our suppliers not able to fulfill demand because of the lack of workers and travel restrictions in China.”
While the vast majority of CalAmp’s products are designed in the U.S., “we currently outsource a substantial portion of our manufacturing to certain contract manufacturers,” most of those in Hong Kong, mainland China, Malaysia and other Pacific Rim countries, the company noted in its last annual report.
It’s been working on a “supply chain diversification program” over the past year or so, to transition manufacturing to sites outside of China, as a result of tariff concerns.
Stock Slump
CalAmp said the coronavirus outbreak was one of the factors that led to a lowering of its revenue outlook for its fourth quarter that ended Feb. 29, which resulted in a hit to its shares.
It’s not alone. The company is one of numerous OC-based publicly traded firms—hailing from a variety of business sectors, not just technology—whose shares have been hammered during the recent stock market panic. CalAmp’s stock is down some 40% from mid-February, with a market cap around $210 million as of late last week.
China Tariffs
The effects of the coronavirus hit just as American companies were beginning to see progress toward a resolution of the U.S.-China trade disagreement. Suddenly a much greater danger was looming, though the full impact is far from clear.
Chapman University Economics Professor Raymond Sfeir told the Business Journal last week that he is not aware of any current data on the economic impact to the high-tech sector in OC.
“If there are any layoffs, it is the temporary employees who lose their job first,” he said.
The outlook for many companies’ bottom lines are clouded.
Chipmaker Skyworks Solutions Inc. (Nasdaq: SWKS) in Irvine on March 4 said it expects revenue may be as low as between $760 million and $770 million in the quarter ending this month, down from an earlier projected possible low of $800 million. Adjusted earnings per share may come in at $1.34, well below the $1.46 previously foreseen in a range midpoint.
Skyworks Chief Executive Liam Griffin said that “the current demand environment for our products has been negatively impacted by interruptions in global supply chains.” Despite the setback, Griffin said he remains upbeat about the future for the $15 billion-valued firm, whose shares are off some 25% from earlier in the year.
Apple Supplier
Skyworks last fiscal year got 51% of net revenue from Apple Inc., which has already warned of negative impact on results from the coronavirus epidemic that started in China.
Santa Clara-based Marvell Technology Group Ltd. (Nasdaq: MRVL), OC’s fourth-largest chipmaker by headcount, also has “started to see supply chain-related impacts to our business,” Chief Executive Matt Murphy said on March 4 as the market crisis was heading into full swing.
“Our guidance for the first quarter of fiscal 2021 reflects the reduction of approximately 5% of revenue to account for coronavirus impacts we are aware of so far,” according to Murphy.
The company cited “ongoing uncertainty associated with the coronavirus” as the reason for temporarily widening its guidance on how much revenue can be expected.
Paul Pickle, chief executive of computer networking products maker Lantronix Inc. in Irvine, cautioned about the coronavirus effect in February, well before the latest panic.
“While the progress towards the resolution of trade disputes between the U.S. and China is a positive potential for our customer base, the full effect of the COVID-19 virus on our supply chain and on end-market demand is as of yet unknown,” Pickle said last month.
Lantronix’s stock price has been cut in half since January; it counts a $60 million market value.
Despite the uncertainty and difficulties caused by the coronavirus, CalAmp’s Burdiek has some words of encouragement: “Take care. Be prudent. Be careful. Be cautious. But carry on.”
Gatherings Canceled
Tech-focused events are being canceled at a rapid pace.
The annual Game Developers Conference, originally scheduled for this week in San Francisco was postponed until the summer after companies including Blizzard Entertainment Inc., Orange County’s largest software maker by headcount, had already pulled out.
Blizzard’s Overwatch League said last week that it’s going on hiatus amid the pandemic, canceling all events for the world’s largest professional esports league that were scheduled for March and April.
The league, whose live competitions draw thousands of fans, and includes teams from overseas, said last week it was working on determining when and where games will be made up in the future.
Irvine’s Ingram Micro Inc., the world’s largest wholesale technology distributor and biggest OC company by revenue, postponed its Cloud Summit, scheduled for May in Miami Beach, until early next year because of the coronavirus outbreak.
Irvine-based data analytics software maker Alteryx Inc. (NYSE: AYX), with offices around the world, postponed an analyst day originally scheduled for last week but now expected in June.
One positive for the company: Alan Jacobson, chief data and analytics officer for Alteryx, said this month that he believes the use of analytics and big data “are critical to understanding and combating the spread of deadly diseases,” and noted China’s use of these technologies has helped slow down the spread of the disease.
OC Firms, Execs Tackle COVID-19
There’s no shortage of news reports focusing on the effects of the coronavirus on business—whether it be stock hits, canceled meetings, or employee safety.
Fewer reports have focused on businesses working to alleviate health concerns pertaining to the virus, directly and indirectly.
Here’s a sampling of OC businesses and executives doing just that, in a variety of ways.
• At a roughly 200,000-square-foot facility off Ortega Highway in San Juan Capistrano, Quest Diagnostics Inc. is working to make coronavirus tests available to more people in California.
The company’s test was developed, validated and is now made at the Diagnostics Infectious Disease laboratory on the outskirts of the city. Last week, it was reported that the site is now able to test 1,200 people a day; it is the first commercial COVID-19 testing lab in the state, according to government officials.
Other Quest labs in the state should be able to conduct testing later this month.
• Similarly, Menlo Park’s Avellino Lab USA said last week that its newly developed coronavirus diagnostic test had been validated. The test uses the company’s genetic diagnostics platform to help clinicians diagnose COVID-19.
“By working hand in hand with healthcare providers, public health officials, and with additional resources, we should be able to scale properly and make the test accessible to all,” said Avellino Chairman Gene Lee, who last year brought on OC healthcare exec Jim Mazzo as a board member (see story, page 1).
• Device maker Masimo Corp. (Nasdaq: MASI) has put together emergency plans for its four different manufacturing sites that include, besides its home base of Irvine, New Hampshire, Sweden and Mexicali in Mexico, to ensure production goes on during the pandemic.
“Between 100 and 200 million people are monitored every year with our technology. If we cannot produce these products, hospitals won’t do surgeries without them,” Masimo CEO Joe Kiani told the Business Journal Feb. 28. The “coronavirus affects respiration, so they need our products.”
Masimo only needs a few components from China—limiting its exposure to supply chain issues that have hampered other area businesses—because years ago it decided not to source its materials from that country, he said.
• R&B Wire Products Inc. of Santa Ana, a maker of commercial laundry carts, hampers and laundromat equipment, said it has launched of a new line of antimicrobial poly trucks, designed to inhibit the growth of microbes on the surfaces of its products
The products—manufactured locally—are expected to find an increased level of interest from customers, “given the strong focus on sterilization we are seeing with the current events,” officials with the family-owned business said.
Changed Routines
Many routines and practices in the area’s tech community have been changed or scratched due to the coronavirus.
Christos Karmis, chief executive of wireless infrastructure firm Mobilitie in Newport Beach, told the Business Journal last week the privately held company has implemented some travel limitations and some work-from-home policies “to ensure a safe and healthy work environment.”
“In the short term, we have not seen any negative impact to our existing leasing business, which is based on long-term contracts,” Karmis said.
“In the longer term, we don’t expect that it would cause any disruption to the macro trends of needing to deploy 5G-related wireless upgrades and networks as rapidly as possible.”
Likewise, Kingston Technology Co., one of the largest private companies based in Orange County, said last week it has “adapted work and production schedules” because of the coronavirus spread. It said travel restrictions that began in January “remain in effect.”
