Loooking at Orange County’s Past Year Sheds Light on ’86 : High Technology
Orange County’s computer industry, which like its national counterpart had enjoyed skyrocketing sales for two years, faced harsh realities in 1985.
The industry had become so accustomed to 40%-plus jumps in annual sales and earnings that the 10% and 15% increases that some segments experienced in 1985 seemed downright stingy.
“This was the year that the growth curve, especially for personal computers, finally slowed down to realistic levels,” said Jan Lewis, president of the Palo Alto Research Group, a market analysis company in the San Francisco Bay Area. “The players might say the curve crashed, but that’s only because their expectations were so high.”
Analysts expect that the industry, having learned its lesson the hard way, has lowered expectations for 1986. However, sales are projected to pick up next year, particularly in the second half.
Nevertheless, there were segments and companies in the electronics industry that were hurt badly in 1985. In general, manufacturers of silicon semiconductors, or “chips,” were hit the hardest this year. Dataquest Inc., a San Jose high-tech research company, estimates that chip sales plunged nearly 28% to $9.6 billion from $13.3 billion in 1984. The company projects only a modest upturn to $10.6 billion next year.
Orange County’s two major chip makers, Western Digital Corp. in Irvine and Silicon Systems Inc. in Tustin, suffered along with their national counterparts. Western Digital, which lost $4.6 million in its 1985 fiscal year, laid off 700 of its 2,600 worldwide work force between August and December. Silicon Systems credits aggressive cost-cutting for preserving its profitability, even though the level dropped 62% to $3 million. Both companies say sales have picked up in the last few months and are predicting better performances in 1986.
The year also was particularly difficult for two of the county’s oldest electronics makers: Computer Automation Inc. in Irvine and General Automation Inc. in Anaheim. Although both companies had been struggling for years, both were dealt such harsh blows during the year that 1986 could be their year of reckoning.
Computer Automation, which has lost more than $20 million over the last three years, was sued earlier this month for $16 million by the very investor that the company had been counting on to save it from its financial woes. And General Automation, whose losses in the last three years total $26 million, was ordered to pay the Internal Revenue Service more than $3 million in back taxes.
But the news was not all bad in Orange County. In 1985, 5-year-old AST Research Inc. of Irvine ce
mented its position as the nation’s leading supplier of personal computer accessories and saw its sales hit $138 million.
And the analysts are projecting an even better performance in 1986 by the young company. Sales are projected to hit the $185-million mark, and the company is expected to announce several key contracts with “big name” players in the industry.
