Roaring back from the Great Recession, the 150 biggest public companies in Silicon Valley had their most profitable year in history in 2010, as their combined stock value climbed to the highest level since the Internet boom of 2000.

Revenue and profits soared as consumers flocked to buy new handheld gadgets, while corporations and public agencies resumed buying hardware and software to handle a rising tide of digital data -- from emails, tweets and videos to all manner of online transactions and Internet search results.

Those trends drove tech sales and profits higher than they were before the downturn of 2008 and 2009. For companies on the Mercury News' SV150 list, combined sales for the past four quarters rose 20.3 percent from a year earlier. Combined profit skyrocketed 78.6 percent. The list comprises the 150 biggest public companies, measured by revenue, that are based in Silicon Valley.

Companies responded by significantly boosting their spending on research and development, new plants and equipment, and stock repurchases. Big companies bought up dozens of smaller ones. But after laying off thousands during the downturn, many were cautious about adding new jobs.

"The industry definitely came out of recession in 2010," said Stephen Minton, an analyst for the IDC research firm. He said the resumption of tech purchases "was faster than expected and it occurred more quickly than after previous recessions."

Much of the growth in 2010 was simply a bounce back from depressed levels of 2009, as corporations resumed making tech purchases they had postponed during the downturn. But analysts said new consumer products and new uses for digital data -- to analyze business patterns and predict trends, for example, or to deliver information to smartphone-toting workers in the field -- also drove tech sales.


"We're really seeing some inflection points," or pivotal changes, "in the tech industry," said John Walsh, a managing partner in the Silicon Valley office of Accenture, a business consulting and services firm. As examples, he said the growing popularity of social media, mobile gadgets and cloud computing, in which software and services are delivered online, are changing how people use technology.

Apple (AAPL) led the way in profit, posting a stunning $16.6 billion in net income from its iPads, iPhones and other stylish gadgets. All told, the SV150 companies had a net profit margin of 15.6 percent -- the richest margin, by far, since the Mercury News began tracking the SV150 in 1985.

Investors, for the most part, liked what they saw: The combined stock market value of the SV150 hit $1.55 trillion on March 31, up 11.4 percent from a year earlier. That's despite sharp declines in share prices of two valley giants, Hewlett-Packard (HPQ) and Cisco Systems (CSCO), which struggled on Wall Street as HP replaced its CEO and Cisco wrestled with new competition.

The rising tide has not lifted all boats, however: While unemployment has been easing, state officials say the rate is still 10.3 percent in Santa Clara County, the geographic heart of Silicon Valley.

After shedding 62,000 jobs in 2009, the SV150 increased its total workforce in 2010 to 1.1 million employees worldwide, about 1,200 more than in 2008. But most companies don't disclose hiring by region, and their reports don't indicate how many workers were added by buying other companies.

Some companies are in hiring mode, especially Apple, Google (GOOG) and other Internet-based businesses. But many have not lost their recession-era caution about adding back workers, San Jose State business professor Joel West said.

And some employers learned to get by with fewer workers, after cutting jobs in the downturn or using technology to automate some functions, said Gary Matuszak, who leads the tech industry practice at auditing and consulting firm KPMG.

That most likely contributed to the record profit margin for 2010, and the fact that total sales per employee rose 13 percent for the SV150 as a whole. But some analysts believe tech companies will increase hiring to match recent growth.

"Last year, companies were uncertain about spending and reluctant to hire," Wells Fargo Securities analyst Jason Maynard said in a report this month on the tech industry. "We don't see that playing out in 2011, and assume that hiring needs to catch up."

Local companies increased spending by double digits in other categories, after generating a whopping $116.7 billion in combined cash flow from operations.

SV150 companies boosted spending on research and development by 16 percent. Capital expenditures rose 46 percent. And companies' spending to buy back their own stock, which can help investors by shoring up the value of their shares, rose 101 percent.

Big companies also gobbled up scores of smaller firms last year, taking advantage of valuations that fell during the downturn. Net cash spent on acquisitions rose 47 percent, to $22.6 billion.

All told, SV150 members bought 170 companies in 2010, according to the 451 Group, a technology industry analysis firm. Seven of those deals were valued at $1 billion or more, compared with six in 2009.

More deals are likely, said Tammy L. Madsen, a business strategy professor at Santa Clara University, who said mergers and acquisitions tend to follow cycles. Financing shouldn't be a problem: The 10 biggest companies in the SV150 are sitting on a combined $181.5 billion in cash and short-term investments.

Many of the recent deals were negotiated by big companies that want to expand into new business segments. Instead of focusing on a few product categories, commercial tech giants such as HP, Cisco and Oracle (ORCL) are vying to sell a full range of computer hardware and software.

In the consumer market, PC sales began to slow last winter as some people bought tablets and smartphones instead. Both Apple and Google, the maker of Android mobile software, are benefiting from those trends, West noted, while HP has announced a major push to sell similar products.

After the post-recession surge, some analysts believe tech sales will grow at a more moderate pace in 2011. Last year's growth rate "was not sustainable," Minton cautioned.

At the same time, companies from startups to giants are moving into social networking and mobile computing -- new technologies that are luring consumers and workers into spending more time online, creating more data and spurring more sales for Silicon Valley businesses.

These new technologies gained traction even in "the darkest period" of the recession, Accenture's Walsh said. Now, they're part of what he called "a renewed level of energy and optimism in Silicon Valley."