A decade of growth, maturation and reinvention. 10-year view Key sectors Computing Software Telecom How we did it Netgear: Most productive Corvis: Fastest growth The NW200 A to Z Ten years is a long time in this volatile industry. We've seen heady growth, constant realignment and repositioning, a spectacular collapse and now, signs of resurrection?By some accounts, we have turned the corner.After the Network World 200 posted the first-ever loss of $65 billion in 2001 and followed that with a staggering $155 billion loss in 2002, last year the group bounced back to profitability.The NW200 - the largest domestic public network companies - posted some $61 billion in profit in 2003. After two years of decline, sales for the group headed back in the right direction, increasing 6% to $818 billion. While respectable, that's well shy of the $909 billion mark the NW200 reached in 2000.We're not officially out of the woods yet, but other positive signs floated to the surface in this, our 10th annual NW200 survey. For one, the number of companies that enjoyed sales growth is edging back toward normal. Until 2001, on average 85% of the NW200 companies would increase sales each year. When the bottom fell out in 2001, only 57% of the companies managed that feat, and in the bleak days of 2002 only 42% saw sales grow. Last year, 68% of NW200 companies sold more goods and services than they did the preceding year.Another positive sign is that more companies ended the year in the black. In 2001, only 32% of NW200 companies posted profits. Likewise in 2002 when 35% were profitable. Last year that tally jumped to 53%. While a good sign, it is a half-full\/half-empty argument: Almost half the companies still lost money in 2003.The bulk of those were the smaller firms at the lower end of the list, but they had company among the biggest players:\u00a0Electronic Data Systems\u00a0lost $1.7 billion last year,\u00a0Sun\u00a0ate $1.4 billion, and\u00a0Level 3 Communications\u00a0lost $711 million.Nevertheless, Wall Street is more bullish about the prospects of the NW200, another sign of improving health. The collective market cap of the NW200 grew 34% in 2003 to $1.9 trillion. While that is well off the high of $5 trillion reached in 1999, no one is anxious to see the return of those phantasmagorical days.On a gloomy note, whatever good news can be gleaned from the NW200 results wasn't reflected in the employment column. Collectively the companies shed some 73,000 jobs last year, with employment dropping 3% to 2.4 million.10-year viewInterestingly enough, that employment figure isn't remarkably larger than 10 years ago, even though the revenue difference is huge. In 1994, the 200 companies comprising the list employed 2.2 million and generated $483 billion in sales. With only 9% more people in 2003, the NW200 produced 69% more revenue - $818 billion.Looked at another way, 10 years ago the companies were generating an average of $218,000 per employee, while today's companies crank out $341,000 per employee. Even adjusted for inflation ($218,000 a decade ago equates to about $276,000 today), that's a leap that speaks volumes about silicon advances and the maturation of technology. Of course, the NW200 has changed significantly over the years, reshaped by numerous boom and bust cycles and the attendant merger-and-acquisition activity. Of companies that made the original list in 1994, only 38 remain, and many of these have changed dramatically.Take\u00a0IBM. Second on the list in 1994 with $63 billion in sales, mostly from hardware, IBM has ascended to the top slot largely on the back of services. In 10 years, it has added $26 billion in revenue to reach $89 billion. Service revenue passed hardware revenue in 2001 and now dwarfs it, accounting for 48% of sales to hardware's 32%. Ranked by revenue In alphabetical order HP, once a third the size of IBM, played the merger gambit to achieve growth. "Technology markets are consolidating, with the No. 1 and No. 2 players being best positioned for sustainable market share growth and profitability," HP CEO Carly Fiorina writes in the company's 2003 annual report, reflecting on the 2002 merger with Compaq. A $25 billion company in 1994, HP today is a $75 billion behemoth (based on trailing 12-month [TTM] data; see "How we did it," below), second only to IBM on the list.The ten most productive NW200 companies Company Rev. per employee NW200 rank Netgear $1,445,903 100 Dot Hill Systems $956,122 119 Dell $900,957 4 Level 3 Communications $865,806 34 Emulex $861,466 95 Qlogic $697,474 76 Foundry Networks $679,592 84 Nextel Communications $636,471 20 Microsoft $623,109 8 Apple $617,760 25 The complete chart Time hasn't been so kind to other NW200 stalwarts.\u00a0AT&T\u00a0headed the list in '94, a $70 billion powerhouse. Today, after multiple fits, starts and reorganizations, it is ranked seventh with half of those sales, $35 billion.Nortel\u00a0had $8 billion in revenue in '94, nearly quadrupled that to $30 billion in 2000, and today is back close to where it started with sales of $9.8 billion.\u00a03Com\u00a0is actually smaller today than it was 10 years ago, falling from 49th on the list in 1994 with sales of $827 million to 69th with $735 million (TTM) in revenue. The company topped out at $5.8 billion in 1999.Key sectorsAnd to think that in the early '90s 3Com was running neck-and-neck with\u00a0Cisco. But Cisco was hitting its stride in 1994. The company almost doubled revenue that year to cross the billion-dollar mark for the first time, finishing the year with $1.3 billion in sales. (1994 was also the year Cisco introduced what would go on to become its hugely popular Catalyst switch.)Netgear: Tops in productivityNetgear debuts on the NW200 with distinction as the most productive company. One quick conversation with Netgear CEO Patrick Lo is all it takes to understand how this small office\/home office equipment maker came to carry the NW200 title for most productive, having pulled in $1.4 million per employee in 2003. Lo is enthusiastic and energetic, passionate about changing the way people live and work.Click here for moreNow Cisco is 14th on the list and about to cross the $20 billion (TTM) threshold. It is the 800-pound gorilla of the network world, but competition is creeping in from different angles, which might help explain the company's anemic 3% growth (TTM) last year.Consider competition in high-end routing.\u00a0Juniper's\u00a0sales were up 28% last year to $701 million, jumping it five rungs up the list to 70th. While representing only a fraction of Cisco's fiscal 2003 $4.9 billion router business, Cisco has been losing ground. Router sales were down 11% from fiscal '02. With Juniper creeping in at the top of the routing food chain, it is nicely positioned for growth as networks expand.Expansion is just what Juniper had in mind when it\u00a0acquired security vendor NetScreen Technologies\u00a0(104th on the list with sales of $275 million) for $4 billion in stock in February. The company has been fairly mum about its motivation, but the union moves Juniper more squarely into the enterprise business where it will more often butt heads with Cisco.In switching, Cisco had a commanding 68% market share in 2003, according to Dell'Oro Group. But it also saw revenue slip there, down $55 million from '02. Every other player, however - including 3Com,\u00a0Enterasys Networks,\u00a0Extreme Networks,\u00a0Foundry Networks\u00a0and HP - each has less than a 5% share. Only Nortel has more, but just a hair: 5.7%.A few companies are gaining ground. Foundry's switched Ethernet sales grew 17% last year, Dell'Oro says, and HP, which is pushing a low-cost story, saw sales jump 49%.3Com and\u00a0Dell\u00a0hope to mimic HP's low-cost play. 3Com has\u00a0formed a joint venture\u00a0with Huawei Technologies that includes research and development and manufacturing, and Dell is looking to do with switching what it has done with PCs - squeeze out costs and sell direct.But two years' effort on this front hasn't amounted to anything for Dell. IDC says Dell had less than 1% of the switch market revenue in 2003. A Dell quarterly financial press release from February extolled gains in servers, storage and even printers, but didn't once mention switches.Corvis returns to the NW200 as Fastest GrowerFlagging revenue bumped Corvis from the 2002 NW200 list, but the optical gear vendor acquires its way back on \u2014 and becomes the fastest-growing company in 2003. Last February, beleaguered optical network vendor Corvis changed its destiny. Accepting that its high-end carrier gear, although well respected, wasn\u2019t its future, Corvis bid to acquire its largest customer, broadband services provider Broadwing. The deal closed in June and led to 1,455% revenue growth.Click here for moreComputingThat hasn't seemed to hamper Dell's growth. Twenty-fifth on the list in 1994 with sales of $2.9 billion, today Dell is fourth, posting sales of $41 billion (TTM).In the quarter that ended Jan. 30, Dell says server shipments were up 40%, and laptop and desktop shipments were up 40% and 21%, respectively.Even though Dell generated $33 billion less revenue than HP in the past 12 months, Dell's profit was remarkably similar - $2.6 billion (TTM) vs. HP's $2.7 billion (TTM). Looked at as a percentage of revenue, Dell's profit was 6% vs. HP's 4%, evidence of Dell's ruthless pursuit of cost-cutting.Big Blue shames Dell and HP in the profit column, exposing the brilliance of IBM's early focus on highly profitable services. IBM generated a 9% return on revenue last year - $7.6 billion - more than twice HP's number.But one step at a time. HP is just glad to be back in the black after ending 2002 with a $928 million loss associated with the Compaq acquisition. In fiscal '03 (ended Oct. 31), HP returned its core Enterprise Systems Group and its Personal Systems Group to profitability. It also increased its managed services revenue by 22% on a full-year, combined-company basis.Sun would have been happy with any profit last year. The beleaguered company lost $1.4 billion (TTM) on sales that dropped 8% to $11 billion (TTM), slipping in the process from 17th on the list to 19th. That compares to happier days in 2001 when Sun reported sales of $18 billion.In a\u00a0recent interview, Sun CEO Scott McNealy said the company has a strong cash position and "a completely re-energized, retooled product line . . . I like our position. I like our brand. I like our product line. Our cost structure is a little high, but we're not going to go take a meat cleaver to it and ruin the product calendar or let customer satisfaction suffer."SoftwareOne of the forces pressuring Sun, of course, is\u00a0Linux. IBM and HP are backers,\u00a0Red Hat\u00a0is growing like a weed, and\u00a0Novell\u00a0is suddenly relevant again.The ten fastest growing NW200 companies Company Rev. growth NW200 rank Corvis 1455% 96 Dot Hill Systems 300% 119 Safenet 105% 175 NetScreen Technologies 71% 104 Computer Network Technology 71% 91 Research in Motion 65% 78 Ascential Software 64% 120 Altiris 58% 143 DSL Net 57% 169 Red Hat 56% 133 The complete chart The five fastest growing NW200 companies with more than $500M in revenue Company Rev. growth NW200 rank Apple Computer, Inc. 637% 25 Veritas 378% 42 Scientific-Atlanta 209% 44 BellSouth 195% 12 Network Appliance 137% 55 Even with the pall cast over Linux by The SCO Group's litigation against IBM and Linux users, Red Hat found enough new takers to ratchet up sales 56% to $115 million (TTM). It turned a $9 million profit in the process and climbed up the list from 162 to 133.Novell is looking for a similar bounce, and with good cause. Like 3Com, Novell today is smaller than it was when we first compiled the NW200: $1.1 billion (TTM) today vs. $1.3 billion in '94. But a decade ago Novell was churning out more than $300 million in profits while today it is losing $49 million (TTM).Its effort to turn the tide is based on Linux. Novell\u00a0announced in November\u00a0it would acquire the company SuSE Linux and soon after completing that acquisition in January announced its\u00a0grand plan: moving up the release of NetWare 7 by a year, shipping it with both the NetWare kernel and SuSE Linux Enterprise Server, and renaming it Open Enterprise Server. The product is supposed to ship by year-end. To assuage concerns about SCO's ongoing legal efforts, Novell announced an indemnification program to cover copyright infringement claims.Microsoft\u00a0already has lost business accounts to Linux and talks about the Linux threat in its 2003 annual report. Competitors "provide customers with open source software at nominal cost and earn revenue on complimentary service and products without having to bear the full costs of [R&D]," the report says.While Microsoft has vaulted from 23 on the NW200 list in 1994 with $4.6 billion in sales to No. 8 with $34 billion (TTM), it is clear the going is getting tougher. Five years ago Microsoft generated 39% profit on sales, while last year it only generated 26% (TTM).But Microsoft knows how to make money better than any other NW200 company. Its $8.9 billion (TTM) in profits leads the NW200. Although, $55 billion smaller than IBM, Microsoft generated $1.3 billion more in net income.TelecomStill missing from the NW200 is\u00a0MCI, which dropped off the list in 2002 after filing for bankruptcy protection and missed it again in 2003 as it continued sorting out its house.How we did itRevenue and profit data for companies whose fiscal years ended in November '03, December '03 or January '04 came from 10K statements filed with the Securities and Exchange Commission or, where those were unavailable, directly from the companies. For companies with fiscal years ending other than November, December or January, we gathered revenue and profit data from their last four quarters of financial reports, taken from 10K and 10Q statements filed to the SEC. In this way, we are comparing the financial results of the same calendar year for all companies, otherwise known as "trailing 12 months."The company just recently completed auditing its 2002 results. The restatements issued as part of that process show MCI's sales dropping from $39 billion in 2000, to $38 billion in 2001 and $32 billion in 2002. Net losses were $49 billion, $16 billion and $9.2 billion, respectively.For 2003, the company has been filing monthly operating reports with the U.S. bankruptcy court. These show a bleak picture. Revenues for the year are down 25% to $24 billion and losses for the year stand at $58 million. MCI\u00a0emerged from bankruptcy\u00a0last week. Clearly, MCI has its work cut out for it in terms of winning back customers.Now consider the big kahuna of telecom,\u00a0Verizon, third on the list with sales of $68 billion. Besides being the largest company, it is the nation's largest wireless carrier, with wireless accounting for 33% of revenue.Verizon is launching next-generation data services that support speeds of 300K to 500K bit\/sec. To attract more business customers, Verizon is building out its national fiber network in a program called Enterprise Advance. This program is expanding the "reach of existing products - such as long-distance, data, fiber rings and optical transport" and serving as a platform for new IP-based services such as VoIP and VPNs.It also is having success bundling services, with 48% of its residential customers buying local service in combination with either long-distance, DSL or both. The company says it has 2.3 million broadband customers and "long-distance is now a $2 billion business, up almost 20% for the year."The world has changed.Speculation is still rife that additional telecom consolidation is in the offing, which will perhaps further reduce the number of companies that can claim they have graced the NW200 since its inception.But the NW200 beat will go on.