DOG DAYS; AREA COMPANIES SUFFER CRUEL SUMMER ON MARKET.

Byline: Deborah Adamson Daily News Staff Writer

It was, by most measurements, a doggedly poor summer for publicly traded local companies.

According to statistics compiled by the Daily News, companies tracked by the Daily News/Bloomberg Index in the San Fernando, Santa Clarita and Conejo valleys and in Simi Valley showed softer operating earnings in the past quarter, with 15 out of 46 reporting firms showing year-over-year declines.

Their earnings were knocked down by reasons ranging from the Asian financial crisis and the General Motors strike to stiff competition keeping prices lower.

The overall stock market drop also hurt stock prices of local companies, with the share prices of 33 companies, or 72 percent, ending lower than when the quarter began. The index declined by 17 percent over the same period.

``There's been a profit slowdown from the end of last year,'' said Rajeev Dhawan, director of econometric forecasting at the University of California, Los Angeles, Anderson Forecasting Project. ``Wage costs are going up and companies can't raise prices because there's no inflation.''

Dhawan is forecasting a 1 percent decline in U.S. corporate earnings for 1998, and rising by 3.1 percent for 1999. In 1997, profits grew 8 percent.

In the early to mid-1990s, corporate earnings grew more strongly because wages were kept down while business improved, he said. But today's low unemployment situation has raised wages, and companies are hard put to increase prices.

In the third quarter, reporting companies comprising the Standard & Poor's 500 showed a cumulative operating earnings decline of 0.9 percent, compared with a 3.9 percent increase in the second quarter.

The U.S. economy is expected to slow to a 1.8 percent growth next year from around 3.5 percent in 1998, Dhawan said. In California, employment growth is expected to slow to 2.5 percent in 1999, down from 3.4 percent this year. Growth in jobs is a standard measure of the state's economy, he said.

Local companies that reported slowing earnings included Walt Disney Co. in Burbank, which was hurt by the Asian economic crisis, weak films such as ``Holy Man,'' start-up costs of new ventures and higher expenses at ABC television.

Dole Food Co. in Westlake Village also reported lower profits, hurt by lower banana prices and weaker demand because of a slump in the Russian market.

Several technology companies reported declines as well.

MRV Communications, a maker of telecommunications network switching products in Chatsworth, was hurt by delays in new product introductions, weaker-than-expected demand and price competition. Pricing weakness in the semiconductor industry affected margins at semiconductor maker Diodes Inc. of Westlake Village, lowering profits. Higher research and development costs contributed to a loss at Brilliant Digital Entertainment, a Woodland Hills digital entertainment developer.

On the bright side, several companies reported improved performance.

K-Swiss, an athletic-footwear maker based in Westlake Village, reported a 53 percent increase in operating income, thanks to strong domestic sales. MiniMed Inc., a Sylmar maker of insulin pumps, had a 100 percent operating earnings gain due to increased worldwide demand.

Xircom, a Thousand Oaks maker of products for mobile PC connection, reversed a loss in the third quarter with strong sales of its RealPort Integrated PC Card line. Operating income at Calabasas-based Xylan rose 164 percent, as demand grew for its network switching products.

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