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THE TIMES 100: THE BEST COMPANIES IN CALIFORNIA : GROWTH : BLOOMING TOO SOON : For Some, Rapid Expansion Proves Too Much to Handle

April 24, 1988

Bigger is not always better. Rapid growth does not always bring profits. In fact, rapid growth can take its toll on a corporation's financial strength.

Among the top 10 on The Times Growth 100 are two companies that lost money in their 1987 fiscal years; in fact, eight of the 100 companies posted red ink last year.

The reasons for the losses vary. For instance, Comarco, an Orange County defense contractor, had difficulties accommodating acquisitions it made in previous years. And Kaypro, a San Diego computer maker, was forced to take writeoffs because its laptop model sold poorly.

New World Entertainment, whose financial condition has steadily declined in the past several months, took the second spot on the Growth 100 with a 90% annual average growth rate from 1985 to 1987. However, the company lost nearly $18.5 million last year, when virtually all of its intended markets soured. Its debt load, taken on to finance a move into kiddie cartoon shows and prime-time television, remained burdensome.

"I think we got too big too fast," New World Chief Executive Robert Rehme said in an interview earlier this year. "We're not ashamed to say we're doing some belt tightening."

Maxicare Health Plans, which occupies the third spot on the Growth 100, lost a whopping $255.9 million in 1987 largely because of a national expansion drive that loaded the company with debt--just as the health maintenance organization industry started experiencing hard times.

"They've got digestion problems," one analyst said recently. "Maxicare got this idea that they wanted to be national." Now, analysts say, the company may need to shrink to survive.

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