Silicon Valley's fastest growers struggle

What a difference a year makes in Silicon Valley. Seemingly
invincible a year ago with companies like Cisco worth more than $ 500 billion,
the valley is struggling. Just consider the performance of the 50 companies that
had the highest sales growth during the 12-month period ending June 30:

• The 50 fastest growing companies in the valley had
  sales of $ 10 billion in the past four quarters. But they lost a combined $
  28 billion.
  

• Only three of the 50 fastest growing companies were
  profitable.
  

• Stocks of all but one of the 50 have plunged this year
  with a majority losing 80 percent or more of their value.
  

Typical of what has been happening to so many companies in
the valley is chipmaker Transmeta. In gross sales, it grew the fastest of any
company in Silicon Valley. During the 12-month period that ended June 29, the
company's sales of $ 44 million were up 30-fold from the preceding year.
 

Transmeta, which makes the Crusoe chip, looked like a gold
mine for its investors with a market value reaching a whopping $ 17 billion in
November 2000. Today, after suffering a series of disappointing quarters, the
company's stock has plunged from $ 50 to $ 1.60 and its market value is down to
$ 200 million.
 

Transmeta has been a disaster for its initial backers, who
included Sony, Compaq, AOL and Microsoft co-founder Paul Allen who bought into
the company at between $ 6 and $ 10. AOL has lost $ 14.28 million on its $ 17
million investment.
 

For much of the past 40 years, Silicon Valley has been a
venture capital dream world. This past year that has turned into a nightmare.
The only venture capitalists who made any kind of money this past year were
those that cashed in their chips back in mid-to-late 2000.
 

Cisco too, has caused its once elated investors tremendous
agony. The company has lost more than $ 300 billion in market value. Its stock
has plunged from $ 80 to just $ 12.
 

Still many remain optimistic that the Valley will regain
its reputation as one of the best places to invest money. There are hundreds of
companies currently planning to go to market with new products and services.
Unlike the 1999-2000 market in which it was fashionable to take companies public
before they even had a product, the new crop of firms will have more time to
establish a track record of sales and prove the vitality of the new markets they
intend to create. "If you're an investor, now's the opportunity," said
Bruce Lupatkin, fund manager for North Bay Technology Partners, a technology
hedge fund in Novato.
 

Several of the Valley's up-and coming high-tech companies
are expected to show strong sales growth and profitability in the years to come.

 

They include:

• VeriSign in Mountain View verifies the identity and
  credit cards of people and companies buying products online. When it bought
  Network Solutions, VeriSign gained a virtual government-sanctioned monopoly
  on the three Internet domain-name suffixes--.com, .net and .org. For each
  address using those suffixes, VeriSign gets $ 6 a year--more if it provides
  other services. VeriSign lost $ 15 billion in the last four quarters, mostly
  related to the purchase of Network Solutions. It has nearly $ 800 million in
  cash and short-term investments on hand to move forward.
  

• Juniper Networks remains a leading supplier of high-end
  core routers, the equipment that directs data through the heart of large
  communications networks. It continues to gain market share from Cisco
  Systems. The firm is profitable and has $ 1 billion in cash.
  

• Based in San Jose, NetIQ makes software that manages
  corporate computer networks.