Growth slows at minority businesses

Orange County's minority-owned companies are showing signs of the economic slowdown.

Technology companies generally have been among the biggest and fastest-growing minority-- owned businesses in the county. But with the lingering tech slowdown, there were mixed results on this year's Business

Revenue at the top 30 companies was down 18% to $21 billion in 2001.

But employment at the top 30 minority-owned businesses rose 5% vs. a year ago-highlighting the divide between revenue and job growth at many of the companies. That's not a bad result, but still is down from double-digit job growth in the late 1990s.

The job numbers stand up favorably compared with the 2.1% countywide job growth OC as a whole posted last year. Overall, the largest minority-owned businesses employ 9,020 workers in OC.

The top two companies on the list-No. 1 Fountain Valley-based Kingston Technology Co. and No. 2 Irvine-based The Linksys Group Inc.-- showed the biggest changes. Memory products maker Kingston showed a huge drop in revenue and staff, while networking products maker Linksys posted a big gain.

One company heavily skewed the 30 companies' aggregate revenue growth down: Kingston. The company's revenue of $900 million is about the size of the next four companies combined, and about one-third of the county's minority-owned business revenue total.

When Kingston is taken out of the list, the remaining 29 minority companies did much better: revenue grew 10% to $1.9 billion with a 10% increase in staff levels.

Kingston had a difficult year, with sales plummeting 47% to the $900 million amount.

"That primarily is due to the drop in the components that we use in our memory modules-about 80% of the valut of our module is the basic memory semiconductor that goes inside," said Steve Rodriguez, Kingston's director of strategic marketing.

"So our corresponding drop is just a reflection of that market," Rodriguez said.

Kingston-a company where layoffs until recent years were unheard of-trimmed OC employment 29% to 815.

"Some of the staff reductions were due to changes in our business mix where we shifted more focus to our generic value memory line," Rodriguez said. "That required fewer resources to manage. It's a low margin business so we moved more production from Fountain Valley to our plants in Shanghai and Taiwan."

Rodriguez said he's upbeat despite the price declines.

"It looks a lot better than last year-for our second quarter year-over-year we're up 20%," he said. "We think the markets are turning around for us and that it's going to be a pretty good year compared to last year."

Kingston recently opened a sales office in Beijing and plans to add more staff to its Shanghai operations.

"In Shanghai we've raised production from our original target of 200,000 modules a month to 500,000 modules a month," Rodriguez said. The company plans to boost staffs in emerging markets for Kingston, such as India and perhaps Russia.

"Business in the U.S. and the Americas is relatively flat now," he said.

Rodriguez said Kingston has no plans for further staff reductions in OC over the next year, but said the company won't be replacing workers lost to attrition.

"Right now our growth area is East Asia," he said. "If we continue to move product lines overseas then we'll have to reduce staff in the county."

Because of the wide range of sectors represented, the list of minority-owned businesses shows trends throughout OC's diverse economy. Minority businesses are in high tech, electronics, supermarkets, auto dealerships, apparel, real estate and temporary staffing markets.

While Chinese-owned businesses supplanted Hispanic firms on the list in recent years, the trend reversed somewhat in the past year.

This year nine of the list's 30 businesses were Chinese-owned, compared to 11 a year earlier. And the list shows seven Hispanicowned businesses compared to five last year-- an indication of the rising influence of Hispanic-owned businesses in OC that corresponds with the county's fast-growing Hispanic demographic.

Indian and African-- American owned businesses are next with four, Vietnamese with three and one each for Filipino, Japanese, Korean and Greek owners.

Keeping tabs on minority-- owned businesses is an inexact science. For one, they are generally privately held: No. 6 Bridge Technology-Co. is the only public company on the list. And many minority companies are small and the ethnicity of ownership isn't always apparent. Some would rather not be categorized as minority-owned.

No. 2 Linksys shunned the high tech sector trend by reporting strong revenue and employment growth. Its revenue grew 68% to 346.7 million last year to take the No. 2 spot for the second year in a row. The company also boosted its OC staff by 54% to 315.

Linksys was founded by Taiwanese immigrants Janie and Victor Tsao 15 years ago.

Janie Tsao, Linksys' vice president of business development, said the company projects its staff at year-end will be 500 to match expected sales of about $500 million for 2002.

"We've been very strong in our broadband markets," Tsao said.

Tsao said its strategy of selling mainly to small businesses and consumers shielded it from the tech malaise. Those markets remain robust, especially compared to the sharp falloff in demand for networking products in the beleaguered telecom sector.

Another company showing big increases on the list was No. 8 Orange-based Checkmate Staffing Inc., a Hispanic-owned temporary staffing agency. Checkmate grew revenue 32% to $99 million. The company also increased its OC staff by 36% to 3,805-the company counts its temp workers as employees.

"We've been expanding and benefiting from companies hiring more temp workers because of the economic slowdown," said Lou Perez, Checkmate's chief executive. "We've added more highly trained people to our frontline sales operations and plan to add more branch offices in Orange County by year-end."

The company has four offices in OC and some 70 elsewhere throughout the U.S.

No. 12 Union Dodge Inc. had a less-than-- banner year. The Korean-owned Garden Grove auto dealership saw sales plummet 21% to $48.2 million.

The Chrysler Group of DaimlerChrysler AG has seen sales fall as its vehicle lines lost market share to Japanese and European automakers.

Five companies are new to this year's list: No. 6 Garden Grove-based Bridge Technology Inc., a Chinese-owned maker of power electronics components, with revenue of $142 million; No. 21 Pacific Islandia California/Sheraton Anaheim, a Japaneseowned hotel near Disneyland with revenue of $17.8 million; No. 22 Tustin-based al Punto Advertising Inc., a Hispanic-owned advertising agency with revenue of $16 million; No. 28 Buena Park-based Cordova Bolt Inc., a hardware distributor with revenue of $11.4 million; and No. 30 Tustin-based APR Consulting Inc., an Asian-owned provider of staffing services with revenue of $10.8 million.

Dropping off the list were: last year's No. 12 CMD Technology Inc. in Irvine, which was acquired by Sunnyvale-based Silicon Image Inc.; last year's No. 14 Pick Up Stix in San Clemente, which was bought by Dallas-based Carlson Restaurants; last year's No. 21 Vanco Trading Inc. of Westminster, which didn't meet this year's revenue cutoff of $10.8 million; last year's No. 22 Orange Coast Electric Supply Company Inc., which moved to San Diego and changed its name to OneSource Distributors; and last year's No. 26 iBASEt, which didn't meet this year's revenue cutoff.