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Friday, March 20, 2009
Inside New England Tech Stocks
Big public companies ride economic wave
By Alan Earls, Special to Mass High Tech
MHT's Doug Banks: 10 Women to Watch in tech
Interactive map of Greater Boston tech layoffs in 2009
How is the economic crisis affecting tech companies?
While startups are a special focus for Mass High Tech, the bigger, more established companies that are publicly traded are a large part of the tech universe, too. Taking stock of the region’s public companies offers a litmus test for how the woes of Wall Street may be affecting Main Street here in New England. Just about every firm out there has been hammered by the stock market rout and the recession. But there are indications of forethought, buoyancy, and better things to come.
The region’s tech sector is represented by some 7,800 tech-related companies according to MHT’s New England Tech Directory, offering a window into a variety of industries. This sampling of six companies and their CEOs provides a glimpse into the state of business today and some indicators of what lies ahead for the region.
Jerald G. Fishman
CEO, Analog Devices
Greatest challenge for your company for the rest of 2009?
“There’s no doubt that the economic crisis has created challenges for virtually all companies, particularly those in the technology space. This has caused many companies to view ‘survival’ as the key objective. At ADI, we reject that hypothesis. We’ve been through many cycles in the past and have always viewed them as opportunities to gain competitive advantage. Though the length and depth of this downturn is arguably unprecedented, we believe we can use our energy, talent and financial strength to emerge a more competitive company. Our focus is on customers, ensuring we remain engaged so we can devise ways to help them get a competitive advantage. Ultimately, our goal must be to help our customers generate revenue moving forward.”
Best strategic move your company has made since the September economic breakdown?
“Our business is cyclical, and experience tells us we can’t wait until the downturns to make strategic moves. In fact, we began the process of increasing our focus on more sustainable and profitable markets well before the economic crisis developed. These moves included the divestiture in 2007 of the PC voltage regulation and thermal monitoring product line and the divestiture of our cellular handset baseband modem and radio chipsets business. When the downturn began, and we started to recognize that the world was fundamentally changing, we were afforded the time to make thoughtful decisions for the long term and short term. The key for us is to preserve our flexibility. To that end, we have taken a number of actions that are significant, yet reversible, such as mandatory employee vacation time, and reductions in discretionary spending.”
What can you say to a loyal employee to assure them they will have a job at year end?
“Nothing is certain in this day and age, and we can’t promise anyone what the future will bring. That said, we work hard at ADI to preserve jobs by taking other, reversible actions. Our charter at ADI is to strive toward innovation and to provide our customers with products that give them a competitive edge. Across many industries, the breakthroughs enabled by technologies like analog-to-digital conversion are exploding. So it’s critical our people focus on the innovations that matter to our customers.”
What the analysts say:
“Though it is facing increased competition in the medical arena, ADI appears to have a knack for coming up with precise parts for particular market needs. Data converters remain the company’s strongest suit. ADI retains a 37 percent share of $3 billion market, and shows no signs of relinquishing any part of it.” — Steve Ohr, senior analog analyst, Gartner Dataquest, January 2009.
“Today’s electronics increasingly rely on data conversion to faithfully translate digital information to provide the images, voice, audio, video and other real-world content that defines the quality of the end-user experience.” — Susie Inouye, research director, Databeans Inc. - November 2008.
Analog Devices Inc.
Norwood,
NYSE: ADI
• Employees: 8,500
• 52-week range (as of March 10): $15.29 - $36.35
• Revenue: Product revenue was $2.6 billion for ADI’s FY2008 (Nov. ’07 - Oct. ’08)
• Operating income: $625 million for FY2008
• Key developments 2008-early 2009:
— ADI forms dedicated health care organization to provide specialized support to medical imaging and patient monitoring industries
— ADI announces consolidation of wafer fabs in Massachusetts; Cambridge production will transfer to a Wilmington facility
— ADI transitions PC audio codec product line to Conexant
Jim Tobin
CEO, Boston Scientific
Greatest challenge for your company for the rest of 2009?
“Boston Scientific is transitioning to a future marked by more profitable and sustainable growth. Our challenge is to execute on that transition, and I’m confident that a combination of top-line growth and expanded profit margins will lead to improved bottom-line growth.”
Best strategic move your company has made since the September economic breakdown?
“Managing our capital wisely and conservatively.”
What can you say to a loyal employee to assure them they will have a job at year end?
“Thanks to the efforts of our people, Boston Scientific is now a stronger company with a bright future. Our cash flow continues to be robust; we have plans in place to significantly improve profit margins; our intellectual property portfolio is unmatched, and our products are the market leaders in the majority of our businesses. We have a dedicated and talented senior management team and outstanding employees, all united by a shared commitment to helping physicians improve patients’ lives.”
What the analysts say:
“Fourth-quarter results point to continued sustainability in Boston Scientific’s leading franchises ... The company gained share in implantable heart defibrillators, maintained the number one position in drug-eluting stents, and delivered better-than-expected gross margins.” — Deutsche Bank analyst Tao Levy.
“They’ve clearly turned the corner ... they are doing what they need to do.” — Tim Nelson, analyst, FAF Advisors.
Boston Scientific Corp.
Natick, NYSE: BSX
• Employees: 25,000 worldwide
• 52 week range (as of March 10): $5.41 - $14.22
• Revenue: $8 billion (2008)
• Net income: $1.2 billion (excluding acquisition, litigation, divestiture, restructuring, and other charges)
• Key developments 2008-early 2009:
— End of moratorium on new product approvals by the U.S. Food and Drug Administration
— Received FDA approval for Cognistim CRT-D and Teligen ICD
— Obtained US and European approval for Altrua family of pacemakers
— Launched the Promus Everolimus-Eluting Coronary Stent System in the U.S.
— Received FDA approval for our next-generation Taxus Liberté Paclitaxel-Eluting Coronary Stent System
— Received FDA approval for the Taxus Express2 Atom Paclitaxel-Eluting Coronary Stent System, the first drug-eluting stent for small vessels
— Completed the sale of five non-strategic businesses
— Prepaid $1.4 billion of debt in 2008
Mark Thompson
CEO, Fairchild Semiconductor
Greatest challenge for your company for the rest of 2009?
“Balancing demand fluctuations with inventory goals is expected to be challenging throughout this year. Staying close to our customers and monitoring end market trends is the foundation for our business actions and overall profitability. New product development remains a priority for Fairchild, and as the economy adjusts during 2009, we will continue to focus on projects that meet our customers’ needs.”
Best strategic move your company has made since the September economic breakdown?
“Our focus on close customers relationships allows an open dialog with our strategic customers during these difficult times. Understanding our customers’ needs is critical to being able to respond quickly to the end market. Fairchild responded quickly to the broad-based reduction in orders at the end of 2008 to effectively manage our supply chain and to reduce costs. We accelerated a number of streamlining actions that will significantly reduce our costs while preserving our ability to respond rapidly to future improvements in demand. Fairchild is committed to taking advantage of this market to speed improvements.”
What can you say to a loyal employee to assure them they will have a job at year end?
“Fairchild’s priority is to run a profitable business that meets the expectations of our customers, shareholders and employees. We are committed to a solid business plan that ultimately instills confidence for our stakeholders. We have an open environment at Fairchild that allows our employees to fully understand the challenges we are facing and our execution plans to ride the storm.”
Fairchild Semiconductor International Inc.
South Portland, Maine, NYSE: FCS
• Employees: 8,300 worldwide
• 52 week range (as of March 10): $2.73 - $15.29
• Revenue: $1.57 billion FY2008
• Net income: Loss of $167.4 million
• Key developments 2008-early 2009
— Fairchild announced that a court overseeing its patent lawsuit with Power Integrations Inc. reduced a jury’s award of damages to Power Integrations to approximately $6 million from the original figure of $34 million.
— Standard & Poor’s Ratings Services lowered its corporate credit rating on Fairchild and its senior secured rating on subsidiary Fairchild Semiconductor Corp. to “BB-” from “BB.”
Ofer Gneezy
CEO, iBasis
Greatest challenge for your company for the rest of 2009?
“The challenges we are focusing on for the balance of 2009 are first and foremost to complete the integration of KPN Global Carrier Services, a business we acquired from the Dutch national carrier KPN in October 2007, which vaulted iBasis to the top of the international telecom business and quadrupled our EBITDA. We expect to accomplish that goal in mid-2009. We must also work diligently to minimize the impact of the rapid fluctuations in foreign exchange rates largely driven by the global economic circumstances.”
Best strategic move your company has made since the September economic breakdown?
“We defined a few strategic initiatives and aligned the entire company behind them to ensure focus and minimize the distracting effect of the cascade of bad economic news.”
What can you say to a loyal employee to assure them they
What can you say to a loyal employee to assure them they will have a job at year end?
“In these uncertain times there are no guarantees, but we believe that the telecommunications industry is in better position to withstand the economic downturn than many other industries. Moreover, iBasis is not in need of capital — our network is fully realized with sufficient capacity to support anticipated traffic growth through 2009 and beyond. And, importantly, the company continues to generate cash from operations.”
iBasis Inc.
Burlington,
NASDAQ: IBAS
• Employees: 397 as of Dec. 31, 2008
• 52 week range (as of March 10): 0.51 - 4.44
• Revenue: $1.3 billion (2008)
• Net income: Loss of $16.5 million
• Key developments 2008-early 2009:
— Acquired the international voice business of TDC, the leading telecom provider in Denmark, and completed the integration of that business into iBasis.
Bob Brennan
CEO, Iron Mountain
Greatest challenge for your company for the rest of 2009?
“Helping our customers to understand that they can lower their costs and perhaps even improve their profitability by investing in information management and getting tighter control over their data.”
Best strategic move your company has made since the September 2008 economic breakdown?
“We resisted the temptation to crouch into a defensive ball; and instead, we continue to invest in our future. While this economic environment requires us to be more selective, we’re investing in areas where we see the greatest potential — international growth, our digital business and in services that help our customers to manage their information, not just store it. We’re fortunate that our services remain in demand and that we’re well positioned to take advantage of the opportunities before us.”
What can you say to a loyal employee to assure them they will have a job at year end?
“What I tell every employee — in good times and in bad — is to take care of our customers and take care of your fellow employees. Also, know what’s expected of you and perform against those expectations.”
What the analysts say:
“The appeal of Iron Mountain’s services to businesses is set to increase because of several factors, such as the continuous ballooning of data volumes, the switch to greater digital records management, and ever-tightening data retention and corporate governance regulations.” — Tim Stammers, Ovum.
Iron Mountain Inc.
Boston, NYSE: IRM
• Employees: 20,000
• 52-week range (as of March 10): $16.71-$31.28
• Revenue: $3.1 billion
• Net income for 2008: $82 million
• Key developments 2008-early 2009:
— Iron Mountain introduced a cloud storage service for inactive data
— Iron Mountain was added to the S&P 500
Robert Friel
CEO, PerkinElmer
Greatest challenge for your company for the rest of 2009?
“The greatest challenge for any company in 2009 will be navigating the difficult economic environment. However, we remain confident that our strategic focus, our solid financial position, the strength and agility of our business model, and our deep portfolio of technologies and applications will provide us with a strong foundation to maintain our market-leading position now and when the economy recovers.
“In 2009, we will leverage our financial and operational strength to move with global market demand, positioning the company for long-term growth in the areas of human and environmental health. We will continue to build our core capabilities, with a strategic focus on expanding our technological portfolio and increasing our global presence to support the rapidly expanding health and environmental infrastructures of emerging nations.”
Best strategic move your company has made since the September economic breakdown?
“We announced our new strategic alignment into human health and environmental health in November of 2008. This alignment reflects our strategic mission around actively creating better outcomes that help improve the health and safety of people and the environment. Through our advanced technologies, applications, and services, we are addressing some of the critical issues that we hope will create a world with healthier babies, earlier detection of disease, and cleaner drinking water and safer surroundings.”
What can you say to a loyal employee to assure them they will have a job at year end?
“PerkinElmer’s work force is the backbone of our success. While we believe that our growth rates will be impacted in 2009, we are not planning to take any large restructuring actions. It is critical to retain the excellent people that have helped us establish our market-leading position through the years.”
What analysts say:
“PKI holds one of the top two market share positions in several important subsets of the life sciences technology and genetic screening segments. However, we think growth in these areas will be offset by the company’s exposure to more cyclical end markets. Productivity initiatives, solid expense control, and active share buyback can help shield (earnings per share) from these revenue headwinds.” — Leerink Swann & Co.
PerkinElmer Inc.
Waltham, NYSE: PKI
• Employees: Approx. 8,400 worldwide
• 52 week range (as of March 10): $10.88 - $29.95 (as of 2.25.09)
• Revenue: $1.9 billion (2008)
• Net income: $126 million
• Key developments 2008-early 2009:
— PerkinElmer strategically aligned the company into two focused businesses, human health and environmental health, to reflect its new strategic focus around actively creating better outcomes to improve the health and safety of people and their environment.
— Completed six acquisitions and entered into several strategic collaborations to focus the company’s portfolio in end markets with long-term growth potential. Acquisitions include: Opto Technology Inc., a supplier of light-emitting diode-based lighting components and subsystems; Arnel Inc., a leader in custom engineered solutions for gas chromatography applications in the petrochemical, food and beverage, and industrial hygiene markets; LabMetrix Technologies, the largest independent provider of metrology-based multi-vendor analytical instrument qualification solutions; and Pediatrix Medical Group Inc., a newborn metabolic screening business.
— Invested heavily in geographic expansion, especially in Asia Pacific, in which it made strategic investments in management infrastructure, technical centers and its distribution channel.
Anatomy of a train wreck
Only five of the 102 companies in the New England Tech Stock Index showed gains in their stock prices between March 2008 and March 3, 2009
TOP GAINERS:
| Company | Symbol | 3/3/2009 price | % change |
| Vertex Pharmaceuticals | VRTX | $27.23 | 54.9 |
| ImmunoGen Inc. | IMGN | $4.20 | 38.6 |
| NetScout Systems Inc. | NTCT | $12.42 | 36.9 |
| Indevus Pharmaceuticals | IDEV | $5.44 | 5.6 |
| American Science & Engineering Inc. | ASEI | $56.29 | 2.9 |
LARGEST LOSERS:
| Company | Symbol | 3/3/2009 price | % change |
| NaviSite Inc. | NAVI | 34 cents | 91.6 |
| CombinatoRx Inc. | CRXX | 41 cents | 92.1 |
| Photronics Inc. | PLAB | 79 cents | 92.3 |
| Candela Corp. | CLZR | 30 cents | 93 |
| Axcelis Technologies Inc. | ACLS | 28 cents | 94.7 |
Source: Bentley University and Mass High Tech New England Tech Stock Index.
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