Subtle changes come to California's corridor of dreamers


June 22, 1992|By Jolie Solomon | Jolie Solomon,Boston Globe

MOUNTAIN VIEW, Calif. -- At General Magic, a young computer company here, Bowser -- resident rabbit and mascot -- has his own nameplate on the wall. Conference rooms have names such as Willy Wonka, and night-owl engineers nap on futons in a corner of the office.

Is this Silicon Valley 1982, or 1992?

Well, it is 1992, and this 2-year-old company is an example of the kind of start-up that gave Silicon Valley its global reputation not only for huge productivity but also for a new brand of creative energy.

Silicon Valley is still the prosperous center of gravity for U.S. high technology, a sunlit land where the agonies of Massachusetts' Route 128 seem far away, not only in miles. Unlike Route 128, which grew on mainframes and minicomputers, Silicon Valley boomed with semiconductors, personal computers and software. Despite their struggles, these have proved more durable and expansive as businesses.

But in the hills and valley surrounding General Magic, subtle changes are evident. Silicon Valley, south of San Francisco and north of the Monterey Peninsula, is vulnerable to the recession still gripping California, to huge military cutbacks that have just begun and to the anxieties heightened by the riots in Los Angeles.

There are other, more basic changes. Silicon Valley is maturing.

"The growth experienced in the last 10 or 12 years will not be repeated," said James Smith, director for technology companies at the National Association of Securities Dealers office in Palo Alto. "Markets are matured. A lot of companies are being forced to consolidate or get out."

Silicon Valley is still the nerve center, but it isn't the only place to be: Many new companies find Seattle, Texas, or Utah more enticing.

Professionals may not stay unemployed for long here, but employment in many computer-related businesses in Santa Clara County, the heart of Silicon Valley, has dropped, to 176,100 this April from 189,900 in April 1989, according to state data.

And start-ups still start up, but it's tougher.

"It's harder today than 15 years ago to have a gleam in your eye and start in your garage," says Alan S. Henricks, chief financial officer at the burgeoning software company Borland International Inc. in Scotts Valley.

Money still flows -- but it doesn't gush. Compared with five years ago, says entrepreneur Moshe Gray, a founder of Edge Diagnostics, "it's a meltdown."

The ratio of engineers to lawyers, bean counters, publicists and management consultants is way down, changing the spirit of the place.

Just a few years ago "it was, 'Here come the ties' " if anyone in a business suit came on the premises at many companies, recalls Mr. Henricks, who worked at Atari, the electronic games maker, among other companies.

Take National Semiconductor in Santa Clara, one of the microchip pioneers here. National is struggling back from several unprofitable years, including a loss of $150.3 million last year. The company is consolidating plants and cutting employees, from 31,500 in 1990 to a target as low as 25,000.

George M. Scalise, chief operating officer, spends much of his time thinking about new training and compensation systems that will get more out of fewer employees. He is putting 400 managers through weeks of training to help them deal better with the relentless change. And a new task force of technical, operating and strategy people now meets once a month to "really look at where we're going," Mr. Scalise says.

That's very different from the way business has been done in Silicon Valley.

An expanse of orchards and farmland just 20 years ago, the area that became known as Silicon Valley grew like Topsy. One small company spawned another, as two lone engineers might take over a small building, adding another building every six months, and spin off new entities.

Rewards were huge, fear of failure remote. Almost everyone was young and competitive, eager to take risks, heedless of tradition and ready to pull repeated "all-nighters" as they had, so recently, in college.

Moreover, the motivation was different years ago. "It used to be, 'Let's have fun and do neat things.' People frankly didn't care if we made any money. If the product was good for education or good for society, that was enough," one executive says. "Now it's, 'Let's be serious, let's compete effectively.' "

In fact, competition is the biggest reason for all this change. "Ten years ago the only competitor was another little start-up," says Irving Rappaport, an intellectual property lawyer who worked at Apple and is now at National Semiconductor. Now, any small company is also "competing with an established giant."

"It's Godzilla meets Bambi," Mr. Henricks says. "You wake up one morning and find out someone has obsoleted your product. You wake up dead."

Competitors were also on more common ground in the past. They were almost all U.S. companies, "with the same venture capital, the same banks," National's Mr. Scalise says. Now that is far from the case.

"When there's little or no competition, cost is not a factor," Mr. Rappaport says. Now the pressure is felt most places. At Xerox Palo Alto Research Center, staffer Luis Rodriguez says there is a certain constraint in the air.

"The culture here was you didn't really have to worry about" money. "Now, you really have to think about funding. There's more of a push toward helping the business itself" rather than simply exploring new technological territory.

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