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High-Tech Companies See Good Times Ahead, Orange County, Calif., Insiders Say

Posted on: Tuesday, 22 July 2003, 06:00 CDT

Jul. 20--The technology sector has been in a slump since the dot-com era went bust circa 2000. Computer sales, chip manufacturing and telecommunication build-out may never be the same again. But, according to Orange County tech insiders, the tech industry doesn't want to relive history. New tools are replacing dated technology.

Companies are diversifying into untouched areas, such as video games and personal video recorders. After some of the worst years in the business, the local tech industry believes things can only get better from here.

Computer sales began slipping in 2000 as fear of recession caused people to put off computer purchases.

It's been pretty flat ever since. But this year, market researcher International Data Corp. predicts that 2003 will beget a slight 5.3 percent growth in the number of computers sold in the United States.

This year, the industry has been rescued by the consumer. While businesses continue to postpone computer purchases, people have been adding a second and even a third computer at home -- good news for many local computer businesses that sell to consumers. They're also buying laptops, which has helped buoy sales for Toshiba America of Irvine.

The low-priced eMachines Inc., which focuses only on consumers and retail sales, has seen sales improve 20 percent from last year, said Adam Anderson, eMachines' chief operating officer.

"We've developed a business model that works extremely well in budget-conscious times. Overall, the computer industry will have its ups and downs but there will always be computers. When business users start buying again, that's when you'll start to see the Dells and HPs business pick up."

Other PC-related companies are abandoning a computer-focused mentality to increase revenues. Cendyne Inc., Santa Ana, known for selling computer CD and DVD drives, recently started selling a gadget that turns a Microsoft Xbox or Sony Playstation II game console into a wireless device. Kingston Technology, Fountain Valley, which has struggled with the volatile pricing of computer memory, has discovered a steady business of selling flash memory used in digital cameras, MP3 players and digital organizers.

Western Digital in Lake Forest supplies computer hard drives to the Xbox game console and personal video recorders. "While we may not see the kinds of growth rates in technology that we saw in the late '90's, it would appear that this industry is beginning to see better growth in the back half of this year driven by both existing applications like computing and new applications in the consumer markets," said CEO Matt Massengill.

Things have picked up for Orange County's two biggest chip makers, Broadcom Corp. and Conexant Systems Inc., on hopes that global semiconductor sales will rise this year. Conexant CEO Dwight Decker says he expects 2003 to be a relatively good year as the chip industry pulls out of the biggest slump in its history. "The future is bright," he said recently.

Analysts expect sales of Broadcom to grow every quarter this year as it churns out millions of tiny "G" chips for wireless home networks that are selling faster than investors had expected.

"Even we were taken a little by surprise by the explosive nature of the business," CEO Lanny Ross said at the company's annual shareholder meeting in May.

Verizon and SBC, California's two biggest telecommunications companies, are expected to be profitable this year, but it's going to be rough going.

Sales of both companies are getting hit because they're losing business to AT&T, MCI and other rivals just getting into the local-phone market.

SBC has been losing customers in California since May 2002, when state regulators required the company to lease its lines out to competitors at a discount.

Verizon will soon have to follow suit.

By Jim Finkle and Tamara Chuang

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To see more of The Orange County Register, or to subscribe to the newspaper, go to http://www.ocregister.com

(c) 2003, The Orange County Register, Calif. Distributed by Knight Ridder/Tribune Business News.

TOSBF, 6502, MSFT, SNE, 6758, BRCM, CNXT, VZ, SBC, T, MCWEQ,

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