Hot techs in a cool economy: these five companies managed to grow while others withered on the vine. (Technology).

The recent economic recession has inflicted pain on the once highflying technology industry--not only on dot-com startups but also on stalwarts such as Cisco, Dell and Intel. But despite the rough waters, some tech companies are implementing unique tactics that have enabled them not only to weather the storm, but to rise above it.

Like Siebel Systems, the No. 1 maker of customer relationship management software. Or Managed Objects, a small firm that helps far-flung corporations keep an eye on their tech infrastructure. Both graphics chipmaker Nvidia and security software vendor Symantec have realized significant growth in an era of lagging PC sales. Even CV Therapeutics, an up-and-coiner in the much-maligned biotech sector, is not only surviving but thriving.

We talked to the CEOs of these five companies to find out what's kept them afloat while others flounder. Some used their own products to manage costs at a time of diminished expectations. Others are exploiting new markets. Still others are redefining their customer base. All have achieved what Nvidia CEO Jen-Hsun Huang calls "a delicate balance between optimism and paranoia."

"I'm always looking around corners to see what will bite us next," says Huang. "But I'm also looking for the next opportunity. Often when I look I see that adversity is the opportunity."

Siebel Systems

Tactic in downturn: Using its own product

Latest quarterly revenues: $478 million

Growth in 2001: 14 percent

Few companies have enjoyed as heady a surge as Siebel Systems. Over the past three years, the San Mateo, Calif., software maker has enjoyed an average annual growth rate of 106 percent. But when the economy started to sour in the first quarter of 2001, the company turned to its own software for help.

"We anticipated the downturn and were able to use our employee relationship management software to budget the entire company," says CEO Tom Siebel. By resetting corporate and individual goals, slashing travel expenses and laying off 5 percent of its workforce, Siebel was able to trim a budget based on an anticipated $4 billion in revenues to one built around income of $2.2 billion. And, he adds, the company was able to do so in less than 30 days.

But the heart of Siebel's business is customer relationship management--putting data in the hands of your sales force to increase customer loyalty and sell more goods. Tom Siebel invented CRM seven years ago; his company now controls nearly 30 percent of a $6 billion market that's expected to reach $16 billion by 2005.

Despite the downturn, the company continues to add new customers. In the first quarter of 2002, 50 percent of its business came from new clients such as Dow Corning, Samsung and Nokia.

Some analysts criticize CRM for being difficult and expensive to implement, with little return on investment. Siebel scoffs at such criticism, noting that he hires an independent auditor to survey all 3,000 of his company's customers twice a year. "In our most recent survey," he notes, "customers reported increases of 8 percent in revenue, 18 percent in both customer retention and satisfaction, and 23 percent in employee productivity--with a return on investment in 12 months."

Symantec

Tactic in downturn: Targeting corporate customers

Latest quarterly revenues: $311 million

Growth in fiscal year 2002: 14 percent

When John Thompson took the helm at Symantec in April 1999, he faced an intriguing challenge: How do you take a firm best known for selling a $30 antivirus software utility and turn it into a corporate security giant?

"It was clear that if we wanted to grow the business, we needed to be more oriented toward the corporate market," Thompson says. So first he jettisoned two previous acquisitions that diluted Symantec's core business. Then he began acquiring companies -- like L3 Network Security, a designer of intrusion detection systems -- which filled in the missing pieces of Symantec's enterprise puzzle. And he began teaching this 17-year-old, Cupertino, Calif.-based company to start thinking about the needs of corporations as well as consumers.

"Our No. 1 issue was getting the whole team aligned around the move toward the enterprise," says Thompson. That meant retooling his workforce, retraining personnel and even repositioning the brand. The payoff? A chance to get into higher-margin security consulting business, as well as offer a full suite of products to deep-pocketed companies.

"John Thompson's managed to maintain a strong consumer side and create a strong enterprise side, yet still have both act like one company, notes John Pescatore, research director for Internet security at Gartner. "That's tough to do."

Three years later, Symantec's customers include 98 of the Fortune 100--including heavyweights Coca-Cola and Intel. Enterprise security now accounts for two-thirds of the company's overall business, up from one-third, and revenues have grown from $632 million to more than $1 billion--giving it a sizable chunk of the estimated $4.3 billion network security market.

CV Therapeutics

Tactic in downturn: Cutting smart deals in a tough field

Latest quarterly revenues: Lost $22 million

Growth in 2001: N/A; important drugs in the pipeline

Starting a biotech company is like taking a roller coaster ride that lasts 10 or 12 years. That's how long it usually takes to develop a new drug and get it approved--assuming it gets approved. Failure rates range between 80 and 90 percent, often after the company has spent hundreds of millions of dollars developing it.

Which is why so many biotech companies mortgage themselves to the pharmaceutical giants, selling royalty rights to their discoveries for pennies on the dollar. But when Dr. Lou Lange founded CV Therapeutics, he decided to take a different route.

"Big Pharma has crafted a lot of one-sided deals with biotech," says Lange. "Our investors took a risk with us; we thought we should find a better way.

Based in Palo Alto, Calif., CVT makes drugs to treat chronic heart disease such as angina. Its lead drug, Ranolazine, underwent successful human trials last November and may be approved for sale by the end of next year.

Instead of cuffing a licensing deal with a pharmaceutical giant and collecting only 8 to 15 percent of the drug's revenues, CVT hired Innovex, a contract sales organization, to handle all sales and marketing for the drug. Innovex collects a third of the profits the first two years, with the percentage decreasing over time. CVT is free from the cost of marketing the drug--typically 25 percent of revenues--and gets to keep more of the profit. Best of all, says CFO Dan Spiegelman, they don't lose control over how the drug is developed.

However, like most biotech firms, CVT has had its share of ups and downs since going public in 1996. The stock price, which hit a low of $3.69 in March 1999 and a high of $93 in November 2000, was hovering around $25 at press time. "We were fortunate to raise a lot of money when the bull market was still snorting," says Lange. The company lost nearly $80 million in 2001 -- not unusual for biotech firms that have yet to bring a drug to market.

But with more than $450 million in the bank and two more late-stage drugs in the pipeline after Ranolazine, CVT looks to be in good health. Dr. Mark Monane, analyst for New York investment firm Needham & Co., timates that revenues from Ranolazine sales could reach $321 million in 2005.

Managed Objects

Tactic in downturn: Helping clients control IT costs

Latest quarterly revenues: Undisclosed

Growth in 2001: 300 percent

It's a struggle as old as technology itself: The information services department clamors for more resources. The business side knows it needs tech to survive, but can't figure out what they're doing with all that money. Can't they all just get along?

That's the problem Siki Giunta aims to solve. The president and CEO of Managed Objects, McLean, Va., wants to help companies manage information technology so their businesses can thrive. And with clients such as Amazon.com, Bank of America and Dell, she's got some strong believers.

Managed Objects' primary product is Formula, a Java-based application that charts technology's impact on the bottom line. Instead of playing the blame game, both managers and IT pros can use the software to quickly fix the most critical problems.

John Storm, vice president of operations for Computer Sciences, New York, says Formula gives him a window into all of his company's business processes, unlike any other product.

That may be one reason why Managed Objects' revenues increased 300 percent in 2001 and are expected to double again this year. Though Giunta declined to provide revenue figures for the privately held firm, she says it has had 15 new clients since spring 2001 --including Merrill Lynch, Reuters and Fidelity e-Business--and expects to be profitable by the fourth quarter of 2002.

But her company's greatest impact may be bridging the gap between the suits and the geeks. "The business side wants everything to work every minute, and IT can't support that," she notes. "But IT can no longer hide behind mumbo-jumbo--'trust us, because we understand this and you don't'".

Nvidia

Tactic in downturn: Seeking new markets

Latest quarterly revenues: $583 million

Growth in fiscal year 2002: 129 percent

Let the phone and cable companies fight over the last mile of the Internet, says Nvidia CEO Jen-Hsun Huang; he'll take the last foot, thank you very much. That's the distance, more or less, between a computer user's eyes and the screen where the real action's happening.

That last foot has become "a very, very large market," says Huang, whose company is the world's leading maker of 3D graphics processors--the chips that turn bits into pixels.

How large? PC makers buy more than 40 million chips a year, and more than one out of every three of them comes from Nvidia. It's the processor of choice for gamers--a big reason why Microsoft picked Nvidia's chips for its Xbox machine. But Nvidia chips can also be found in research labs, Boeing flight simulators, Air Force fighter jets, exercise bicycles and slot machines.

In a few years, digital displays will be as common as digital clocks on microwave ovens, VCRs and cell phones, and most will be connected to the Internet, says Huang.

In a year that saw semiconductor revenues plummet 40 percent, Nvidia grew by more than 100 percent. And the company continues to grow--from $240 million in revenues in the first quarter of fiscal year 2002 to $583 million in the first quarter of fiscal year 2003. About 20 percent of income comes from Xbox sales; the rest, from expanding into new markets, particularly low-cost PCs and notebook computers. In the past year, Dell, Toshiba and Gateway have added Nvidia chips to their lines of mobile machines. Huang expects to ship 100 million processors in 2002, collecting about $2.5 billion in revenues.

Yet Nvidia almost didn't make it. Its first product was "one of the most amazing failures I've ever seen in the tech industry" admits Huang. The MD1, introduced in 1995, was the first attempt to put 3D graphics on a single chip -- years before the market was ready for it. But the experience taught him a valuable lesson.

"We were able to build a culture that's intellectually honest about what we're good at and not good at," he says.