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Monday, June 21, 2004
Flying 40 List Tells a Story
List of 2004's Flying 40 here
By Andrew Webb
Journal Staff Writer
At the end of 2002, Michael French thought his company, Network Architechs, might have made it through the recession unscathed.
That year was one of the toughest for the New Mexico Technology Flying 40, an annual ranking of the state's largest and fastest-growing companies.
"When everybody else took a hit, we had our best year ever," he said of 2002.
Alas, such things are difficult to predict. The unexpected challenges faced by his company in 2003 testify to the fickle nature of the state's economy.
As has been widely noted, New Mexico has always lagged behind the rest of the country's economic trend line. While most of the country went through its worst year in 2001 and began to see signs of improvement in 2002, New Mexico firms breathed a sigh of relief in 2001, believing the state's government research-driven tech economy immune to the specter of recession. The Flying 40 had some of its most robust revenue and head-count growth that year.
Then, in 2002, it hit.
And as other New Mexico companies began to see a silver lining in 2003, Network Architechs, which supplies computer and communications networks to large companies and government agencies, caught the tail end of the storm as it began to blow out of the state.
"Last year was a little off for us," French said.
Recovering companies had only just started to make capital improvements and purchase the requisite capital equipment and it will take some time for that market to catch up.
"We're in a tertiary market," French notes.
Though French says Network Architechs' profits were down in 2003, the firm did have a $2 million revenue increase to $14.6 million last year, putting it in the state's top 10 companies for revenue. By comparison, the company's revenues grew from $8.8 million in 2001 to $12.2 million in 2002.
Overall, after a tough 2002, the vital signs for New Mexico's companies are showing improvement. In 2002, for the first time in the seven years the list has been compiled, the group's total revenues and employee count dropped.
For 2003, total revenues were up 11 percent to $724 million.
Employee head counts among the Flying 40, which plummeted by almost 1,500 in 2002, rose by about 150 to 3,696 in 2003.
"The indication is some of the market is coming back," said Sherman McCorkle, president of Technology Ventures Corp., which, along with the Journal, KPMG LLP and New Mexico Bank & Trust, sponsors the Flying 40 list. "It's a big change from 2001 and 2002. Those were just very tough years. We follow the economy up, and we follow it down."
Because New Mexico's tech firms largely produce components, they are at the far end of the whip with regard to the national economy.
"By and large, we don't produce the finished product. We sell into other high-tech businesses who then retail the products," McCorkle said of the state's tech industry. "So we're on the tail, rather than the leading edge of the sales cycle. It will take us a while to catch up."
Take, for instance, Albuquerque's SBS Technologies. After reporting its worst ever fiscal year in 2002, with losses of $20 million, chief financial officer Jim Dixon says, the company has seen sharp increases in two of its three main markets.
Most notably, during the first nine months of its fiscal year 2003, SBS had a 40 percent sales increase in telecommunications a struggling sector that had left its suppliers devastated for the two previous years. The firm also had sales gains of 12 percent to military markets for the same period.
"It's not anywhere near the sales volume we used to see, but we've seen encouraging activities from that set of customers," Dixon said.
This is the seventh Flying 40 ranking for TVC, which was founded by Lockheed Martin in 1993 to assist new technology companies and promote tech transfer from the state's national laboratories.
The Flying 40 ranks technology companies with headquarters or major operations in New Mexico. Though it includes major operations, many with large government contracts, such as Applied Research Associates and SBS Technologies, the list also highlights the state's star startups in many cases offering a glimpse into what could someday become the state's major employers.
Though traditional industries such as food processing and tourism will always play an important role, "I think 25 years from now, the entire economy of New Mexico will be based on these technology companies," McCorkle said.
A star sector
Economist Lee Reynis said startups do give some hint of future manufacturing business a sector which, despite the beating it has taken over the last few years, still represents some of the country's highest-paying job opportunities.
Additionally, she says, it's these small businesses, which are often suppliers to other businesses, that are better able to weather downturns than larger firms such as Philips Electronics. The company closed a semiconductor plant in Albuquerque in 2003 at a cost of 600 jobs.
"My sense is a lot of the dynamism of this sector, its ability to sustain big hits, is because you've got all these small firms that are still continuing to grow," said Reynis, director of the Bureau of Business and Economic Research at the University of New Mexico.
The state's manufacturing and information industries sectors continued their downward slide in 2003, fueled by continuing slumps in telecommunications and other customer bases, said Labor Department economist Dan Hall.
According to the Labor Department, electronics and computer manufacturing jobs declined by 6.1 percent to 10,800 jobs in 2003. About 8.6 percent of semiconductor jobs were lost in 2003, bringing the total to 7,400.
But the Flying 40 companies, which don't include large out-of-state firms such as Intel and Philips, showed gains during the same year, and job loss percentages in both sectors declined by at least two percentage points in 2003, Hall said.
"We certainly didn't have overall growth in those subsectors, but we could see that things had started to turn around," he said.
Thanks to booming construction and extractive industries, such as mining and gas, Hall said, the state had a net job growth of about 1.2 percent, or 9,400 jobs, for 2003, keeping New Mexico in the top 10 in the nation for job growth.
Reynis says New Mexico has historically lacked large company headquarters and the philanthropy and spinoff business that accompanies them. But thanks to some changes in the state's business environment, that could be changing.
"What you'd hope is they could not only start them up here, but raise them beyond adolescence," she said.
Improving availability of venture capital and a better trained work force are helping to foster that, she said.
"We're moving to that level," she said. "That's important. We've got to have reasons for folks to stick around."
Reynis points to Labor Department statistics for science and technology services, under which some of the Flying 40 companies fall. In the 1990s, the state was losing those types of jobs. But the total actually grew by 3 percent in 2003, to 41,000 jobs, the highest growth since 1994.
"You can see the underlying strength in that sector," she said. "Look at manufacturing, but look at this, too. This is what could subsequently translate into manufacturing."
Here are the top ten companies:
1. APPLIED RESEARCH ASSOCIATES
Applied Research Associates is an employee-owned engineering and applied science company that does in-depth research, engineering and technical support work for government and commercial clients. Its general business areas include defense and civil technologies, software development, system engineering, manufacturing of specialty products, laboratory technologies, field testing and environmental testing. It was founded in 1979 and employs 875 in the United States and Canada.
2. SBS TECHNOLOGIES
SBS Technologies, founded in 1986, designs and manufactures open-architecture, embedded computer systems. Its components are used in several applications, including communication networking, medical imaging, industrial automation and military systems. Its products include computer components and interconnections, avionics, telemetry and system enclosures. Headquartered in Albuquerque, SBS employs 417 in New Mexico, Minnesota, Massachusetts, California, North Carolina and Germany.
Emcore Corp. makes compound semiconductor-based components for broadband and wireless communications and for solid-state lighting. Emcore acquired Micro Optical Devices, or MODE, of Albuquerque in 1997. The company is headquartered in New Jersey, but it located much of its manufacturing in Albuquerque in 1998 after purchasing MODE. MODE has since become an entire division of Emcore, which was the first tenant in the Science and Technology Park near Sandia National Laboratories. The company, founded in 1985, employs 235.
4. SCHAFER CORP.
Schafer Corp., founded in 1972, does research and development, testing and evaluation, modeling and analysis for government agencies and companies in the biotechnology, defense, energy, environment and wireless communications services industries. Headquartered in Boston, Schafer has 10 offices in seven states. The Albuquerque office of the Space and Directed Energy Division employs more than 50 people in directed energy modeling and developing low-cost propulsion systems and lightweight optics. Schafer employs 385 nationwide.
5. ABBA TECHNOLOGIES INC.
Abba Technologies is an Albuquerque company that designs and implements high-performance computing and enterprise-level customer solutions. Its largest customers are Los Alamos and Sandia national laboratories, California DOE laboratories, New Mexico state agencies, White Sands Missile Range, Kirtland Air Force Base, Public Service Company of New Mexico and the University of New Mexico. The company, which was founded in 1993, employs 30.
6. KTECH CORP.
Ktech Corp., founded in 1971, is an employee-owned technical services and products company based in Albuquerque. It specializes in scientific, engineering and technical sciences; design, integration and manufacturing of automated industrial equipment, gauges and sensors; research lab operations management; information technology products and services; and communications media, including Web design, technical writing and publications. It also provides support for Sandia National Laboratories' Pulsed Power Research Center. It employs 367.
7. CVI LASER CORP.
CVI Laser was founded in 1972 and has grown from a two-person office to six facilities in the U.S., Japan, Korea and the British Isles. CVI designs and manufactures laser optical components and electro-optical systems for the semiconductor, industrial, biomedical and research markets. CVI has developed products that enable new applications for laser technology in semiconductor manufacturing and laser surgery. It employs 211.
8. HOLMAN'S INC.
Holman's sells and services high-end computers and peripherals, surveying equipment, maps, GPS technology and computer-aided drafting software. The company has supplied architects, contractors, engineers, surveyors and the scientific community in the Southwest for 49 years. It has offices in Albuquerque and Tempe, Ariz. It employs 60.
9. LECTROSONICS INC.
Lectrosonics, based in Rio Rancho, manufactures high-end wireless microphone systems and digital signal processing systems for the audio, television and movie industries. Its products are designed in-house and are sold worldwide through its dealer network. It also has offices in New York, California and Tennessee. Lectrosonics was founded in 1971 and employs 130.
10. NETWORK ARCHITECHS CORP.
Network Architechs is a networking firm that designs, implements and maintains communications and computer network systems for businesses, municipalities, universities, hospitals and banks. It specializes in Internet protocol-based networking, including local- and wide-area networks and voice over Internet protocol technology. It is the state's largest Cisco partner and employs 24. It was founded in 1998.