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FROM THE POST:
The centerpiece of Washington area technology is still the federal connection, as evidenced by the 1997 Fast 50, Washington Technology magazine's list of the fastest-growing technology firms.
Read recent stories by Post regional economy reporter Peter Behr.
Read last year's story on The Post 200.
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Go to Business Front.
Washington Post Staff Writer
Monday, April 28, 1997; Page F04
The success of the technology companies -- and their ability to reap investor support -- buttresses the Washington areaís bid for recognition as one of the nationís technology leaders.
"Youíre seeing more companies coming to the area, and some start-ups with really good software ideas and several new telecom companies popping up out of nowhere. The area seems to be attracting a lot of talent on the technology side," said William Loomis, a securities analyst with Ferris, Baker Watts Inc. in Baltimore.
The centerpiece of Washington area technology is still the federal connection. Contractors that create software and weapons systems, configure computers and help manage the governmentís operations filled almost 20 places on the Top 100 last year, led by the nationís largest defense firm, Bethesda-based Lockheed Martin Corp.
But the biggest moves last year were made by a cluster of companies that transmit conversation, data and images over long-distance and wireless networks and the Internet.
Like LCC, Vienna-based SSE Telecom Inc. worked the hardware side of the telecom market. Strong sales of its satellite communications products moved it back onto the Top 100 at No. 94, after falling off last year.
The ferment was not all technology-based. Geico, the ninth-largest area firm in 1995, dropped off the list this year when it was acquired by Berkshire Hathaway Inc. Columbia Gas System moved the headquarters of its energy production and distribution company from Delaware to Reston last year, becoming the new No. 9 on the Top 100.
Several of this yearís newcomers are on the far side of the technology spectrum. Choice Hotels International of Silver Spring was spun off from Manor Care Inc., as the second-largest hotel franchiser in the world and District-based CapStar Hotel Co., which owns and manages hotels throughout the United States, went public last year.
The nonstop acquisitions of District-based U.S. Office Products Co., which equips offices with stationery, furniture, computers and coffee, pushed it up 28 places on the list, to No. 33.
All in all, the Top 100 firms recorded net income of $8.8 billion last year, a gain of $3.7 billion, or a huge 70 percent above the 1995 level. Nearly $3 billion of that profit was rung up by Fairfax-based Mobil Corp., a 25 percent increase.
Revenue for Top 100 companies totaled almost $201 billion last year, a 14 percent gain over 1995, and only 12 of the companies took in less money last year than the year before.
Technology companies also paced job growth in the region. Unemployment rates throughout the region fell during last quarter of 1996 to reach the lowest levels since the beginning of the decade. The demand for workers, particularly those with technology skills, far exceeded the supply, companies reported.
Led by locally based technology companies, half of the Top 100 companies boosted employment in the Washington area, adding some 16,000 workers, a gain of 32 percent. (The total excludes year-to-year changes at Lockheed Martin, which picked up thousands of area employees of Loral Corp. when it acquired the contractor last year.)
The telecommunications companiesí success comes as the regionís leading telecom company, District-based MCI Communications Corp., makes its final appearance on the Top 100.
After a long climb over three decades from upstart challenger in the long-distance market to global telecommunications power, MCI has agreed to be acquired by British Telecommunications PLC for $21 billion. If government agencies approve, the merged companies would bear the name Concert PLC.
But MCI will leave offspring behind, in the form of newly grown telecommunications firms whose owners and managers trace their roots directly or indirectly to MCI, the nationís second-largest long-distance firm.
Donald A. Burns, president and chief executive of Telco Communications, says the strategies he now employs at Telco were developed a decade ago, when he worked at a small long-distance company founded by an MCI alumnus.
Nextel and Primus are headed by former MCI executives, and such examples fill the family tree of the regionís telecommunications industry, Burns said.
The Top 100 list cannot provide a perfect snapshot of the area economyís performance because Mobil, Lockheed Martin and a handful of other billion-dollar companies dominate the revenue picture. But the list does offer insights into companies and industries in transition. And transition can be painful.
And 1996 was another money-losing year for Hechinger, as the family-run home improvement retailer searched once more for a winning strategy amid flat revenue.
GTSI, largest provider of off-the-shelf computer products to the federal government, was hurt once again last year by changes in federal purchasing policies that make it easier for agencies to buy computers at retail.
The Dart Group in Landover and its principal components, Trak Auto Corp. and Crown Books Corp., continued to suffer the fallout from the legal battles within the Haft family, which controls the group, as well as from competitive pressures.
Three home builders on the Top 100 had different results last year in the intensely competitive Washington area market. NVR Inc. of McLean, the regionís largest home builder, used its size to advantage, recording strong gains in revenue and profit.
The Ryland Group, based in Columbia, rebounded to post a profit in 1996 after a loss the previous year, although its sales declined last year. Earnings fell and sales were flat at Washington Homes Inc. of Landover during the first half of 1996 but have picked up since.
The regionís government contractors on the Top 100, headed by defense contractors Lockheed Martin and General Dynamics Corp. of Falls Church and a cluster of information technology firms around the Capital Beltway, generally had a good year in 1996, Loomis said. Despite cutbacks in many parts of the federal bureaucracy, funding held up for agenciesí investments in new software and computer systems, the specialty of the regionís technology contractors.
The expertise within the Washington regionís technology companies and their growing appeal to outside investors are raw materials that can make the nationís capital a national center of technology, according to Rolf Selvig, marketing director of VentureOne Corp., a San Francisco research firm that tracks venture capital investments.
"There are centers of technology all over the world," he said. A large supply of venture capital is essentialóbut it wonít guarantee success either. "Venture capitalists will go anywhere now to get a deal."
It is the entrepreneurial culture that makes the difference in the end, Selvig said.