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The Times 100: The Best Companies In California : The Bottom Line : Business As Usual? Rare In California

April 24, 1988|JAMES FLANIGAN | Times Staff Writer

What's California got to do with it? Is there a special quality that characterizes companies in this state, some business advantage that being in California imparts?

And if so, do The Times lists of the most profitable, productive and valuable companies in California tell us anything about it?

The answer is yes, on both counts. This special section offers an arresting picture of where business is today, how it got there, and where it is heading tomorrow--in California, where the advantages are both obvious and subtle.

First and obvious is the very size of the market. California leads the nation in total personal and household incomes, so it's not surprising that 100 of the 989 firms surveyed for The Times are in financial services. And where else but in the home-building and home-selling capital of the nation would lists of the 100 largest and most profitable companies include a dozen savings and loan associations? A swelling tide lifts all boats.

For others, the California advantage is more subtle. The state came later than other regions to major industry, and developed its own pattern of scientific, educational and financial support for business. Because of that, California companies tend to be younger, and smaller. On The Times profitability list, even some of the giants are young--Teledyne and Kaufman & Broad are both under 30--and many, such as Ashton Tate and Wyse Technology, are less than 10 years old.

But giants are few. Although it's the most populous state in the union, California isn't headquarters for many big companies--42 of the Fortune 500 compared to New York's 62--nor does it have the largest employers. Lockheed Corp., one of the state's largest with 99,000 employees, scarcely compares with the 300,000-plus work forces of General Electric, Ford and IBM, not to mention the 800,000 people who work for General Motors.

California makes up for it by having a lot of employers, more than any other state, and industries built on patterns of subcontracting. It is a flexible system developed in the film industry, where companies work with hundreds of independent suppliers, and perfected in aerospace-defense, one of the state's largest and most visible industries.

The 15 aerospace-defense companies listed here--and others such as McDonnell Douglas, Rockwell International and TRW that have headquarters out of state--developed an ability to work through suppliers to a greater degree than the automobile companies of an earlier industrial generation. U.S. auto companies, in fact, are now trying to reacquire that ability.

California companies, says urban affairs consultant Christopher Leinberger, "have a flexibility and adaptability that companies elsewhere have had to learn."

Which is another way of saying that they made a virtue of necessity. Again, California started later, so there was little chance to build a company like American Telephone & Telegraph, which housed within it the matchless research of Bell Laboratories--where the transistor was invented.

Yet California was the state above all that turned the transistor into high-technology industry. On The Times lists there are 255 microelectronics, computer and bio-engineering firms included in high technology, by far the largest industry grouping.

These are companies, many quite small, that work on a tightrope of venture capital and whose products might best be described as ideas--whether etched on grains of sand like the semiconductors of Silicon Valley or written in genetic code as are the products of Genentech and Cetus.

Why are such companies in California? Because the universities did the research the companies could not do. Stanford, the University of California at Berkeley, and Davis and all the rest, and the California Institute of Technology all helped companies.

Stanford alone has spawned companies from Hewlett Packard in the 1940s through Apple Computer in the 1970s to Sun Microsystems in the 1980s, and helped many more. The University of California, both at Berkeley and its San Francisco medical school, gave intellectual birth to the biotechnology pioneers Cetus and Genentech.

"The state built an educational infrastructure in the 1950s," explains David Teece of the UC Berkeley business school, and it is still bearing fruit.

To outsiders, California means high tech, as reflected in the market value lists--the ones that let us see ourselves as others see us. In market value we find Apple Computer and Intel and tiny Genentech ranked up with Pacific Telesis and Southern California Edison, the big telephone and electric companies, and far ahead of larger financial service firms.

The market's favorites list, showing stock value in relation to sales, is even more revealing. There the small but smart are listed: the MacNeal-Schwendlers and Linear Technologies, the Chirons, Trimedynes and Cypress Semiconductors.

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