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A decade of change

Top 10 Companies
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1. Wyman-Gordon

2. Keane, Inc.

3. Parametric Technology

4. Biogen, Inc.

5. EMC Corp.

6. TJX Cos.

7. Dynatech Corp.

8. State Street Corp.

9. New England Business Service, Inc.

10. Genrad, Inc.

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The 1998 Globe 100

Turnover a constant, but old reliables survive with innovate-or-die philosophy

By Charles Stein, Globe Staff

On the surface the Massachusetts economy looks an awful lot like it did when we first published the Globe 100 survey 10 years ago.

The economy is buoyant, home prices are rising, and the state is trying to figure out how to spend its budget surplus. But surface appearances can be deceiving. Just ask the guy at the wheel of the Titanic.

The past 10 years have been a time of enormous upheaval in Massachusetts.A boom gave way to bust and then boom again. Major industries such as defense and minicomputers withered away, while others - software, biotechnology, and finance - grew up to take their place.

''We have a very different portfolio than we had 10 years ago,'' said Craig Moore, an economics professor at the University of Massachusetts.

The same could be said for the Globe 100, our annual ranking of the performance of the state's public companies.

Many of the companies that topped our lists in those early years are gone. e Some failed; some moved away; many more were acquired by out-of-state firms. In their place have come new entries: companies such as Parametric Technology Corp., EMC Corp., and Staples Inc., which have grown dramatically over the past decade, sometimes creating whole new industries in the process.

Then there are the old reliables, such as Gillette Co. and State Street Corp., which were top performers then and now. Once again, however, appearances can be deceiving. Upon closer examination, the old reliables have prospered, not because of inertia, but because they have constantly reinvented themselves. Like the emerging companies, they have figured out ways to change along with a changing world.

''There's a phoenix-like quality to Massachusetts,'' said Frederick Breimyer, chief economist at State Street Bank. ''We have a creative spark that endures in good times and bad.''el-.5

The Globe 100 is the product of a computer analysis of publicly traded companies based in Massachusetts. It was developed from data for the calender year 1997 or for the four quarters ending closest to Dec. 31, 1997. The computer analysis was done by Nordby International Inc., an information services company in Boulder, Colo.

For our main list, the Globe 100 itself, we rank companies using four equally weighted measures: return on equity, annual sales, sales growth, and change in profit margin. We think this mixture captures the essential components of a quality company.

Sorting through the history of the Globe 100 is a bit like going through the family photo album: As you turn the pages, you quickly become aware of how much things have changed. In the case of Massachusetts companies, a few key trends emerge. They include:

  • You say goodbye, I say hello. The economist Joseph Schumpeter wrote about the creative destruction of capitalism. He must have had Massachusetts in mind. Over the past 10 years, scores of local companies have disappeared, mainly through mergers. Lotus was sold to IBM, Colonial Group to Liberty Financial Cos., Digital to Compaq Computer Corp., BayBanks to BankBoston Corp., Shawmut National to Fleet Financial Group Inc., and Affiliated Publications, owner of The Boston Globe, to The New York Times Co.

    Fortunately, new companies have been born as the old ones have died. In the last four years alone, about 130 Massachusetts companies have been created through initial public offerings. The new companies give us hope for the future - and something to write about.

  • Technology trees don't grow to the sky - at least not in Massachusetts. In the past decade a few small US technology companies have become giants. Dell Computer, Gateway 2000, and Cisco Systems certainly fit that description. In Massachusetts, technology giants are few and far between. Parametric, at about $800 million in sales, and EMC, with about $3 billion in sales, are the only homegrown technology firms that have risen from small to substantial companies in recent years. Plenty of other promising companies got their start here - Cascade Communications, Wellfleet Communications, Powersoft, and Atria Software - but when they reached a certain size, they were acquired by rivals, usually from California. As Breimyer puts it, ''We are the seedbed for new technology, but we don't grow the seedlings very tall before they become attractive to others.''

    Some elephants learn to tap dance; some don't. Gillette and State Street were already successful companies when we launched the Globe 100. They are more successful today because they have continued to innovate. Gillette, whose drop in shareholder equity due to a 1988 takeover battle cost it a spot on the first Globe 100 list,

    used new technology to create the Sensor, the razor behind the company's growth spurt in the 1990s. State Street entered new businesses - money management and foreign exchange - and grew them into major divisions. Both companies have moved into new markets around the globe, including markets that 10 years ago were locked behind the Iron Curtain.

    Polaroid and Digital were also substantial companies a decade ago. They still are. But both have struggled, largely because they failed to anticipate the direction technology would take. Why do some companies catch the wave while others do not? We'll leave that question to another group of Massachusetts companies, the management consulting firms.

  • If you picked the right stocks, you'd be rich now. The stock market as a whole has done spectacularly over the past 10 years. And the stocks of some Massachusetts companies have done a lot better than that. Consider: On May 1, the stock of Keane Inc., a Boston software company, sold for just over $50 per share. A decade earlier you could have bought the same stock for 56 cents. Put another away, a dollar invested in Keane 10 years ago would be worth $90 today. No other company in Massachusetts - or practically anywhere else - can make a claim like that.

    Still, a few other companies have done pretty well. Here's what a dollar invested in the following companies 10 years ago would be worth today: EMC, $80, State Street, $14, Gillette, $11, Thermo Electron, $8. Two more recent entries, Parametric and Staples, both of which went public in 1989, also have put up some impressive numbers. A dollar invested in Parametric at the beginning would be worth $36 today. A dollar invested in Staples would be worth $12.

    UMass professor Craig Moore doesn't think so. The excesses of the 1980s haven't been replicated in the 1990s, he said. Beyond that, the state's economy is more diversified. ''We don't have all our eggs in two or three baskets,'' said Moore.

    Without a crystal ball, it is impossible to know if whether Moore's optimism is justified. But here's a suggestion: Check back with us in 10 years for the 20th anniversary of the Globe 100, and we'll let you know how things turned out.

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