THE TIMES 100: THE BEST COMPANIES IN CALIFORNIA : THE BOTTOM LINE : ROLLER COASTER CAN GO BOTH WAYS : High-Tech Firms Turn Losses Into Profits
Intel Corp. President and Chief Executive Andrew S. Grove says there is little mystery to Intel’s dramatic comeback in 1987 from the “terrible” and “bloody” year that preceded it.
“We are seeing the introduction of a new generation of technology for desktop computing, and it is spreading goodies throughout the industry,” says the Hungarian immigrant and co-founder of one of Silicon Valley’s leading semiconductor companies.
Few companies are better positioned to exploit the transition to today’s vastly more powerful desktop computers. That is because Intel is the sole supplier of the top-of-the-line 80386 microprocessor, a $250 chip that serves as the electronic “brains” for the most powerful personal computers from IBM, Compaq, Tandy and a host of other manufacturers.
“Apple is just about the only major holdout,” notes Grove with some satisfaction. Apple uses a Motorola microprocessor in its top model, the Macintosh II.
Intel swung from a $183.3-million loss in 1986 to a $175.5-million profit in 1987 on a 51% jump in revenue. Part of the profit surge came from sharply improved productivity. Craig R. Barrett, senior vice president for manufacturing, noted that the sales surge was accomplished without adding to Intel’s 9,000-employee manufacturing force or opening new plants.
To hear Grove tell it, the good times have only begun. Shortages of the 80386 are evaporating as Intel steps up manufacturing of the 276,000-transistor chip. Intel will ship more than 2 million units this year, up from 600,000 in 1986, according to the market research firm Dataquest.
And Intel’s engineers are hard at work on the 80486 for the next generation of desktop computers; the new chip will incorporate a staggering 1 million transistors. Don’t expect Intel to license other manufacturers to make the 80486 either.
“As these development efforts run into the hundreds of millions of dollars, you will see fewer and fewer licensing deals,” says Grove. Why hasn’t Intel licensed the 386 to anyone besides its biggest customer, IBM? “Nobody,” says Grove, “has made us a commercially viable offer.”
Another company whose fortunes are tied to the personal computer business, Tandon, also made the list of the top 25 comebacks of 1987, going from a deficit of $62.8 million in 1986 to a profit of $12.7 million.
Technology and electronics companies dominated the top 25 turnarounds, making up about half the list. They included Fisher Scientific, National Semiconductor, Varian Associates, Computer & Communications Technology, Diasonics, Adac Laboratories, Xicor Inc., Data Design Laboratories and Finnigan.
Other companies that went from losses in 1986 to profits in 1987 were American Medical International, Smith International, Tiger International and Cooper cos.
Big financial institutions dominated the list of companies that went from profits in 1986 to losses in 1987. First Interstate went from a profit of $338 million to a loss of $556 million, and Financial Corp. of America, the ailing parent of American S&L;, lost $468 million, contrasted with a $95-million profit in 1986. Both set aside huge sums to cover anticipated loan losses.
MGM-UA, staggered by heavy debt, went from a profit of $17 million to a loss of $88 million. Beverly Enterprises, a nursing home operator, and Maxicare, an HMO company that had trouble swallowing an acquisition, also went from profitability to losses.
BORN AGAIN Ranks companies by absolute dollar change from loss to profit in one year.
Change 1987 income 1986 loss in income Rank Company ($ millions) ($ millions) ($ millions) 1 Intel 175.5 (183.3) 358.8 2 Fisher Scientific Group 30.9 (233.0) 263.9 3 American Medical Intl. 111.3 (97.3) 208.6 4 Smith Intl. 16.3 (149.0) 165.4 5 Tiger Intl. 58.7 (45.1) 103.7 6 Cooper Cos. 68.3 (25.1) 93.4 7 Tosco Corp. 27.8 (56.4) 84.2 8 Tandon 12.7 (62.8) 75.4 9 National Semiconductor 42.7 (28.8) 71.5 10 Ross Stores 11.5 (41.4) 53.0 11 Varian Associates 21.4 (14.9) 36.2 12 Oak Industries 5.7 (30.3) 36.0 13 Computer & Commun. Tech. 4.8 (27.4) 32.3 14 Diasonics 15.2 (16.7) 31.9 15 MCO Holdings 0.4 (29.1) 29.5
NOSE DIVES Ranks companies by absolute dollar change from profit to loss in one year.
1987 loss 1986 income Rank Company ($ millions) ($ millions) 1 First Interstate Bancorp (556.2) 337.9 2 Financial Corp. of America (468.0) 95.4 3 Maxicare Health Plans (255.9) 4.3 4 Gibraltar Financial (131.0) 56.3 5 Carter Hawley Hale Stores* (115.3) 47.6 6 MGM/UA Communications (88.1) 16.6 7 Beverly Enterprises (32.8) 51.5 8 Xidex (44.5) 32.2 9 Landmark Land (47.5) 10.4 10 ICN Pharmaceuticals (30.8) 9.4 11 Lewis Galoob Toys (24.5) 5.8 12 New World Entertainment (18.5) 10.7 13 Nu-Med (22.4) 4.4 14 Price Pfister (8.0) 10.4 15 Transcon (13.5) 2.3
Change in income Rank ($ millions) 1 (894.2) 2 (563.3) 3 (260.2) 4 (187.3) 5 (162.9) 6 (104.6) 7 (84.2) 8 (76.8) 9 (57.9) 10 (40.2) 11 (30.3) 12 (29.2) 13 (26.8) 14 (18.3) 15 (15.8)
* Restructuring and year-end change render data not comparable
