Oregon: High tech's second home
BYLINE: Mike Rogoway, The Oregonian, Portland, Ore.
Mar. 17--Few tall pines sprout in Oregon's Silicon Forest, but the state turns out to be pretty good at nurturing transplants.
Intel, IBM, Hewlett-Packard Co. and Xerox Corp. -- all based elsewhere -- have some of their most important corporate functions in Oregon. Several other well-known tech brands, including Google, Yahoo, Dell and Sun Microsystems, have significant outposts in the state.
Motorola Inc. plans to establish an Oregon office this year when it completes the purchase of Lake Oswego-based Tut Systems Inc. And HP announced last month that it will add a Beaverton site with about 80 employees once it finishes the acquisition of Oregon startup PolyServe Inc.
Such outsiders have helped offset Oregon's inability to grow large companies on its own, and have been a stabilizing force in the state's highly volatile tech sector. Favorable corporate taxes, a relatively low cost of doing business, abundant electricity and a history of tech success make Oregon an appealing second home.
"There's an awareness around the country and around the world that Oregon is a very inviting place to do business," said Allen Alley, former chief executive of Pixelworks Inc. in Tualatin.
Recently appointed deputy chief of staff to Gov. Ted Kulongoski, heading up the governor's economic development efforts, Alley said Oregon is going to be more assertive in recruiting big-name companies to open satellite offices in the state.
"I think it's being recognized that it's probably the last affordable place on the West Coast," he said.
Out-of-state tech companies find Oregon in one of two ways, either by opening an office here or by purchasing an established business and folding it into the main company.
Intel arrived in 1976 with a branch facility in Aloha. A 1993 change to Oregon's corporate tax structure cleared the way to exempt billions of dollars in Intel equipment from property taxes, and that first campus mushroomed into several more.
The chip maker kept its headquarters in the Silicon Valley, but Washington County became the chip maker's largest hub in the world and Intel became Oregon's largest private employer. The company's most vital research takes place in Hillsboro and several of its top corporate officers live and work in Oregon.
The success Intel and HP had developing Oregon operations helped open the door to others, said Jim Craven, director of legislative and public affairs for the tech industry trade group AeA.
"The really big leading companies explored Oregon, which sort of sent a signal that maybe it's worth exploring," he said.
Xerox arrived in the Silicon Forest after acquiring Tektronix's printer business and making the Oregon facility in Wilsonville the headquarters of Xerox's Office business group, the largest of its three business segments. After buying Sequent Computer Systems Inc. in 1999, IBM turned Sequent's old Beaverton campus into a center for open source software development.
Rather than collecting employees at mammoth corporate campuses, IBM and other companies are dispersing their offices across the country and around the world. They use the Internet to connect employees at decentralized sites, making it possible for offices in places such as Oregon to play important roles hundreds or thousands of miles from corporate headquarters.
"The collaborative technologies that have evolved have made this all come together," said Rick Warren, Beaverton vice president with IBM.
IBM picks locations close to the talent pool it wants to employ, Warren said -- in Oregon's case taking advantage of a cluster of open source software activity and a Northwest lifestyle that makes it easy to recruit.
"You want to pick places where employees want to be, and this happens to be a very good place to attract and retain talent," he said.
If Oregon is an attractive place to hire workers, though, it hasn't proven conducive to entrepreneurs.
"Clearly, the flip side of the story is we haven't started many world-class companies here," said AeA's Craven.
Oregon's failure to produce large companies itself -- Nike, the notable exception, is the state's only member of the Fortune 500 -- has long been lamented by many in the business community. Various factors get the blame, from an unbalanced economy too focused on manufacturing to the absence of a major research university in the Portland metro area.
A comparatively weak economy that inhibits local business formation can be an asset in other ways. Lower wage rates and real estate prices make Oregon an attractive option for Silicon Valley companies, a long succession of whom have opened branch offices in nearby Oregon.
Out-of-state businesses proved a steadying force when the state's technology sector reeled during the 2001 tech bust, shedding 19,000 jobs. But they haven't restored what was lost.
Oregon tech employment now stands around 58,000, down from its 2001 peak of 73,000. The number of technology jobs has been roughly flat for a year.
So the state is seeking to be more "proactive" in bringing new companies to Oregon, Alley said.
"There's a certain percentage of economic development that is responsive, where companies come to you and they say they're looking at opening up a facility -- 'What do you have?' " he said.
Now, Alley said, he plans to identify big companies with expansion potential, "cold-calling" them to put Oregon on their radar.
"You talk to the top companies, the ones you really want to have," he said. "You find out what their decision criteria is."
Energy companies developing "sustainable" technologies are at the top of the Oregon's priority list, and Alley said they're a neat fit with the state's technology heritage.
This month, for example, a German company called the SolarWorld Group said it would spend more than $400 million to open a shuttered semiconductor plant in Hillsboro to make silicon wafers for solar panels.
Ultimately, Alley said, the state's future ought to lie in starting companies in Oregon rather than recruiting branch offices from elsewhere. With sustainable technology, Oregon's green ethos, and its experience in technology, Alley said the state has an opportunity to start something now.
"I think we've got a really significant shot at growing some companies that could be here for a long time," he said.
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