The Times 100 : The Best Performing Companies in California : THE GIANTS : Leading Edge Firms Among Sales Leaders : Bigger wasn’t better: Profits fell an average of 17% for all companies.
If it were a child, Conner Peripherals would still be in preschool.
But this precocious 4-year-old San Jose company, a maker of computer disk drives, has already taught much more mature companies a thing or two. It just graduated to the Fortune 500 and sometime this year is expected to surge past $1 billion in sales, making it the first U.S. company in history to grow so big so fast.
Perhaps it’s no coincidence, then, that the previous holder of the Speedy Gonzalez record among U.S. manufacturing companies was Houston-based Compaq Computer Corp., which provided millions of dollars of start-up money for Conner Peripherals when no venture capitalist would touch it.
With sales that soared 175% from the year before to $704.9 million, Conner Peripherals vaulted into 87th position on The Sales 100, the Times’ list of California’s largest companies based on revenue.
Business has boomed, observers say, primarily on the strength of fast customer service and Chief Executive Finis F. Conner’s canny recognition that the company should focus on smaller disk drives, or data storage devices, for computer workstations and the new generation of desktop, portable, laptop and notebook computers.
Conner Peripherals was one of a dozen newcomers to the list, many of them young zoomers that demonstrated a knack for growth by providing the right product or service at the right time.
They joined the usual array of old-line California energy, banking and computer behemoths that routinely head the list, including top-ranked Chevron, with $29.4 billion in sales.
Of 830 California companies surveyed by MZ Group, The Sales 100 generated 85% of a total $406 billion in revenue.
“Overall, there was fairly strong revenue growth of about 10%” for The Sales 100, said Kevin Colosimo, vice president of MZ Group in San Francisco.
But bigger sales didn’t necessarily mean better profits. Companies on the roster showed an overall earnings decline of 17%.
“There were very few bright spots,” Colosimo noted. “A sales rise doesn’t always mean the companies are getting healthier.”
Computer products companies in particular showed strength, with sales in the sector growing to $27.9 billion from $22.2 billion. That was despite widespread volatility in the market and a trend toward sharply lower productivity, as at Apple Computer. Conner Peripherals’ hypergrowth helped.
“Companies with new leading-edge products (for) emerging markets are poised for this large jump in sales,” said Todd D. Bakar, a technology analyst with Hambrecht & Quist in San Francisco.
Among other technology-related companies that made the sales grade were Softsel Computer Products (No. 94), which merged April 9 with Microamerica to create the nation’s largest distributor of personal computers and software; Oracle Systems (No. 83), a supplier of software that lets companies use their databases to best advantage, and LSI Logic (No. 99), which developed a design system that saves customers time and money by allowing them to simulate new electronic products on computers rather than round up parts and build them.
FHP International Corp. and PacifiCare Health Systems, two health maintenance organizations that hopped aboard at No. 90 and No. 92, respectively, are benefiting from the crisis in employee health care that is prompting more companies to seek lower-cost solutions.
FHP and PacifiCare, which have shown growth in members of more than 25% a year, “have the luxury of demand exceeding supply,” said Larry Selwitz, an analyst with the Newport Beach investment firm of Cruttenden & Co.
The companies follow different strategies. Whereas FHP owns and operates most of its own facilities and hires most of its own doctors, PacifiCare contracts with outside physicians and hospitals or clinics to provide services. FHP, therefore, makes greater capital investments but also has more control over costs.
Both companies have been able to raise premiums substantially in recent years. Most of FHP’s income comes from operations, whereas PacifiCare to date has derived most of its profits from investments.
“(These) HMOs are almost like printing presses for cash,” Selwitz said.
No surprise here: High-flying L.A. Gear, the maker of snazzy athletic shoes that has captured the hearts and wallets of millions of young American consumers, joined the list at No. 95. Although a bevy of skeptical stock watchers routinely contend that it’s only a matter of time before this bubble bursts, the company’s sales continued their phenomenal growth, with a 176% gain.
Charles Schwab, parent of the nation’s largest discount brokerage company, also made the list at No. 97, thanks to a 41% gain in sales. The company, with one of the most valued franchises in the investment community, has embarked on a long-term strategy of aggressively opening branch offices nationwide.
It has 111, plans 15 more openings this year and might add as many as 10 or 15 per year for several years to come, according to M. Doyle Lyons, an analyst with Merrill Lynch Research in New York.
“Each branch raises revenues,” she said. Although costs rise as the company adds offices, market share also grows. The strategy leads to a little more volatility for earnings near term, Lyons said, “but long term I’d say it’s an excellent strategy.”
Heading the group of newcomers at No. 75 is MagneTek, a Los Angeles company that got off the ground in 1984 largely thanks to the high-yield, high-risk instruments that came to be called junk bonds.
The company started by buying the operations of Litton Industries’ Magnetics Group. Since then, MagneTek has grown by acquiring the electrical equipment subsidiaries sold off by several conglomerates.
“Our philosophy is one of niche markets,” said President Frank Perna Jr.
The company repairs and maintains power-generating equipment for utility companies and makes a wide range of electrical equipment products, including ballasts for outdoor signs and fluorescent lights and motors for bathroom and kitchen ventilation fans, swimming pools and spas. (Ballasts are transformers that regulate or alter electrical current.)
Perna estimated that 80% of new homes being built in the United States have a MagneTek motor in them. And MagneTek ballasts light up the golden arches at many a McDonald’s.
Rounding out the dozen newcomers are three companies that emerged from the wing of a parent.
Allergan (No. 79), a well-known player in eye and skin care, was spun off to shareholders of SmithKline Beckman (now SmithKline Beecham) in July, 1989.
After T. Boone Pickens failed in his bid to buy Unocal in 1985, the company formed a master limited partnership to hold the oil and gas exploration, development and production assets of Unocal. That company, Union Exploration Partners, which is 95% owned by Unocal, made the list at No. 84.
And joining the list in the 100th spot is Argonaut Group, a mid-tier underwriter of workers’ compensation insurance and other property and casualty lines that was spun off by Teledyne in 1986.
Like many other insurers in the late 1970s and early 1980s, Argonaut “got killed” by medical liability claims, according to Dan B. Williams, an analyst with Sutro & Co. in San Francisco.
The company’s salvation, Williams said, was that its investment portfolio had been run astutely by Teledyne Chairman Henry E. Singleton, who invested in takeover candidates during the wild and woolly merger and acquisition days.
THE SALES 100
Companies ranked by net revenue.
1989 ’88 sales % chg. Rank rank Company ($ millions) from ’88 1 1 Chevron 29,443.0 17 2 2 Occidental Petroleum 20,068.0 3 3 3 Atlantic Richfield 15,351.0 -13 4 4 Rockwell International* 12,518.1 5 5 7 Hewlett-Packard* 11,899.0 21 6 6 BankAmerica** 11,389.0 12 7 9 Unocal 10,056.0 14 8 10 Security Pacific 10,018.4 18 9 5 Lockheed 9,891.0 -7 10 8 Pacific Telesis Group 9,593.0 1 11 12 Pacific Gas & Electric 8,588.3 12 12 13 McKesson* 7,578.4 8 13 14 SCEcorp 6,904.4 10 14 11 Transamerica 6,834.1 -13 15 15 Pacific Enterprises 6,762.0 14 16 16 First Interstate** 6,534.6 10 17 18 Fluor* 6,277.6 22 18 20 Wells Fargo 5,648.9 16 19 23 Apple Computer* 5,284.0 30 20 17 Northrop 5,248.8 -9 21 25 Vons 5,220.7 33 22 19 Litton Industries* 5,022.8 3 23 22 Price Co. 5,011.6 21 24 29 Walt Disney* 4,594.3 34 25 27 H.F. Ahmanson 4,371.5 24 26 30 Natl. Medical Enterp.* 3,963.0 8 27 28 Bergen Brunswig* 3,923.2 13 28 32 Great Western Financial 3,824.2 20 29 38 Consol. Freightways 3,760.2 40 30 21 Teledyne 3,531.2 -22 31 31 Times Mirror 3,475.0 7 32 35 MCA 3,382.3 12 33 36 Intel 3,126.8 9 34 37 Calfed 3,099.1 17 35 40 Carter Hawley Hale* 2,787.4 7 36 33 American Medical Intl.* 2,750.2 -12 37 41 Castle & Cooke 2,717.8 10 38 42 Glenfed* 2,606.4 9 39 98 Maxxam 2,423.3 367 40 43 American President 2,233.9 2 41 47 Longs Drug Stores* 2,110.6 10 42 46 Beverly Enterprises 2,103.5 4 43 48 Amdahl 2,101.1 17 44 44 San Diego Gas & Electric 2,082.5 0 45 53 Golden West Financial 1,940.9 38 46 52 Homefed 1,805.4 18 47 71 Sun Microsystems* 1,765.4 68 48 50 Avery International* 1,732.4 10 49 82 Union Bank 1,650.2 110 50 56 Tandem Computers 1,632.5 24 51 39 National Semi.* 1,612.8 -2 52 63 Gap* 1,586.6 27 53 49 Great American Bank 1,556.0 -3 54 51 Fleetwood Enterprises* 1,543.3 -5 55 62 Computer Sciences* 1,442.8 11 56 66 Tosco 1,440.5 26 57 60 Rykoff-Sexton* 1,382.7 7 58 57 Columbia Savings 1,378.8 4 59 59 Seagate Technology* 1,371.6 8 60 61 Clorox* 1,356.3 8 61 58 Syntex* 1,349.4 6 62 64 Varian Associates* 1,343.6 15 63 74 Mattel 1,237.0 25 64 70 Potlatch 1,227.6 13 65 79 Kaufman & Broad* ** 1,210.2 33 66 68 Coast Savings Financial 1,201.0 9 67 34 First Executive 1,194.8 -61 68 80 Businessland* 1,188.7 36 69 67 Advanced Micro Devices 1,104.6 -2 70 69 Raychem* 1,083.0 -1 71 65 Imperial Corp. of Amer.* 1,059.4 -9 72 78 Rohr Industries* 1,044.7 15 73 84 Western Digital* 992.1 29 74 86 First Capital Holdings 972.9 32 75 MagneTek* 961.6 6 76 77 Hilton Hotels 954.1 4 77 81 Caesars World* 902.0 8 78 88 MGM/UA Communic.* 876.5 30 79 Allergan 806.9 7 80 76 Guy F. Atkinson 797.7 -13 81 85 Jacobs Engineering* 793.6 5 82 83 Beckman Instruments 785.9 2 83 Oracle Systems* 769.3 32 84 Union Exploration 753.2 18 85 87 Intermark* 750.0 7 86 91 Ross Stores* 733.5 17 87 Conner Peripherals 704.9 175 88 94 20th Century Industries 704.3 13 89 92 First Amer. Financial 699.4 9 90 FHP International* 699.1 39 91 89 Calmat 681.9 4 92 Pacificare Health* 646.2 52 93 96 Amer. Bldg. Maint.* 638.4 10 94 Softsel Products 629.4 35 95 L.A. Gear* 617.1 176 96 100 Adia Services 604.5 20 97 Charles Schwab 553.2 41 98 97 Collins Foods Intl.* 548.4 1 99 LSI Logic 546.9 44 100 Argonaut Group 545.1 17
* See exceptions, page 46.
** See company notes, page 45.
Source: MZ Group. Certain historical data is from Standard & Poor’s Compustat Inc.
BIGGEST INDUSTRIAL COMPANIES
Companies ranked by total revenue.
1989 revenue % change Rank Company ($ millions) from 1988 1 Chevron 29,443.0 17 2 Occidental Petroleum 20,068.0 3 3 Atlantic Richfield 15,351.0 -13 4 Rockwell International* 12,518.1 5 5 Hewlett-Packard* 11,899.0 21 6 Unocal 10,056.0 14 7 Lockheed 9,891.0 -7 8 Fluor* 6,277.6 22 9 Apple Computer* 5,284.0 30 10 Northrop 5,248.8 -9 11 Litton Industries* 5,022.8 3 12 Teledyne 3,531.2 -22 13 Intel 3,126.8 9 14 Maxxam 2,423.3 367 15 Amdahl 2,101.1 17
* See exceptions, page 46.
Source: MZ Group. Certain historical data is from Standard & Poor’s Compustat Inc.
BIGGEST SERVICE COMPANIES
Companies ranked by total revenue.
1989 revenue % change Rank Company ($ millions) from 1988 1 Pacific Telesis Group 9,593.0 1 2 Pacific Gas & Electric 8,588.3 12 3 McKesson* 7,578.4 8 4 SCEcorp 6,904.4 10 5 Transamerica 6,834.1 -13 6 Pacific Enterprises 6,762.0 14 7 Vons 5,220.7 33 8 Price Co. 5,011.6 21 9 Walt Disney* 4,594.3 34 10 National Medical Enterprises* 3,963.0 8 11 Bergen Brunswig* 3,923.2 13 12 Consolidated Freightways 3,760.2 40 13 Times Mirror 3,475.0 7 14 MCA 3,382.3 12 15 Carter Hawley Hale Stores* 2,787.4 7
* See exceptions, page 46.
Source: MZ Group. Certain historical data is from Standard & Poor’s Compustat Inc.
BIGGEST BANKS AND S&Ls;
Institutions ranked by assets.
1989 assets % change Rank Company ($ billions) from 1988 1 BankAmerica** 98.764 4 2 Security Pacific 83.943 8 3 First Interstate Bancorp** 59.051 1 4 Wells Fargo 48.737 5 5 H.F. Ahmanson 44.652 11 6 Great Western Financial 37.176 13 7 Calfed 26.191 -5 8 Glenfed* 25.626 8 9 Golden West Financial 19.521 17 10 Homefed 17.767 4 11 Great American Bank 15.899 -1 12 Union Bank 15.376 2 13 Coast Savings Financial 11.244 -11 14 Imperial Corp. of America* 10.961 -11 15 Columbia Savings & Loan 9.253 -27
* See exceptions, page 46.
** See company notes, page 45.
Source: MZ Group. Certain historical data is from Standard & Poor’s Compustat Inc.
