Techies hope recovery can reboot the industry.

• Position: High-Tech

Leaders of the once high-flying high-tech sector thought its free-fall might end in 2003 with a soft landing. Wrong. As of June, about 1,900--45%--of the state's high-tech companies had shut down or moved away during the previous two years, according to the North Carolina Electronic and Information Technology Association.

Laid-off workers continued to search for jobs. Startups that managed to hang on turned to family or credit cards to keep their businesses afloat. That's because private-equity financing in North Carolina tech companies hit its lowest levels in six years. The $17.4 million of second-round financing in Ziptronix, a Morrisville-based maker of integrated circuits used in cell phones, would have gained little attention in the late 1990s. But in the first three quarters of 2003, Ziptronix was the state's darling with the largest single deal. Through September, venture capital investment was running 42% behind the same period for 2002 with $229 million acquired, compared with $396 million in 2002.

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Two established tech companies thrived in the down market. Cary-based SAS Institute found fertile soil for its data-mining software. By midyear the privately held company reported software revenue of $480 million, up 16% from the same period in 2002. And Raleigh-based Red Hat, which sells and services the Linux computer-operating system, reported $4.9 million in net income for the first half of its fiscal year, which ends in February. It lost $6.5 million in the first half of the previous year.

A family feud threatened another high-tech mainstay: Durham-based Cree, which makes semiconductors, lighting and other products. In June, Eric Hunter, one of two brothers who founded the company, filed a $3.2 billion federal lawsuit against Cree and its chairman, his brother Neal Hunter. Eric Hunter claimed that Cree had published "numerous false and misleading statements" that caused losses to shareholders and that he had been intimidated by Neal Hunter to keep quiet.

The news sent Cree's stock plummeting and sparked investigations by the Securities and Exchange Commission and the Nasdaq Stock Market. In late November, the lawsuit was settled, with no payment to Eric Hunter, and the stock price started recovering. It was trading at $17.15 a share in early December, about 10% less than in December 2002.

Cary-based SpectraSite, which manages wireless towers for cell-phone companies, emerged from bankruptcy in February. Freed...