Posted by Tom Foremski - April 18, 2011
It's taken a decade but Silicon Valley companies have climbed out of dotcom dotbomb recession and reported their most profitable year in history.
The San Jose Mercury News reports that 2010 was a banner year for the 150 largest Silicon Valley companies.
"We're really seeing some inflection points," or pivotal changes, "in the tech industry," said John Walsh, a managing partner in the Silicon Valley office of Accenture... As examples, he said the growing popularity of social media, mobile gadgets and cloud computing...are changing how people use technology.
The combined stock market value of the SV150 hit $1.55 trillion on March 31, up 11.4 percent from a year earlier. That's despite sharp declines in share prices of two valley giants, Hewlett-Packard (HPQ) and Cisco Systems (CSCO).
While stock prices have jumped, employment has not. Unemployment is still fairly high at 10.3 percent.
However, a good 2010 is expected to boost employment levels. It is certainly boosting acquisitions.
Net cash spent on acquisitions rose 47 percent, to $22.6 billion. All told, SV150 members bought 170 companies in 2010, according to the 451 Group, a technology industry analysis firm. Seven of those deals were valued at $1 billion or more, compared with six in 2009.
More deals are likely, said Tammy L. Madsen, a business strategy professor at Santa Clara University, who said mergers and acquisitions tend to follow cycles. Financing shouldn't be a problem: The 10 biggest companies in the SV150 are sitting on a combined $181.5 billion in cash and short-term investments.
[Please see: Investment Banker Prepares For A Silicon Valley M&A Boom]
Foremski's Take: Silicon Valley's return would have happened sooner if it hadn't been for the financial crisis in 2008. The recession that followed had nothing to do with tech markets.
Silicon Valley firms are doing well but there are problems. Large companies such as Cisco, and HP are struggling; Google is going through a major reorganization; Yahoo is searching for an effective business strategy and so is eBay. And there is a lack of mid-sized companies that can feed M&A appetites.
Also, employment levels are unlikely to bounce back until we have a return of IPO markets. Newly IPO'd companies are by far the largest driver of new hires.
Here are the Silicon Valley 150.