Small Computer Firms Faring Well : Massachusetts: High-tech jobs were down more than 42,000 from 1988 for 1991’s first five months, but big companies had much of the decline.
Judging by the results of some not-so-well-known companies such as IPL Systems and Parametric Technology, the computer industry here appears to be enjoying robust times.
These and other small firms have been enjoying tremendous growth while more prominent names such as Digital Equipment Corp. and Wang Laboratories Inc. have faltered.
Observers say smaller companies have found profitable niches and have been more adept at navigating a fast-changing market that has tripped up bigger companies. But it remains uncertain whether their success will bring a full rebirth to the fabled Route 128 high-tech corridor that rings Boston.
Howard Foley, president of the Massachusetts High Technology Council, said even as companies grow, “the whole computer industry in the future will generate less jobs per dollar of sales than it used to.”
But Paul Deninger, who follows computer companies, said the process now occurring is “like the regeneration of the forest. Large trees fall, and new trees grow.
“It would not surprise me at all to say that in five years, there will be a couple of billion-dollar companies among the firms that today have $100 million in revenue,” said Deninger, a principal with Broadview Associates, a Fort Lee, N.J., investment banking firm.
Through the first five months of the year, the high-tech sector accounted for an average 290,300 jobs in Massachusetts, down more than 42,000 from 1988, according to the state Department of Employment and Training.
Much of the decline has come from major computer companies. Digital, Wang, Data General Corp. and Prime Computer Inc. each have cut thousands of jobs.
These companies, which soared with their expensive proprietary technologies, saw profits shrink as customers started demanding smaller, powerful machines that operate on industry standards.
And the problem persists--in the most recent quarter, Wang lost $314.5 million while Digital said it expected to eliminate up to 9,000 jobs in a costly restructuring program.
But other companies were headed in the opposite direction.
* Stratus Computer Inc., of Marlboro, said profits rose 48% to $10.5 million in the April-June quarter compared with a year ago. The company’s 1990 sales totaled $403.9 million, more than double the 1987 figure.
Stratus, founded in 1980, makes “fault tolerant” computers that use backup systems to offer 100% reliability. The company typically sells the machines to banks, stock traders and other customers who need constant access to information.
* Parametric Technology Inc., of Waltham, whose revenues have exploded more than eightfold since its first software product was shipped in 1988, projects profits this year will rise by about 80%, topping $10 million.
Parametric’s software for computer-aided design allows users such as car designers to easily alter three-dimensional, solid models on their screens. Bruce Jenkins, an analyst with Daratech Inc. in Cambridge, said Parametric revolutionized the field with its software, though “others have begun catching up.”
* IPL Systems Inc., of Waltham, has enjoyed a second life by making storage systems to enhance the performance of IBM’s minicomputers. The company, founded in 1973, originally made IBM-compatible mainframes, but it crashed in the mid-1980s when IBM cut prices on its own machines.
Since shifting its product line, IPL has nearly doubled in size every year, recording sales of $28.7 million in 1990 and profits of $5.5 million. With a potential $1.6 billion market for IPL’s storage systems, “it would be difficult not to grow as long as we do the right things,” said Robert Norton, IPL’s chief executive officer.
And there are others. Octocom Systems Inc., a private firm in Wilmington, saw double-digit increases in sales and profits last year. Founder Ian Davison said Octocom, which makes modems, has succeeded by focusing on international markets--which account for 85% of sales--while the U.S. economy has been sagging.
These companies are still dwarfed by mammoths such as Digital, which had sales of $13.9 billion in its last fiscal year. But their growth demonstrates how the prognosis for the industry is not entirely gloomy.
“There is a myth held by people outside the computer industry that there is a single computer industry, like the auto industry,” Deninger said. “Various areas are in sunset, and others are in sunrise.”
