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High Technology /Orange County Computer Industry Is Upbeat About '88

OUTLOOK '88: Second of a series in which county business leaders look at the coming year.

December 28, 1987|DAVID OLMOS | Staff Writer

After the October stock market collapse, executives at General Automation held a powwow to reassess the company's 1988 plans, which predicted sales to grow a hefty 30% or more.

The company revised its forecast to call for slightly slower growth--about 25% to 30%--a figure that many businesses would happily settle for.

"Everybody has been saying we should wait for the slowdown," said Leonard Kenzie, chairman of the Anaheim computer maker. "But business seems quite vibrant."

Like General Automation, many Orange County high-technology companies are in an upbeat mood about the prospects for 1988. Most companies expect the modest computer industry recovery that began in 1987, which ended a two-year slump, to continue next year.

Sales Reported Strong

Although there were fears that business would cut back on spending after the market crash, many high-tech firms report that sales are strong going into the new year.

"We're getting more and more bullish on 1988," said Steven W. Frankel, president of Emulex, a Costa Mesa-based maker of computer storage products.

Emulex's success is closely tied to Digital Equipment Corp., the nation's No. 2 computer maker, because two-thirds of its sales are for add-on products for Digital computers.

"DEC is growing so rapidly and that's a good market," Frankel said. "The storage peripheral market is very strong right now."

And officials at Printronix, a computer printer manufacturer in Irvine, said the company's backlog of orders "continues to creep upward."

'No Reduction'

"A lot of people seem to be thinking the stock market crash indicated a recession," said David Mayne, Printronix's senior vice president. "While that may well be true, at the moment we see no indication of a reduction in business."

As Mayne sees it, the health of the computer industry depends less on the overall economy than on new product cycles. Even when business is slow, he said, companies are likely to invest in new technologies that increase efficiency.

Many experts said IBM's announcement of a new line of personal computers, which exceed the performance of its earlier models, should have a favorable affect throughout the PC industry in 1988.

One county company that hopes to benefit from healthy PC sales is AST Research of Irvine, a fast-growing maker of PCs and related products. AST is counting heavily on sales of its new Premium/386 computer, which the company said offers features similar to IBM's new models.

"1988 looks like a good year," said Robert E. Maples, AST's investor relations manager.

Revenue Jump Expected

AST is predicting that strong PC sales will push its revenues up from $205 million last fiscal year to more than $365 million in the year that ends June 30, 1988.

AST's work force grew by 600 people to 1,400 in 1987. The company doesn't expect similar job growth in 1988, but it does plan to open a factory in Taiwan to manufacture personal computers.

Alpha Microsystems, a Santa Ana computer maker, expects the relatively weak dollar to help its international business, which accounts for about one-third of its total sales.

"We are seeing some gain from the weakened dollar," said John S. Cain, Alpha Micro's chief financial officer and executive vice president. "I would expect our international sector to continue to grow more rapidly than the domestic business."

Cain also said he doesn't see a recession on the horizon. "I have a feeling, though, that if we keep talking about it long enough we might convince ourselves."

If a recession does arrive, several computer analysts said the industry will weather it better it did the 1985-86 downturn.

During that period, Computer companies in the county and elsewhere reduced inventories, trimmed employment, closed plants and built up their cash reserves.

Peter Labe, a computer analyst with the New York investment firm Drexel Burnham Lambert, said the last industry downturn was largely the result of overbuying of business computers in the early 1980s. That buying spree led to "technological confusion" among many corporations, which were unsure how to get the most out of the computers they had bought, Labe said.

"In 1988, by contrast, we are not coming out of a period of overbuying by users," Labe said. "The personal computer is much better understood today and is the work station of choice in America."

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