Alan Shugart feels vindicated.
Three years ago, as the personal computer market was experiencing its first market meltdown, Shugart axed nearly half the work force at Seagate Technology, the Scotts Valley disk drive manufacturer he founded in 1979.
Although roundly criticized for decimating the economy of the small, woodsy community on the western fringe of Silicon Valley, Shugart believed that only bold measures would save the company. Others bet that almost nothing would prevent Seagate's demise.
But while other disk drive makers folded or were swallowed in the industry's retrenching in 1985, Seagate survived--and rather nicely. Despite the cutbacks, the company retained sufficient strength to take full advantage of the tremendous rebound that the personal computer industry has enjoyed in the past two years. In its 1987 fiscal year Seagate posted sales of $958.1 million, representing a remarkable 111% annual growth rate since 1985. The performance won Seagate the No. 1 position on The Times list of the 100 fastest-growing California companies. Seagate's growth is all the more remarkable when compared to other California publicly traded companies.
FOR THE RECORD
Los Angeles Times Tuesday April 26, 1988 Home Edition Business Part 4 Page 2 Column 1 Financial Desk 2 inches; 63 words Type of Material: Correction
A table in The Times 100, Part II of Sunday's Business section, was mislabeled. Column headings for the Growth 100, which ranked companies by sales growth, should have been: "2-year compound sales growth %," "1987 revenue ($ millions)" and 1987 income (loss) ($ millions). In addition, while the "Fast Track to Profit" table showed two-year average annual profit growth, the numerical ranking was by compound growth rate, for which data was not given.
The 989 public companies surveyed for The Times Growth 100 posted an average annual growth rate of 8% from 1985 to 1987. For the top 100 companies, a list that admittedly favors smaller companies, the average yearly growth rate was 17%. (To be ranked in the Growth 100 a company had to have sales of $30 million in 1985 and must have been a publicly traded company for the past three years.)
Seagate's growth is consistent with the strong showing from the state's high-tech sector. Thanks largely to a new generation of powerful desktop computers, surging exports and renewed modernization of manufacturing facilities, the state's high-tech companies--and particularly those related to personal computers--are enjoying a new round of growth, the strongest in the past five years.
Fifty-one of the 100 companies on The Times list of the fastest-growing public concerns can be categorized as high tech or high tech-related companies. Of the top 10 companies on the list, six are personal computer-related concerns. "High technology is one of the most exciting segments of our economy right now," says Larry Kimbell, director of the UCLA Business Forecast for California. And Shugart believes that there's room for even more spectacular growth in the high-tech industry in general, and at Seagate in particular.
"The industry is growing, and unless we screw it up we should expand accordingly," says Shugart, who serves as the company's chairman and chief executive.
Although high-tech companies dominated the growth chart, also making a strong showing were speciality retailers, such as Wherehouse Entertainment, the video and record chain; Williams Sonoma, the upscale housewares concern; The Gap and Clothestime, two clothing chains, and Price Co., the discount warehouse operator.
The strong showing of these outfits is sure to continue fueling the interest of venture capitalists in specialty retailers that was aroused about two years ago when the traditional outlets for their funds--high-tech companies--started slumping.
Health-care operators also enjoyed some fast-paced growth. Among the fast-growing companies in this segment were Maxicare Health Plans, the health maintenance organization, and Community Psychiatric Centers.
Nevertheless, it was high tech that stood out for its sales growth from 1985 to 1987. And analysts are projecting that 1988--possibly even 1989--will see continued banner sales for the state's high-tech companies. "Last year was a good year for technology companies, and 1988 should be a great year," says Jeanette Garretty, a Bank of America economist who specializes in the state's high-tech sector.
Garretty credits the declining value of the U.S. dollar for spurring export sales of computers and other technology goods, a situation she predicts will continue at least through 1988 and possibly well into 1989. She says high-tech companies have also benefited from the latest round of plant modernizations and expansions because corporations are increasingly buying labor-saving machinery, such as computers and robotics, to improve worker productivity. High-technology companies can claim some credit of their own for the growth they are enjoying. Among the products most often cited for renewing confidence and interest in office computers are: a powerful new microprocessor chip from Intel Corp. of San Jose, which is increasingly serving as the "brains" for a whole new generation of PCs; sophisticated networking software that allows computers to share information easily, and the easy-to-use Macintosh from Apple Computer, whose graphics capabilities prompted the creation of the fast-growing desktop publishing industry.