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Friday, Jun 9, 2023


The recession may be over, but it has dramatically and permanently changed the face of public companies in Los Angeles.

More than half of this year’s 100 largest public companies were not on the list a decade ago. Back then, the local economy was still rich with giant aerospace companies and financial powerhouses. But those names are long gone either shut down, moved away, or merged out of existence.

In their place has emerged a more-entrepreneurial economy, leaving in its wake a stagnation of the aggregate revenues of L.A.’s largest 100 public companies.

Total revenues of the companies on this year’s list are $175.3 billion, up a scant 1.7 percent from $172.3 billion a decade ago. With inflation taken into account, those revenues are actually down nearly 20 percent, in real terms.

“Inflation has averaged 2 percent per year,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University. “That means 20 percent of (1997) revenues are from increased prices rather than production.”

Of course, much of that slack has been taken up by the explosive growth of smaller, privately held L.A. companies in the past decade, as well as by robust growth at the L.A. operations of public companies based elsewhere, such as the major Hollywood studios.

So the question remains: Is L.A. better or worse off by having a more limited base of large public companies?

Tom Lieser, executive director of the Anderson Forecast at UCLA, believes that the Los Angeles of yesteryear dominated by big corporate headquarters operations was better. The loss of large companies has resulted in both a drying up of corporate-backed philanthropy and a lack of political guidance from Fortune 500 executives, he said.

Adibi sees it differently, saying: “It’s not a bad sign. If the composition of the city was not changing it would mean that we are stagnating.”

Jack Kyser, chief economist of the Economic Development Corp. of L.A. County, agreed.

“It has been creative destruction,” he said. “A new economic order has emerged, and it is probably the best economic base we’ve ever had.”

While the recession is clearly responsible for some of the stagnation in large-public-company revenues, another factor is the shift toward more entrepreneurial ventures.

“Smaller, entrepreneurial companies have become more of a driving force in the Los Angeles economy, especially in the areas around downtown,” said Gary Schlossberg, economist at BankAmerica Corp. in San Francisco.

Adibi agreed, saying: “Southern California used to be dependent on a few big industries aerospace, entertainment, banks. Since the recession there has been major restructuring, with smaller companies igniting the growth.”

The decline of L.A.’s defense industry is particularly apparent when the 1998 and 1988 lists are compared.

Back in 1988 there were six aerospace/defense companies among the largest L.A. public companies. Now there are just two, and next year there could be just one. Northrop Grumman Corp., ranked fourth on this year’s list with $9.15 billion in 1997 revenues, has agreed to be acquired by Lockheed Martin Corp. The Justice Department is opposing the deal, but if it does go through, Northrop Grumman’s Century City headquarters would be shut down and merged with Lockheed Martin’s headquarters in Bethesda, Md.

Lockheed Martin itself has deep L.A. roots. Lockheed Corp. was among L.A.’s top-three largest public companies for years. But it shut down its Calabasas headquarters and moved to Bethesda when it was acquired by Martin Marietta Corp. in 1995.

While many public-company giants have disappeared, a few have emerged over the past decade none more forcefully than Walt Disney Co., surging from 19th place a decade ago with revenues of $2.87 billion, to first place this year with 1997 revenues of $22.47 billion. That’s a 680 percent growth in revenues.

While the other major entertainment studios in town also have experienced robust growth in the past decade, none of them are autonomous public companies. Instead, they are units of public companies based elsewhere.

Besides Disney, the other publicly traded entertainment companies based in Los Angeles remain also-rans.

Metro-Goldwyn-Mayer Inc. is ranked 35th on this year’s list with 1997 revenues of $831 million, and Spelling Entertainment is in the No. 44 spot.

Gone from the list of 10 years ago are MCA Inc., which is now renamed Universal Studios Inc. and controlled by Seagram Co. Ltd. Lorimar-Telepictures Corp. and Cannon Group Inc. no longer exist.

Another industry that has seen considerable upheaval is technology. A decade ago, it was dominated by large, publicly traded companies that depended heavily on military contracts. Today, there are two fewer technology companies among L.A.’s 100 largest public companies compared with a decade ago.

That’s not to say technology is a less-significant contributor to the local economy. But today’s local tech companies are typically much smaller and focused on commercial applications especially the Internet and entertainment-related uses.

El Segundo-based Computer Sciences Corp., which builds computer systems for large corporations, has moved up considerably on this year’s list. It now ranks as the seventh-largest public company in Los Angeles, with $6.6 billion in 1997 revenues. Back in 1988, the firm was ranked 33rd with 1987 revenues of $1.13 billion.

Ironically, the mergers-and-acquisitions craze that has stripped L.A. of many of its large public companies helped fuel Computer Sciences’ growth. The company has made a particular specialty of finding ways to integrate the computer systems of newlywed corporations.

While the overall prominence of tech-related companies on the list has declined in the past decade, the prominence of health care companies has increased.

Health maintenance organizations Foundation Health Systems and Wellpoint Health Networks Inc. garnered two of the top 10 spots this year, testimony to the growing role of HMOs.

“They have been pushed along by the push to cut down health care costs,” said Kyser. “This (managed care) was an industry that hardly existed 10 years ago.”

HMOs’ dramatic growth may slow in the years to come, however, Schlossberg said.

“Their ability to penetrate new markets is becoming increasingly limited, so growth will become more challenging,” he said.

Another striking change over the last 10 years has been the virtual disappearance of large, locally based banks and thrifts.

Back in 1988, Security Pacific Corp. was No. 5 on the list, with revenues of $7.8 billion. First Interstate Bancorp was ninth, with revenues of just over $5 billion. Both those institutions have since been bought out.

The biggest financial institutions on this year’s list are H.F. Ahmanson & Co., parent of Home Savings of America, at No. 15 with 1997 revenues of $3.73 billion, and Golden State Bancorp Inc., parent of Glendale Federal Bank, at No. 28 with revenues of $1.16 billion.

But even those institutions will probably be gone next year because both are in the process of being acquired by larger, out-of-town competitors.

That being the case, the honor of being the biggest publicly held L.A. financial institution will fall to City National Corp., at No. 56 on this year’s list. The Beverly Hills-based business bank had 1997 revenues of $411 million, only 5 percent as much as Security Pacific had back in 1987.

Despite a decade of volatility, some of L.A.’s big energy and utility companies have managed to maintain their perches.

Oil firms Atlantic Richfield Co., Occidental Petroleum Corp. and Unocal Corp., along with utility Edison International, each were in the top 10 a decade ago, and remain there today.

Their growth, however, has in most cases been less than impressive.

While Atlantic Richfield is ranked second on this year’s list, its $19.27 billion in 1997 revenues is up only 9.4 percent from the $17.61 billion it posted in 1987.

Unocal has actually shrunk in size, from $9.39 billion in revenues a decade ago to $6.06 billion last year.

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