Area Technology Firms Predict Brighter Future

After watching their markets, profits and stock values erode in the wake of an overseas financial crunch, Ventura County technology firms are again taking an optimistic view of the future.

For much of the past year, a number of local high-tech firms have taken a beating after economic crises in Asia, South America and Russia reduced demand for some county-made products and touched off wild fluctuations in the stock and over-the-counter trade markets.

However, recent strengthening in those troubled economies and a rebound in stock values have many area firms predicting that the coming years will be better than the one just passed.

“We’re living in a global economy, so what’s been going on has had a lot of people worried,” said Patricia Ito, marketing director of Camarillo-based Vitesse Semiconductor. “But I think things are starting to get better, which is encouraging.”

With many companies producing sophisticated components and technologies for foreign consumers, some, such as ACT Networks of Camarillo, were forced to scale back overseas operations and search for new markets.

Others, like Vitesse Semiconductor, were not directly affected by the crises in Asia because they sell to domestic manufacturers. But Vitesse was swept into this summer’s stock-selling frenzy.

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During September, the producer of high-capacity integrated circuits saw its per-share stock price drop by almost 50% from about $35 to about $18.

ACT’s stock, as well, took a pounding and dropped to its book value of $5 a share.

But the situation is beginning to change as countries like Japan, Brazil and Thailand begin shoring up their dysfunctional economies.

Last week, the Japanese parliament passed a $184-billion spending package to strengthen its flagging economy. Brazil is set to receive a massive infusion of capital from the International Monetary Fund. Thailand plans to sell $10 billion worth of foreign loans to drum up the cash needed to restore currency value.

Vice President Al Gore also announced a $10-billion initiative to jump-start the region’s economies at the annual Asia Pacific Economic Cooperation summit in Malaysia last week.

In addition, the stock market is beginning to rebound--after a summer of relentless dips--to higher and more stable levels.

And the results of the November elections have given investors solace that monetary and economic policies will, for the most part, remain unchanged.

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However, throwing money at the world’s market problems is not the solution, many economists say. Rather, troubled countries need to start reforming their economic and political systems to make any lasting change.

“It’s a step in the right direction, but that could just be rhetoric,” said Mark Schniepp of the UC Santa Barbara Economic Forecast Project. “We need to see some follow-through. We need to see these countries start making some structural changes to improve their production, stabilize their currencies, reform their banks and reduce costs. . . . That hasn’t happened yet.”

Taken as a whole, the Ventura County economy is as strong as it has ever been, Schniepp added.

Unemployment rates, which continue to fall, are hovering at about 5.8%. The real estate market is more active than it has been in a decade, with more than 1,300 homes sold in October at a median price of $216,000. Ventura County’s business community is also expanding into a diverse and successful mix of agriculture, service and manufacturing firms.

In addition, the county is cradled by a robust state economy, which has emerged from the near-crippling recession of the early 1990s as one of the largest economies in the world.

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“The county has had the best year in this decade,” Schniepp said. “Things could really not be much better.”

Despite that, growth in the county’s high-tech industry had stagnated. Employment in the sector, which mushroomed in 1997 with the addition of about 500 jobs, had plateaued with no real increase since March.

But now area companies affected by the economic crises are beginning to emerge from their shells with an itch to recoup losses.

ACT Networks, which laid off 69 employees in July as part of its consolidation of four recently acquired companies, is looking for a new crop of engineers and marketing specialists.

The company’s stock price has also recovered and hovered at the $8-to-$9 range last week.

After posting a record $175 million in sales during the 1997-98 fiscal year, Vitesse’s stock value has again climbed to the $35-a-share level. Company headhunters are also busy combing the job pool for skilled employees.

Even Valex Corp. of Ventura, a subsidiary of Reliance Steel & Aluminum, which went through a round of layoffs earlier this month, is predicting growth as the market for sophisticated technologies improves.

Established in 1976, Valex is one of the world’s largest producers and distributors of specialized tubing and fittings used in semiconductor manufacturing.

“We’re all paying the price for the huge buildup of capacity [in the semiconductor industry] in 1995 and 1996, but things have started to turn around,” said Dan Mangan, company president. “We’re certainly optimistic about the future and see this as a long-term growth industry.”

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Valex executives said they expect the semiconductor industry to fully rebound by the middle of 1999, and if that prediction holds true, the company could begin hiring back workers.

Executives at ACT Networks, which produces communications equipment for a largely foreign clientele, also predict a future of sustained growth, despite a 10% drop in foreign sales over the past year.

ACT quickly adapted and began focusing more on the North American market, which company officials credit with pushing sales to $55 million in the 1997-98 fiscal year--up from $49 million the year before.

ACT also cut back on an ambitious Asian marketing initiative and instead focused on the region’s stronger economies.

“We are definitely focusing on the low-hanging fruit right now and probably won’t do anything else until we see things start to firm up,” said Mike Zeile, ACT’s vice president of marketing. “But the long-term thought is that [Asia] will get stronger and, as it does, we’ll begin looking at them again.”

Although no real change has occurred in the world’s most troubled economies, their slide has slowed, leading firms like Vitesse and Imation, which produces high-volume data storage equipment, to conclude that the current economic crises are little more than a pothole along the road to prosperity.

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Both plan to expand with overseas offices. Vitesse recently opened a branch in Tokyo, and Camarillo-based Imation will open one in the south of France.

Imation also recently sold its medical imaging division to Kodak so it can focus exclusively on development and production of data storage devices.

Both offices are being opened to serve existing customers but will also act as the companies’ flagship in those foreign markets.

“It shows that we’re taking our foreign business seriously,” said Brad Allen, Imation’s vice president of corporate communications and investor relations. “We’re confident about the long-term.”