The Fastest-Growing Technology Companies
Our yearly ranking of businesses whose inventiveness and quick reflexes are helping them to set the pace for the economy.

(Business 2.0) – The Business 2.0 100 is more than just a snapshot of American business today; it's also a savvy predictor of where we're headed. That's because the B2 100 concentrates exclusively on the engine of economic growth: technology. In this broad field, covering everything from cell-phone chips to defibrillators to Humvee armor, you'll find industry's most agile and innovative players, those most willing and able to seize new opportunities.

Nearly a third of these corporate success stories come out of the field of medical technology. And no wonder: You can't overstate the market power of aging baby boomers. Breakthrough medicines drove much of the growth, but our increasingly creaky, wrinkly population has been a godsend for companies that repair or replace rickety knees, lift sagging body parts, or clear clogged arteries.

The other great force fueling growth, sadly, is war. Thirteen military suppliers made our list, headed by Ceradyne, whose ceramic body armor can stop six successive 7.62-mm steel-core rounds. Again, it's no wonder: U.S. defense spending grew $96 billion last year.

The B2 100 tells us not only why tech companies are growing, but where. California, as always, is the nation's hotbed, with 32 businesses among the top 100. But the surprise this year is Minnesota, home to eight of our fast growers, up from just one last year.

One thing remains constant: It's tough to make our list. With the help of Zacks Investment Research, we winnowed down a universe of 2,000 publicly traded tech companies using a formula that stresses operating cash flow (see Methodology, page 128). Why? Because the ability to turn innovation into cold, hard cash is the key to any company's long-term prosperity.

The class of 2005 is a prosperous bunch indeed. The average B2 100 company has seen earnings grow 80 percent a year and revenue climb 26 percent. In the four years we've done the list, the numbers have never been higher. That says good things about the economy now, and bodes very well for the future.

METHODOLOGY To find the B2 100, we started with 2,000 publicly traded tech companies and narrowed the list to companies that have been trading for at least three years, bring in at least $50 million in annual revenue, and have positive cash flow over the most recently reported 12 months. Zacks Investment Research of Chicago ranked them using a rigorous combination of four financial criteria: growth in revenue, profit, and operating cash flow during the past three years, and the 12-month stock market return as of March 31, 2005. Cash flow growth counts for 40 percent of a company's ranking. Each of the other criteria counts for 20 percent.