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Upstart
Google is engine in an industry that could
For Google, possibilities are
growing
MOUNTAIN
VIEW, Calif.-- Hannah Mestel has ridden
some steep waves in California, and we're not talking about surfing here.
In early 2000, she caught the crest of
the Silicon Valley job-hiring frenzy as she completed her bachelor's
degree in computer studies at Stanford University. "There was crazy
recruiting, lots of hiring," she said.
She went to work for a wireless-software
company. Then the recession set in, and employers in California's
high-tech heartland suffered a wipeout - 190,000 jobs were shed in three
years. Mestel received a layoff notice early last year.
Her setback was short-lived. The
25-year-old soon landed a job as a client-services coordinator at Google
Inc., the upstart search-engine company that now dominates its field.
Now Mestel could be on the verge of
catching a veritable tsunami.
Google, which has grown from a two-man
garage operation in 1998 to employ more than 1,000, is fast becoming one
of Silicon Valley's most successful start-ups ever. Analysts estimate that
the company will generate nearly a billion dollars a year in revenue,
primarily from selling ads that target users of the popular search engine.
Now Silicon Valley is abuzz with
anticipation that Google will organize an initial public offering next
year, the first big high-tech IPO since the go-go days of the late 1990s.
The speculation has coincided with a return of optimism to a region that
was built on the belief that technology could enrich people's lives, along
with their bank accounts.
So it is no wonder that Google's
employees are electrified these days. "Everybody here is really
excited," said Mestel, referring to the work atmosphere at the office
park here known as the Googleplex.
Google, which sorts through billions of
Internet pages to find the Web sites most relevant to words entered by a
user, became the nation's most popular search engine by winning high marks
for being quick and easy to use. Google's computers, which contain mirror
images of nearly every public site on the Internet, conduct more than 250
million searches a day.
The mood is upbeat across this region at
the southern tip of San Francisco Bay. The Semiconductor Industry
Association expects global sales of semiconductors to increase 15.8
percent this year and by 19.4 percent during 2004. Tech-stock indexes are
up about 50 percent on the year.
In another upbeat signal, the
Semiconductor Equipment and Materials International, a trade group that
follows sales of computer chip-making equipment, said the industry's
future orders exceed current billings, a closely watched yardstick known
as the book-to-bill ratio that indicates a business is expanding.
"It's sort of a psychological
breakthrough," said Jonathan Davis, a spokesman for the trade group.
The organization anticipates 39 percent growth next year.
Home sales in Silicon Valley, which
stagnated for several years, are increasing once again, fueled partly by
employees cashing in their recovering tech-company stock options
(residential real estate remains hideously overpriced - a two-bedroom
fixer-upper can fetch $500,000 in a moderate neighborhood).
Not all signs are bullish. Corporate
donations to arts and civic organizations have not recovered to heyday
levels. About 23 percent of commercial real estate is vacant - the market
has 50 million spare square feet of office space, and lease rates have
dropped substantially.
But venture capitalists are looking for
opportunities rather than counting losses. San Jose State University's
survey of local consumer confidence is up. So is business confidence, as
measured by Santa Clara University's Leavey School of Business.
"The Silicon Valley business
environment is about to begin a period of rapid improvement, and that's
consistent with national consumer sentiment," said Mario L. Belotti,
an economics professor who tracks Santa Clara's business index.
Silicon Valley's cyclical economy is
sort of a manic-depressive version of the nation's. When it is up, it is
hot. And when it goes down, it stinks. "We go through bigger booms
and bigger busts here," Belotti said. "It takes a while to catch
up with the rest of the nation."
Three years ago, the unemployment rate
in Santa Clara County dipped to 1.3 percent, far lower than the rest of
the country. Last year, it got as high as 8.9 percent, far worse than the
national average. The most recent measure stands at 7.6 percent, two
points higher than the rest of America, but the gap is closing.
"People are beginning to hire here
and there," Belotti said. "But it's still a soft employment
market."
Indeed, though signs point to a
recovery, most companies are cautious about adding staff. "Executives
who have become very adept at cutting costs are hesitant about adding new
costs," said Davis, of the Semiconductor Equipment and Materials
International. "We haven't seen a real significant return to hiring
yet."
Some analysts say Silicon Valley has
changed fundamentally in recent years, becoming less reliant on
manufacturing as companies have relocated production facilities to take
advantage of lower costs. Even software companies have moved programming
jobs to low-cost centers, such as India.
Silicon Valley leaders say the region
must grow as a research and development mecca, capitalizing on the
existing talent pool and infrastructure, centered on universities, think
tanks and corporate research centers.
"The valley's driving industries
must keep renewing themselves through innovation and entrepreneurship,
finding new ways to add value if we expect to preserve and improve our
standard of living," said one organization, Joint Venture: Silicon
Valley Network, in a recent report called "Building the Next Silicon
Valley."
"The alternative is to resist
change, and slip into a prolonged economic decline like other regions that
once dominated driving industries - such as Detroit with automobiles or
Pittsburgh with steel."
There are few dark clouds on the horizon
of companies such as Google and eBay Inc., the Internet auction giant
based in San Jose. Both companies are expanding into corporate
headquarters vacated by tech companies that were forced to downsize during
the recession.
Google's IPO could generate as much as
$2 billion in cash for the company and value the start-up at more than $20
billion. Company officials do not comment publicly about reports that they
hired an investment bank to explore opportunities.
But Google makes no secret about its
expansion blitz. Stacy Sullivan, Google's human resources director, said
the company hired upward of 800 employees last year, primarily software
engineers and sales and marketing people such as Mestel. The company
receives about 1,500 resumes a day submitted through its Web site.
"It is an awful lot to go
through," Sullivan said. "We're still growing and
developing."
Even in a buyer's market, Google appears
to offer attractive benefits that are legendary in the business - three
weeks' vacation, free gourmet lunches, a choice of health-care programs,
matching 401(k) benefits, and on-site doctors, dentists, masseuses and
gymnasium.
The generous benefit packages were
inspired by the company's founders, Larry Page and Sergey Brin, former
Stanford graduate students now in their early 30s and likely to become
multibillionaires in the event of an IPO. Page and Brin devised Google's
proprietary algorithm, which ranks the relevancy of Web pages by how often
they are linked to other pages.
They created a free-wheeling work
environment, where fancy titles are shunned; a grand piano was installed
in the lobby; and employees are encouraged to devote 20 percent of their
time to self-directed projects (though employees also put in famously long
workdays).
There is another reason for offering
such attractive perks: As hard as it is to imagine, today's Google might
be tomorrow's mature, slower-growing Silicon Valley enterprise. It has
happened many times before.
"The underlying reason for offering
the benefits is the recruitment and retention of our employees,"
Sullivan said, "because Google might not always be a fast-growing,
popular company."
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