Programmed for growth
Business-software giant SAS has an impressive record of growing revenue every year since it was founded 39 years ago. Last year was no exception: The Cary-based company registered a 2.3% increase to $3.09 billion — a number that’s closer to 5% when currency fluctuations are taken into account. What’s the secret sauce behind SAS’ success, particularly in an industry known for fast-paced innovations? A healthy research-and- development budget clearly doesn’t hurt. Last year SAS, which employs more than 5,300 in North Carolina, poured about $692 million, or 23% of revenue, into R&D. That was close to its average over the last five years. Looking at the results, the investment seems to have paid off. Revenue rose 27.2% over five years, while the R&D budget grew 18.7%. Compared with large tech companies such as Microsoft and Google, SAS’ outlay is relatively small. Microsoft spent $10.4 billion, or 13% of revenue, on R&D last year. Google spent $8 billion.
Software companies are rising in the research-and-development ranks, says Barry Jaruzelski, a senior partner at New York-based consulting firm Strategy&, an arm of PricewaterhouseCoopers. He leads the company’s annual Innovation 1000 list, which ranks companies’ R&D expenditures and effectiveness. Over the last decade, the 1,000 companies have increased R&D spending by a 5.5% compound annual growth rate, while the software industry’s rate is 11.7%. The sector’s products have a high turnover rate, but software companies also have more flexibility because they don’t typically have large capital expenditures, such as building and maintaining factories, Jaruzelski says. “If you’re making code, you can spend a lot more of your revenue on R&D because it’s just electrons.”
Growth around SAS’ cloud analytics unit has been particularly strong, with revenue rising 24% last year alongside an increasing push to store information online and interpret that data. The company heavily marketed analytics software last year, a move that SAS reported brought in more than 2,000 new customers. SAS opened a 220,000-square-foot building on its campus last year to house an analytics lab that works with state and local governments. Revenue from government agencies rose 23% in 2014, while sales to life- sciences companies gained 21%.
DURHAM — Los Angeles-based PacWest Bancorp will acquire Square 1 Financial, parent of Square 1 Bank, in a deal valued at about $849 million. In addition to its local headquarters, Square 1 operates 12 loan-production offices nationwide and had $3.1 billion in assets as of Dec. 31. PacWest has more than $16 billion in assets and operates 80 branches in California. The deal is expected to close in the fourth quarter.
OXFORD — Shalag will expand its local plant, investing $16 million and adding 40 new jobs to its 74 over three years. The company, based in Israel, makes nonwoven materials for pro- ducts including baby diapers and medical and industrial wipes. The new jobs will pay an average annual wage of $35,531, lower than Granville County’s $37,511.
RALEIGH — First Citizens Bank will acquire Atlanta-based Capitol City Bank & Trust for an undisclosed amount in its seventh FDIC-assisted transaction since July 2009. Capitol City has eight branches in Georgia and assets of $275 million. Based here, First Citizens has 566 branches in 18 states and the District of Columbia. Parent First Citizens BancShares has $30 billion in assets. James Bennett, executive for the bank’s South Carolina central region, will lead operations for the new branches.
DURHAM — Dennis Gillings will step down as chairman of Quintiles Transnational Holdings at year-end. He will remain a director of the contract-research organization he co-founded in 1982. Quintiles went public in 2013 and now employs more than 32,000 people in 100 countries, including about 2,900 in North Carolina. Gillings’ successor has not been named.