Is Battered Silicon Valley Making a Comeback?

Tuesday Feb 17th 2004 by Sharon Gaudin
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Silicon Valley, which was the virtual eye of the storm when the dot-com bubble burst, is in line to make a comeback, but industry analysts say it will never look the same.

Silicon Valley, which was the virtual eye of the storm when the dot-com bubble burst, is in line to make a comeback, but industry analysts say it will never look the same.

''What makes Silicon Valley so magical is that you've got all the important things for starting new business -- talent, money and a venture culture,'' says Scot Melland president and CEO of New York-based Dice, Inc., a high-tech job placement company. ''After two years of downtime, all the iffy concepts and iffy companies have been weeded out. There's all this money sitting on the sidelines waiting for a good idea and it's starting to happen.''

When the Internet caught on and dot coms took off, Silicon Valley was the place to be. Techies, marketers and business people flooded the Bay Area like it was the second coming of the Gold Rush. Most workers there planned to put in 12- or 16-hour days, seven days a week for the next 10 years and then retire as young millionaires. And thousands, if not hundreds of thousands, of people were on the road to doing just that.

Developers drove sports cars. Apartment rentals in San Francisco went through the roof. Palo Alto became the most expensive city to live in in the whole country. It was a time when the Bay area worked hard, lived off expense accounts and dreamed about technology... and someday buying their own island.

If dot coms were hot everywhere else in the country, they were a rocket ride in Silicon Valley.

But then the bubble burst. Dot coms fell like Dominos and even the tech giants started to struggle. Suddenly the repo man had more work than your average developer. And nowhere was that more true than in Silicon Valley.

But now, three to four years later, industry analysts say the area is looking at a comeback. With that much high-tech talent in one place, it's inevitable, they say. But what will that comeback look like? Will Silicon Valley regain its old shine? Will the businesses that thrive there be completely different?

''A lot of business has gone away in Silicon Valley, but what that leaves behind is a lot of knowledge workers and service workers,'' says David Foote, president and chief research officer of Foote Partners, LLC,, an IT research firm based in New Canaan, Conn. ''Silicon Valley was staffed awfully high, and became the laughing stock of anyone reading the Bureau of Labor statistics. It was the worst place to be. They went through a really violent economic up and down.''

Continued

Finding Life in the Ashes

But what that downturn left behind -- technically savvy workers with real job experience -- is what will build the area back up again.

''It's one of the areas of the country that's a real brain trust,'' says Foote. ''California, going way back, had a pioneering mentality and it still does today. People go there simply because it's a great place to take an idea and get some traction on it. They might not now be doing what they did five years ago, but they're still around. They'll continue to be entrepreneurs and pioneers.''

A new study by Joint Venture: Silicon Valley Network shows that the area is on the mend but the revitalized Silicon Valley won't exactly mirror the old region. The network is a community group that works on problems that face the Silicon Valley area.

The group's 2004 Index of Silicon Valley study shows that biomedical and health services are two industries growing at a faster rate in that area than in the rest of the country. The study, which analyzes the 'changing occupational structure of the Valley', shows that the area is picking up with research and development work, professional services, and technical production, as well as a site for corporate headquarters.

''There are many more positions available today than there were six months ago or 12 months ago,'' says Dice's Melland. ''It's not the craziness of 2000 but we can't expect that. But there are really good, solid positions out there today and it's getting better.''

Foote notes that other regions, such as Boston, outside of Washington, D.C. and New York, are seeing an increase in technical jobs, as well. But Silicon Valley is still the heart of the country's technology world. And because of that, it may show a stronger comeback than the other areas.

''Silicon Valley is not even close to where it was several years ago, but it is coming back,'' says Melland. ''The major technology centers are still where most of the jobs, and most of the highest-paying jobs, are... About 12 months ago, we started to see a lot of small companies being funded again. This time it's more biotechnology and nanotechnology. What you won't see today are so many Web services and seven different online pet stores. You're going to see hard-core technology companies and a broader array of them.''

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