High Tech Appearing Hale and Hearty Again

After a slump of better than two years, the San Fernando Valley area’s high-technology companies are showing signs of renewed health.

Local companies, including firms such as Tandon and Micom that had been hurt by the industrywide slump, are posting some of their biggest earnings increases in years in their latest fiscal quarters. In some cases, earnings have more than doubled compared to year-earlier results.

Those improved results are in line with a recovery throughout the computer industry sparked by the introduction of new products, higher demand for office equipment such as personal computers and cost-cutting that is finally paying off.

Leading the industry’s turnaround nationwide are those companies with strong personal computer sales, including Apple and Compaq, and those selling larger computers, such as Digital Equipment, Unisys and Prime Computer.

Of the 26 publicly held Valley companies (including ones outside the computer industry) that have reported quarterly results in the first three months of this year, 15 have shown improved results from a year earlier; nine reported lower profits, and two posted losses. The companies are those with headquarters from Burbank to Camarillo.

Tandon, a Chatsworth personal-computer and disk-drive company that lost nearly $200 million over the past two fiscal years, posted a 164% earnings increase to $5.1 million in its second quarter ended March 29. For the six months, Tandon’s earnings have climbed 120% to $6.1 million.

“We are developing a habit of making money again,” Chairman Sirjang Lal (Jugi) Tandon said.

Tandon’s improved results are due to strong computer sales from overseas, which account for two-thirds of its overall sales. Personal-computer sales in Europe have been particularly strong. Sales also have surged for Tandon’s 3 1/2-inch hard-disk drives, a smaller memory device increasingly used in personal computers instead of the older generation of 5-inch drives.

Although Tandon’s executives declined to make specific predictions, they did say they expect the company to post an overall profit in the current fiscal year. In the company’s last fiscal year, ended Sept. 28, 1986, Tandon lost $62.8 million. In the fiscal year before that, Tandon posted a $135.4-million loss.

Cost-cutting measures included closing a San Jose disk-drive plant and cutting the number of domestic employees from 2,450 in 1984 to less than 1,000 now.

At Micom, a Simi Valley-based maker of equipment that helps link computers in various offices, officials cited lower expenses as the main reason for its 169% earnings increase to $4.3 million in the fourth quarter ended March 31.

The results mark the biggest percentage increase in quarterly profits for Micom in nearly seven years.

For its fiscal year, Micom’s earnings increased 13% to $12.2 million from a year earlier. A year ago at this time, Micom’s executives were faced with a 58% decline in earnings to $10.8 million for the full year.

Cutting Costs Pays Off

“Our earnings in the last few quarters are coming from cost-cutting and cost controls more than any significant expansion in our business,” said Raymond Thomas, Micom’s chief financial officer.

Micropolis, meanwhile, a Chatsworth maker of high-capacity computer disk drives, continues reporting big jumps in earnings. In the first quarter ended March 27, Micropolis’ earnings rose 66% to $6.2 million as a result of strong sales from its highly profitable 85-megabyte disk drives. The company’s sales rose to $61.8 million in the quarter, up 22% from a year earlier.

Dataproducts, the Woodland Hills manufacturer of computer printers, also has been reporting higher earnings, thanks in part to cost-cutting. Early next month the company plans to report its results for the quarter ended March 31. In its last reported quarter, ended Dec. 31, the company posted a 108% increase in profit to $2.1 million.

Outside the computer industry, the area’s companies reported mixed results. Walt Disney, the area’s most profitable company, continued to post big earnings gains.

Last week, the Burbank entertainment concern said its net income in the second quarter ended March 31 soared 76% to $91.2 million from a year earlier. The company said earnings benefited from strong attendence at its theme parks.

MCA, on the other hand, said its earnings in the first quarter ended March 31 fell 8.4% to $28.3 million from a year earlier. The entertainment conglomerate, which owns Universal Pictures, said the drop was caused in part because it released no movies during the period.

Box-Office Hit

This month, however, the company released “The Secret of My Success” starring Michael J. Fox of television’s “Family Ties.” Last week the film was the top box-office hit in the country.

Lockheed, the Calabasas-based aerospace giant, said its earnings fell 1.1% to $86 million in the first quarter ended March 31, in part because of interest costs associated with its $1.18-billion acquisition in August, 1986, of Sanders Associates of Nashua, N.H.

Cherokee Group, a North Hollywood apparel maker that is one of the area’s fastest-growing companies, continued to show large earnings gains. In the first quarter ended Feb. 28, the company’s earnings rose 42% to $2.5 million.

American Ecology, an Agoura Hills company that specializes in disposing of low-level radioactive waste, said its profit fell 71% in the first quarter ended March 31, to $200,000. The company blamed $600,000 in expenses associated with a lawsuit concerning one of its dump sites in Illinois.

Redken, a Canoga Park hair-care company, said its earnings rose nearly tenfold from a year earlier to $1.1 million, as a result of improved sales and the introduction of several new hair-care products.

QUARTERLY PROFITS

Results are for most recent fiscal quarters ended January through March.

HIGH TECHNOLOGY

Net Income Company (loss) % Change Micom Systems $4.3 million +169% Micropolis $6.2 million +66% Tandon $5.1 million +164%

OTHERS

Net Income Company (loss) % Change Cherokee $2.5 million +42% Walt Disney $91.2 million +76% House of Fabrics $2.3 million +69% Lockheed $86 million --1.1% MCA $28.3 million --8.4% Newhall Land & Farming $5.0 million --25% Valley Federal $4.3 million +21%