Computer Industry Hurting, Survey of Area Firms Shows

Computer equipment companies based in the San Fernando Valley area generally suffered dismal profits or losses during their latest fiscal quarters, while defense and entertainment firms continued to prosper.

A survey by The Times of 43 of the Valley area’s public companies and financial institutions that have reported results for their most recently completed quarters found that the number of profitable businesses outpaced money losers by a 3-to-1 margin. Only 24 of the concerns, however, showed better results than in the corresponding period last year, while 19 posted weaker profits or expanded losses.

The survey covered about half of the public companies, banks and savings and loan associations headquartered in the area extending from Burbank to Camarillo, including nearly all of the largest of those concerns.

Most of the results are for fiscal quarters that ended in August or September.

Largest Public Companies

With few exceptions, quarterly profits for the largest public companies in the area were healthier than in the corresponding period of 1984. Lockheed, the Burbank-based aerospace concern and the biggest company in the Valley area, reported a 15% increase in third-quarter profits, to $102 million.

MCA, the next-largest company in the area, posted a 90% earnings increase, to $67.5 million. The North Hollywood-based entertainment conglomerate’s improved earnings were attributed partly to the success of the movie “Back to the Future” and two television syndication deals.

Walt Disney Productions of Burbank, the area’s No. 3 company, reported record profits of $53.8 million, largely because of better results from its theme parks.

The soft earnings among local computer equipment companies dovetailed with the continuing slump in the industry.

Analysts Expect Loss

Dataproducts, a Woodland Hills-based manufacturer of computer printers, reported a $13.8-million loss in its latest quarter. Tandon, a Chatsworth-based disk drive maker, is expected by analysts to report its fifth consecutive quarterly loss when its results are released within days.

Another money loser was PerfectData, a Chatsworth-based maker of computer cleaning products, which lost $3.5 million on sales of $1.3 million.

Micom Systems, a Simi Valley maker of computer communications equipment, remained profitable, but its earnings tumbled 60%, to $2.7 million.

The one major company in the area that bucked the computer industry’s downturn was Micropolis, a Chatsworth-based maker of high-capacity disk drives. Enjoying strong demand from manufacturers of personal computers, the company reported a fourfold increase in its net income, to $452,865, on sales that rose 44% to more than $22 million.

Profit Up 90%

Another disk drive maker reporting more profit for the quarter was Chatsworth-based Computer Memories, which earned $2.8 million, up 90% from the corresponding period in 1984. But Computer Memories also received a jolt in the quarter when it learned that IBM would not renew its contract at year-end.

Lockheed was joined by other defense firms reporting strong quarterly earnings. For example, Sherman Oaks-based TransTechnology, which makes products such as decoy flares that divert heat-seeking missiles, reported a 14% increase in earnings, to $1.5 million, on $23 million in revenue.

Some companies that have a tradition of healthy earnings reported losses or lower profits. Redken Laboratories, a Canoga Park maker of hair and cosmetic products, reported a 45% drop in earnings, to $1.4 million, on sales of nearly $27 million.

House of Fabrics, a Sherman Oaks-based chain of fabric stores, posted its first quarterly loss ever, $621,000. The company said the loss occurred largely because it was understocked.

Results were mixed for health care and biotechnology companies. Amgen, a Newbury Park-based genetic engineering firm, entered the black for the first time when it reported $2.3 million in profits. Amgen’s profits stemmed from payments made by Johnson & Johnson under a joint venture with the drug company.

Two Florida Hospitals

But profits for Nu-Med, an Encino-based hospital chain, fell 12% to $1.2 million. The company attributed the decline in earnings to low occupancy rates, primarily at its two Florida hospitals.

Seven of the 11 banks and savings and loans based in the Valley area that have assets exceeding $100 million reported higher profits than a year earlier. In several of those cases, however, profit increases were smaller than in the second quarter or came from one-time gains.

On the other hand, Valley Federal, the largest financial institution in the area, enjoyed a turnaround in its performance. It posted a $3-million profit in the quarter, up from a loss of $1.7 million a year earlier.

Valley-area insurance companies reported strong earnings. The holding company for 20th Century Insurance, 20th Century Industries of Woodland Hills, reported that its profits increased 80% to $7.4 million. Zenith National Insurance, an Encino workers’ compensation firm, reported a 30% increase in net income, to $3.2 million.

Among smaller companies, Cherokee Group, a North Hollywood apparel company that Forbes Magazine recently named one of the “200 best small companies in America,” reported a 36% increase in profits to $1.3 million on revenue of $22.1 million.

QUARTER PROFITS AT VALLEY FIRMS

NET INCOME (LOSS)

1985 Quarter 1984 Quarter

Dataproducts ($13.8) million $5.4 million Walt Disney Productions $53.8 million ($64.0) million House of Fabrics* ($621,000) $912,000 Lockheed $102.0 million $89.0 million MCA $67.5 million $35.4 million Micom Systems $2.7 million $6.7 million Olson Industries $84,000 ($700,000) 20th Century Industries $7.4 million $4.1 million Valley Federal $3.0 million ($1.7) million Zenith National Insurance $3.2 million $2.4 million

* Figures for quarter ended July 31. All other results are for quarters ending in September.