Train Wreck

Every so often, I wonder if Silicon Valley is all it's cracked up to be. Sure, the confluence of venture capital, universities, and lawyers make it a veritable petri dish for the formation of technology companies, but there are a lot of other great places for innovation, right?

Well, if you go strictly by market capitalization, and look at the top 10 information technology companies, 6 of them are based in Silicon Valley: Cisco Systems, Google, Intel, Hewlett-Packard, Apple, and Oracle. In fact, if you map these company's headquarters, they'd all be inside a circle with a radius of just 10 miles. Amazing, when you think about it.

And these companies are far from just "headquartered" in Silicon Valley.

Google and Apple are very much centralized from a product and technology development standpoint.

Intel has research-and-development facilities in Oregon, Arizona, and Israel, but a significant amount of its R&D occurs at or near its Santa Clara, Calif., headquarters. The same is true of Cisco, though the networking giant owns several large subsidiaries--such as Scientific Atlanta--that are based elsewhere. Likewise for Oracle.

HP is somewhat more diversified, with product development for its Compaq unit in Houston, plus R&D facilities in Idaho, Oregon, and additional cities around the globe. But still, more of its R&D occurs in northern California than anywhere else.

Three of the four companies not based in Silicon Valley have research and development consolidated near their corporate headquarters: Microsoft in Redmond, Wash.; Qualcomm in San Diego; and Nokia in Finland.

IBM, on the other hand, is the most distributed company of the 10, with R&D facilities in New York, Massachusetts, Vermont, North Carolina, Texas, Minnesota, and a number of international locations, including London.

What does all this mean? Well, the data's essentially useless, unless you compare these companies to the same group, say 5 or 10 years ago. Luckily, I've got a good memory. It's not necessarily obvious from the data, but there does appear to be a trend toward more distributed R&D among large companies--if not domestically, then certainly internationally.

Although there are a number of new and growing U.S. technology hubs, none appears to be in a position to unseat Silicon Valley as the tech mecca.

Internationally speaking, China, India, Israel, Japan, and the United Kingdom each have technology development centers with tremendous growth potential. South Korea and Taiwan are nothing to sneeze at, either. Sure, they all have a way to go to match the confluence of resources and talent that Northern California offers. But the trend is there.

And while our qualitative analysis consists only of 10 companies, I do believe that it represents the industry as a whole.

In summary, as information technology penetrates further into the lives of more and more people, it stands to reason that innovation hubs will become more and more geographically distributed, if not also technically specialized.

And someday, a new technology may take root and ultimately supplant electronics as the driver of human innovation. It might be a form of biotechnology, nanotechnology, or something else entirely. In that case, all bets are off.

Updated 5/29/08 12:23 PM - Modification to paragraph on Intel R&D.

I'm not a big fan of surveys, so I don't quote them often. But a recent Consumer Reports survey about PC manufacturers listed Apple as No. 1 in tech support, with Lenovo second, Dell third, and HP dead last. I should also say that Dell came in second in desktops.

I thought the headline should be "Survey says leading PC maker HP dead last in tech support." But that's not what happened. The media hailed Apple, trashed Dell, and gave HP a pass.

Horror stories about Dell's support are all over the blogosphere. Why is that? I mean, why does the media give Dell such a hard time?

Because perception is reality. But aside from being a pithy statement, what does that really mean? ... Read more

How do we value technology companies? Ingenuity and invention, quality of service, brand loyalty, manufacturing muscle, operating efficiency, supply-chain management, price, great place to work. There are lots of metrics.

For those unfamiliar with the wily ways of Wall Street, the stock market has its own way of expressing what it thinks of companies. It's called market capitalization or market cap for short. ... Read more

Note: I wrote this on Thursday before Microsoft's latest bid for Yahoo; it's a follow-up to a post I wrote six months ago. I have two comments on Microsoft's offer: 1) It's aggressive and it's a sweetheart deal for Yahoo's shareholders; I think Yahoo's board will accept it; and 2) nevertheless, the issues I present are the same; it just becomes Microsoft's problem.

It's been seven months or so since Yahoo chief and co-founder Jerry Yang replaced Terry Semel at the helm of the ailing internet giant. At the time, I pondered the obvious question: Can Yang fix Yahoo?

For the record, I thought the board acted rashly in appointing Yang--a relatively inexperienced executive--to perform what would clearly be a challenging turnaround. I didn't think he had the experience to pull it off.

At the time, I thought that Yang--a visionary--wasn't what Yahoo needed. I thought Yahoo's problem was largely failed execution and missed opportunities in search advertising that allowed Google to leapfrog its more mature rival.

At this point, I'm even more convinced that Yang was the wrong choice. But I think the problem is bigger than missed opportunity and failed execution. The company does indeed need a new vision. And it needs a CEO who's capable of articulating and selling that vision down through the ranks and ensuring everybody's goals are aligned.

That's a tall order, but it can be done. Lou Gerstner did it at IBM, and that was no walk in the park. But Jerry Yang is no Lou Gerstner. ... Read more