YEAR IN REVIEW: 2001; A Year to Remember, Though Many Would Like to Forget
A look back at the Business Journal’s people and companies to watch for 2001
2001 began in Orange County with many wondering whether an extended economic boom with some signs of cracking would give way to a full-fledged slowdown.
Well, we all know how that one turned out.
The past 12 months stand to be remembered for a dramatic economic shift that saw the waning days of the late-1990s boom officially recede into the uncertainty of the early-2000s.
And how quickly it happened.
While the dot-com bubble had burst by early 2001, chip and fiber-optic companies still were hot at the start of the year. Data centers were popping up across OC to meet demand for electronic commerce and back-room operations. Real estate development was strong. With great fanfare, the ribbon was cut on California Adventure, capping a $4 billion investment in OC by Walt Disney Co., hotel builders and government agencies.
But, by summer, technology’s last few hotspots had burned out. Broadcom Corp., the poster child of OC’s new economy, lost its title (for a while, anyway) of being OC’s most valuable company. And, after a 2000 buying binge, Broadcom bought only a mere four companies in 2001. Founders Henry Samueli and Henry Nicholas saw billions in personal wealth wiped away with a downturn in Broadcom’s stock.
In a sign of how things flip-flopped, Allergan Inc., one of OC’s most venerable companies, emerged for a good part of the year as its most valuable on Wall Street.
As the year wore on, plans for new commercial real estate developments were put on hold or scrapped across OC. California Adventure’s initial fanfare gave way to light crowds. Two restaurateurs,Wolfgang Puck Food Co. and Robert Mondavi Corp. pulled out of the park in October.
Corporate expansions dissolved into waves of pink slips at companies such as Conexant Systems Inc. and Ingram Micro Inc. Big names such as Texas Instruments Inc. and Cisco Systems Inc. closed or scaled back OC operations. Even fast-growing Broadcom laid off about 200 of its 2,700 employees companywide.
Then there was the energy crisis. OC saw a few days of rolling blackouts early in the year but escaped them during the critical summer months. OC businesses are paying a big price to keep the lights on in the form of some of the highest electricity rates in the nation, as a result of state energy contracts and Southern California Edison’s bailout.
In March came a telltale sign of how much things had changed. Out-of-state recruiters, who had all but written off poaching from California during the boom years, were back. Their pitch: inexpensive, reliable power in places such as Texas, Tennessee and even Pennsylvania. At least a couple of OC businesses took them up on it.
All of this before Sept. 11.
The ailing economy in OC and elsewhere was floored by the terrorist attacks in New York and Washington, D.C. For a week, business here came to a virtual standstill.
For many companies, the first few hours after the attacks were spent accounting for people in New York. Aliso Viejo engineering company Fluor Corp. had three executives on the 38th floor of the World Trade Center’s second tower when the attacks took place. They managed to escape.
Chris Newton wasn’t so lucky. The head of Work/Life Benefits in Cypress was aboard American Airlines Flight 77, which crashed into the Pentagon. Newton was in the process of moving the consulting firm to the East Coast, a move that’s been put on hold.
Executives and officials at other OC companies spent the days after the attacks trying to get home on buses and trains. Still others had to figure out how to conduct business with the nation’s air fleet grounded.
“Obviously, that put some burden on us,” said Luke Kensen, director of business development at Express Manufacturing Inc., a Santa Ana-based contract electronics maker.
Since the attacks, OC companies have turned their attention to the longer-term fallout of Sept. 11: lost sales, weakened consumer confidence and an exacerbation of an already slowing economy.
It wasn’t all bad in 2001, however. In a cyclical shift, some of OC’s old-line industries,health, defense and homebuilding,had a relatively good year.
In late August, Orange-based Bergen Brunswig Corp. was acquired by AmeriSource Health Corp. to create Valley Forge, Pa.-based AmeriSourceBergen Corp. While OC lost one of its largest publicly traded companies in the deal, the company plans to keep Bergen’s former Orange headquarters as a Western management center.
The deal also was the crowning achievement for Robert Martini, the longtime head of Bergen who’s now non-executive chairman of AmeriSourceBergen. For the past two years, Martini had worked to revive the company after a pair of trying acquisitions and a thwarted combination bid with Cardinal Health Inc. of Dublin, Ohio.
Irvine drug maker Allergan continued its expansion. Late in the year, the company ordered steel for a 172,000-square-foot, three-story R & D; building set to be built early next year on its Irvine headquarters campus.
With the technology downturn, medical startups found themselves in favor with venture capitalists. Companies such as Irvine-based IntraLase Corp., Laguna Niguel-based Novalar Pharmaceuticals Inc. and MyDrugRep Inc. of Irvine were among those that received venture funding in 2001.
After years of downsizing, OC’s defense industry saw growth in 2001,a trend in motion well before the attacks on Afghanistan.
“We’re looking at a 10-year uptick in military spending,” said Jim Peterson, chief executive of Irvine-based Microsemi Corp., a supplier of chips to the aerospace industry.
Projects such as the F-35 Joint Strike Fighter, the F-22 Raptor fighter and the national missile defense stand to keep Boeing Co., Parker Aerospace and other defense players busy for years out.
Even OC’s battered technology sector was showing some signs of life by year’s end.
Conexant Systems, which had spent most of the year slashing costs amid slumping sales and losses, said it expects revenue for the December quarter to be up 5% to 7% from prior quarter, driven by strong demand for chips used in wireless devices like mobile phones.
Conexant Chief Executive Dwight Decker told a group of analysts that he believes the worst is over for the company’s hard-hit personal networking unit and its Mindspeed Technologies subsidiary.
Bring on 2002.
