Improvement posted in area tech industry.

The third quarter brought much long awaited improvement to the technology sector, which has been the weakest link in the San Fernando Valley's economic chain.

Many local, publicly held tech companies reported revenue increases in the double digits and more in the third quarter and earnings for a number of those companies rose as well compared to the like period last year.

But behind the good news is a more sobering trend.

Most of the same companies still fall far short of the revenue and earnings levels reached at the heyday of the tech boom three years ago, and chances are it will be some time before they do.

"So far so good relative to the type of recovery we're in," said Chuck Hill, director of research at Thomson First Call. "The problem is I think too many people are expecting this recovery is supposed to bounce back and start looking like the traditional recovery. That, I don't think is going to happen, but slow and steady growth is not all that bad."

Twelve of the Valley's 15 largest tech companies reported revenue increased in the quarter ended Sept. 30, with growth ranging anywhere from 6 percent to as much as 77 percent for one of the firms.

Net income rose for only half of those same 15 companies, although many were still logging the effects of consolidations and layoffs that occurred over the past year or two.

The numbers mirror the national landscape, where revenues at tech companies increased an average of 7 percent, the first real growth in many quarters and a sign to many that the momentum will be sustained.

Still, the improvements are a far cry from a full recovery, many caution. Most of the technology spending that boosted sales in the quarter was consumer spending, and there is still a great deal of uncertainty over when and by how much corporate America will resume the capital spending needed to reach the sales levels of 1999 and 2000.

"1999 and 2000 were just a period of unusually rapid spending in the technology industry that resulted in what we saw as the bubble," said Bob Pearlman, a partner with BDO Seidman LLP in L.A. "And now that the bubble has burst, the recovery is getting us back to numbers that are more normal."

Consider these examples:

* Ixia reported revenues increased more than 28 percent to $21.6 million in the quarter and earnings doubled to $2.4 million or $0.04 per share, compared to the third quarter of 2002. But the company's revenue levels in the most recent period are essentially flat when compared to revenues in the like period of 2000--$21.3 million.

* Diodes Inc., a Westlake Village based maker of semiconductors, reported that earnings soared 45 percent to $2.6 million or $0.26 per share over the comparable period last year on a 15.4 percent increase in revenues to $34.9 million. But net income still fell short of levels in the third quarter of 2000 when Diodes reported earnings of $4.7 million or $0.50 per share on sales of $32.3 million.

* California Amplifier Inc., Camarillo-based maker of microwave equipment used in satellite television and wireless and broadband applications, recently said it expects to see its revenues jump more than 75 percent to the range of $41 million to $44 million in its third quarter ending Nov. 30, 2003. But the company's earnings guidance for the period--between $0.13 and $0.17 per share, compares with earnings of $0.16 per share in the quarter ended Nov. 25, 2000.

Many other companies are still bleeding red ink, even as revenues rise.

Optical Communication Products Inc. in Woodland Hills, reported sales increased more than 17 percent for the company's fourth fiscal quarter, which ended Sept. 30, to $10.4 million, compared to the fourth quarter of 2002, but at the same time, the fiber optics manufacturer reported a net loss of $2.1 million or $0.02 per share for the current period, compared to net earnings of $858,000 or $0.01 per share in the like period last year.

In the quarter ended Dec. 31, 2000, OCP had reported net income of $10.8 million or $0.14 per share on revenues of $41.9 million.

Camarillo-based Vitesse Semiconductor Corp. also saw significant improvement in its fourth quarter ended Sept. 30. Revenues at Vitesse rose 20 percent in the period to $42.8 million, but the company posted a net loss of $36 million or $0.17 per share. By comparison, Vitesse earned $16.8 million or $0.22 per share on revenues of $69 million in the quarter ending Sept. 30, 2000.

Charges from discontinued operations accounted for much of the loss at Vitesse, which supplies the networking, communications and storage industries. In the most recent period, the company sold one of its product lines and, in the third quarter of fiscal, 2003, it closed a facility in Colorado Springs.

Vitesse is not the only company that continued to bring its costs in line with current revenue levels this year. California lost a staggering 540,000 tech jobs in 2000, according to Cyberstates 2003, a report on the industry just released by AeA, an industry trade group. And the report projects that another 234,000 high tech jobs will be lost in the state this year.

But there are also signs that the swing toward an upturn has begun.

Power-One Inc. registered a 6 percent revenue gain to $63.7 million with a $3.6 million or $0.04 per share loss for the quarter, but that was a dramatic improvement over a loss of $198.5 million or $2.45 per share in the comparable period last year.

ValueClick Inc., an online marketing and advertising services company based in Westlake Village, recorded a 31 percent increase in revenues to $22.7 million and earnings of $2.0 million or $0.03 per share, compared to a loss of $800,000 in the comparable period last year.

Digital Insight Corp. marked its 17th consecutive quarter of revenue growth, posting a 16 percent sales increase to $39.4 million and net income of $4.6 million or $0.14 per share, nearly a two-fold increase over the third quarter of 2002 when Digital Insight recorded earnings of $1.7 million or $0.05 per share.

Dave Wood, executive director of the Los Angeles Council of AeA, said his organization sees signs of a sales upturn in computers, software, medical devices as well as IT services, and some of the organization's members have already begun to do some limited hiring.

"I'm looking at a significant growth in 2004," said Wood. "I think a full recovery is not in the foreseeable future. We're probably a year or two years out before we get back to a significant recovery."

Digital Insight Buys Cash Services Firm

Calabasas-based Digital Insight Corp. has acquired cash management firm, Magnet Communications in a cash and stock deal.

Digital Insight would pay $33.5 million in cash and 1.45 million shares of its own common stock for the Atlanta-based firm. Magnet's revenues for the fiscal year, ending on Sept. 30, were $17 million or about 25 percent more than the year prior.

Acquiring Magnet allows Digital Insight to offer market-leading cash management services for the entire business banking market, from small businesses to large corporations, including Bank of America, Silicon Valley Bank, Commerce Bancorp Inc.

"This acquisition ... will make us a clear market leader in one of the fastest growing segments of the online financial services business and it significantly strengthens our ability serve the country's largest financial institutions," said Digital Insight Chairman and CEO Jeff Stiefler.

For the quarter ending Sept. 30, the company reported a $5 million profit or $0.14 per share on $39.4 million in sales.

Tech Improves in Third Quarter, Finally

Some of the recent financials reported by Valley firms (in millions).

Company                                 Q3 O3

                               Revenues    Earnings/EPS

California Amplifier Inc. *    $41-44      NA/0.13-0.17
Digital Insight Corp.          39.4        $4.6/0.14
Diodes Inc.                    34.9        2.6/0.26
Ixia                           21.6        2.4/0.04

Company                            YTY % Change

                               Revenues    Earnings

California Amplifier Inc. *    +79%        +100-plus
Digital Insight Corp.          +16         +170%
Diodes Inc.                    +15.4       +45
Ixia                           +28.3%      +100%

* Based on company guidance