101 Tech Corridor firms put products on hold until recovery. (Media & Technology).

Back in January, telecom suppliers along the 101 Tech Corridor thought for sure that they would be rolling out new equipment by the third quarter. However, as the economy continues to sputter and investor confidence remains at an all-time low, these same companies are now placing their hopes on a recovery sometime in 2003.

Firms like Vitesse Semiconductor Corp. and Internet Machines Corp. have a laundry list of new products and launch dates to coincide with what they still believe will be an upturn in business next year.

Faster, smaller and better network processors, switchers and optical modules are ready for shipment, but there are few takers just yet, said David Readerman, an analyst and partner with Thomas Weisel Partners.

"It's still a tough market out there if you're a telecom supplier," he said. "It depends what segment of the tech industry you look at, but overall you could be looking at recovery in the third or fourth quarter of 2003."

Camarillo-based Vitesse, which supplies chips and components to telecom equipment makers, wants to introduce its high-end network processors by year's end, along with a number of optical components. In May, the company announced it would delay releasing its 10-gigabit network processor indefinitely due to lack of demand.

Vitesse responded to the weak economy and a troubled tech market last year by eliminating 300 jobs and by moving away from chip manufacturing to optical components.

Its chief executive, Lou Tomasetta, cites some sales improvement in recent months, but he does not expect a full recovery until at least early next year.

Because the company serves networking equipment makers like Alcatel, Lucent Technologies Inc., IBM Corp. and Nortel Networks Inc., it has been hard hit by the tech downturn.

Likewise, California Amplifier Inc. of Camarillo, which cut its staff to 363 from 706, is looking to introduce new satellite communications components once the market improves.

The quick drop in the wireless market last year forced California Amplifier to rethink its strategy and focus more on its satellite components business. "We were hoping we'd be in the middle of recovery about now, but we realize that have to look at '03," said Greg Dare, Cal Amp's marketing manager.

Nevertheless, in its most recent quarter ended May 30, California Amplifier managed to improve over the same period a year earlier. The company reported net income of $1.5 million in net income, compared with $71,000 for the like period a year ago.

Although Westlake Village-based Diodes Inc. went a rough stretch last year when it laid off 300 workers, Chief Financial Officer Carl Wertz pointed to an increased focus on the Asian market, which now accounts for almost half of the company's revenues. For the first quarter ended March 31, Diodes reported net income of $208,000, compared with $521,000 for the like period a year ago.

"It has helped us improve overall," Wertz said, noting that the company is still optimistic about an overall economic upturn in early 2003.

Semiconductor firms that had been forecasting a turnaround by year's end are now predicting continued flat numbers through early 2003.

The Semiconductor Industry Association has reported a continued decline in PC chip sales and some strength in the non-PC chip markets of digital signal processors and flash memory chips. Then, two weeks ago, the tech industry received worse news when the world's biggest chipmaker, Santa Clara-based Intel Inc., reported it would cut 4,000 jobs or about 5 percent of its work force.

Vitesse, like others, is banking on new products developed by its research and development unit to take advantage of the upturn when it does occur. "The whole communications market is like a big pyramid," said Tomasetta. "Recovery is going to come from the bottom up and we're starting to see signs of it, but it will take time."

Likewise, Chris Hogenboom, chief executive of Agoura Hills-based Internet Machines Corp., said recovery has been gradual while demand for equipment has improved, thanks to consumer electronics sales.

"What's got the telecommunications industry in a funk right now is that companies that are in a position to consume new equipment don't have the balance sheet to support that equipment," he said.

Hogenboom said that Internet Machines, which raised $40 million in startup funding in 2000, is in a good position to develop its high-end chips embedded in Internet routers and switchers to speed up the flow of data through the Web.

"Access to capital now is extremely difficult, so we're very fortunate that we were able to raise the money that we raised," he said.