THE TIMES 100 : The Best Performing Companies in California : RISING FORTUNES : In Measuring Fast Growers, Try Software

A big change is brewing in the ranks of California’s fastest-growing companies.

The Times Growth 100 list has always been dominated by high-tech enterprises, and 1991 was no exception: About half the companies are in some way part of the computer industry.

But a changing of the guard is underway. Computer manufacturers and chip-making companies are suddenly sliding down the Growth 100 list, and software companies are finding their way to the top.

The most obvious winner (in sales, at least) was top-ranked Borland International. The personal-computer software company posted a whopping 163% sales growth rate on the strength of its acquisition in late 1990 of one-time database king Ashton-Tate.

But Borland wasn’t alone. Five of the top 15 spots on this year’s list are occupied by software companies, compared to just one out of the top 20 in 1990. Analysts say the ascent of software is likely to continue.

“In the 1980s, the computer technology market was driven by hardware,” says Tim Bajarin of the Silicon Valley market research firm Creative Strategies. “In the decade of the 1990s, it’s going to be software.”

All the hot software growth companies this year benefited from acquisitions, reflecting a trend toward consolidation in the young, fast-changing business. Cupertino-based Symantec, No. 4 on the growth list, purchased Los Angeles-based Peter Norton Computing, and Cadence Design Systems of San Jose continued to absorb its rivals in the computer-aided design business. ASK Cos. of Mountain View, which writes software for large corporate computer installations, reached the No. 12 spot after merging with Ingres.

To be sure, this year’s Growth 100 list was also shaped by the recession. Computer hardware vendors were hit hard by the economic downturn, while software companies--whose products can teach existing computers new tricks at relatively low cost--escaped mostly unscathed.

“Software is an inexpensive way for people to improve what they’re doing a little bit. As long as the economy is soft, that will continue,” says Michael Murphy, editor of the California Technology Stock Letter.

There’s also the simple reality that size is the enemy of rapid growth, and some of the longtime growth stars have become very large indeed. Recession and size help explain why disk-drive maker Conner Peripherals of San Jose, which claimed top honors in 1990, fell to 77th this year. Computer workstation vendor Sun Microsystems of Mountain View, No. 10 last year, dropped to 55th this year, while its rival, Silicon Graphics Inc. of Mountain View, fell from seventh to 37th. Maxtor Corp. of San Jose, another disk-drive firm, dropped from 14th to 67th.

The recession appeared to hold growth rates at many fast-growing companies below levels of previous years; annual growth of 13.4% was good enough to make this year’s top 100, while last year’s cutoff was 18.4%. The year-to-year figures are not entirely comparable, however, because the current list is for the most recent four quarters rather than for the two-year annual average used in the past.

(The change was made to avoid the vagaries of different company fiscal years. Next year the list will again use a two-year average.)

Some computer equipment companies continued to fare well. Milpitas-based Quantum Corp. held its own in disk drives. Komag Inc. of Milpitas, which enjoys a virtual monopoly on disks used in hard-disk drives, continued a long march up the growth ladder, landing in the No. 6 spot. And Solectron Corp., a San Jose a circuit-board maker, placed 16th.

Among non-electronics companies on the list, health care firms remained prominent. Perennial biotech champion Amgen of Thousand Oaks was No. 3, and the Orange County pharmaceutical company ICN and its 53% owned subsidiary, SPI, continued to perform well, placing ninth and second, respectively.

Newcomers in the biomedical group included Palo Alto-based Alza Corp., which makes skin patches for drug delivery and debuted in the No. 26 spot, and drug company Advanced Medical Technologies Inc. of San Francisco, which placed 28th. Adac Laboratories of Milpitas and Syncor International Corp. of Chatsworth, at 38th and 43rd, respectively, made the list as nuclear medicine boomed.

In the future, analysts say, biotech companies will become even more prominent among the growth stars as more new drugs work their way through the Food and Drug Administration approval process. Murphy points out, however, that biotech is less concentrated in California than electronics, and thus computer-related companies are likely to remain the strongest group.

The composition of the group will continue to shift away from computer systems and toward software and telecommunications, however. In the venture capital world, a leading indicator of fast-growing public companies of the future, “there’s clearly a shift away from computer hardware and toward software on the one hand and health sciences on the other,” says Pierre Lamond, a principal of the Sequoia Group, a Menlo Park venture capital company.

The Growth 100

Companies ranked by increase in sales from 1990 to 1991.

‘91 ’91 Revenue Revenue Rank Company ($ Millions) % Growth 1 Borland International * 501.6 162.9 2 SPI Pharmaceuticals Inc. 364.4 158.9 3 Amgen Inc. 682.0 128.4 4 Symantec Corp. * 175.9 127.2 5 Carolco Pictures Inc. 601.1 123.3 6 Komag Inc. 279.2 86.3 7 PatheCommunicationsCorp. 921.7 75.3 8 Cadence Design Sys Inc. 392.3 69.5 9 ICN Pharmaceuticals Inc. 460.4 69.3 10 Varco International 216.2 65.1 11 Century Medicorp * 137.5 62.9 12 ASK Cos. * 398.7 59.7 13 Chiron Corp. 118.5 50.9 14 Quantum Corp. * 1,073.6 49.9 15 Electronic Arts Inc. * 140.1 48.1 16 Solectron Corp. * 317.3 46.9 17 GTI Corp. 77.9 43.6 18 SysteMed Inc. 86.6 43.3 19 Zycad Corp. 43.5 43.2 20 Republic Pictures * 81.7 42.4 21 BEI Electronics Inc. * 149.5 42.4 22 SynOptics Communications 248.3 41.1 23 AST Research Inc. 827.3 41.1 24 Countrywide Credit Inds. * 278.5 40.9 25 Alza Corp. 139.7 40.8 26 Compression Labs 72.6 40.3 27 Datron Systems Inc. * 74.1 39.0 28 Advanced Medical Inc. 127.1 38.5 29 Good Guys Inc. * 457.2 38.1 30 House of Fabrics Inc. * 455.1 37.0 31 Network General Corp. * 56.8 36.7 32 Altera Corp. 106.9 36.5 33 Adobe Systems Inc. 229.7 36.1 34 Nichols Institute 236.3 35.2 35 Merisel Inc. 1,585.4 33.0 36 Farr Co. 112.4 32.4 37 Silicon Graphics Inc. * 637.9 32.3 38 Adac Laboratories * 106.6 32.0 39 Image Entertainment * 56.8 31.7 40 Gap Inc. 2,518.9 30.3 41 UniCare Financial Corp. 126.3 30.0 42 Linear Technology Corp. * 107.0 28.5 43 Syncor International Corp. * 181.3 28.3 44 Centex Telemanagement 146.6 28.1 45 Exar Corp. * 136.7 28.1 46 Mentor Corp. * 87.0 28.1 47 Kasler Corp. 195.2 27.7 48 Cypress Semiconductor 286.8 27.3 49 VLSI Technology Inc. 413.3 27.3 50 Cirrus Logic Inc. * 166.8 27.2 51 Charles Schwab Corp. 795.2 27.0 52 First Republic Bancorp Inc. 86.1 26.0 53 Circon Corp. 68.9 26.0 54 Silicon Valley Bancshares 77.5 26.0 55 Pacificare Health Systems * 1,312.9 25.8 56 Sun Microsystems Inc. * 3,454.7 25.0 57 California Microwave Inc. * 192.6 25.0 58 Teradata Corp. * 297.0 24.9 59 Amer. Recreation Centers * 64.3 24.7 60 Tekelec 52.4 24.4 61 Clothestime Inc. * 244.6 24.0 62 FHP International Corp. * 1,430.1 23.9 63 Octel Communications * 175.1 23.7 64 Informix Corp. 179.8 23.1 65 Fidelity National Financial 220.6 23.0 66 Price Co. * 7,056.2 22.4 67 Intel Corp. 4,778.6 21.9 68 Maxtor Corp. * 961.0 21.7 69 Emcon Associates Inc. 68.7 21.5 70 Lam Research Corp. * 158.6 21.4 71 Maxim Integrated Prods.* 80.0 21.3 72 Newport Corp. * 72.9 21.1 73 Vivra Inc. 139.3 20.8 74 IDB Communications Group 104.4 20.8 75 National Health Laboratories 603.9 20.3 76 Williams-Sonoma Inc. * 305.3 20.3 77 Autodesk Inc. 284.9 19.8 78 Conner Peripherals 1,599.0 19.5 79 Novellus Systems Inc. 80.0 19.2 80 International Technology * 460.4 19.1 81 FileNet Corp. 122.5 19.0 82 Acuson Corp. 336.3 18.9 83 Lewis Galoob Toys Inc. 150.6 18.7 84 Diagnostic Products Corp. 90.1 18.7 85 Guardian Bancorp 51.1 18.5 86 Raycomm Transworld * 55.6 18.3 87 Gottschalks Inc. * 322.3 18.2 88 Titan Corp. 146.5 18.1 89 Syntex Corp. * 1,870.7 17.9 90 Zitel Corp. * 44.9 17.0 91 Zenith National Insurance 546.3 16.7 92 Jefferies Group Inc. 196.0 16.6 93 McKesson Corp. * 9,710.7 16.5 94 Franklin Resources Inc. * 333.9 16.3 95 Computer Sciences Corp. 1,944.7 15.8 96 Ross Stores Inc. * 896.9 15.4 97 Retix 60.5 15.4 98 Applied Material * 661.0 15.4 99 Everex Systems Inc. * 492.5 15.2 100 Dreyer’s Grand Ice Cream 354.9 15.1

* See exceptions, Page 54.

Source: MZ Group. Certain historical data is from Standard & Poor’s Compustat Inc.