Other states poke fun at power crunch, but Silicon Valley staying put

By Brian Bergstein AP Business Writer
Monday March 12, 2001

SAN JOSE – With gifts of flashlights, batteries and glow-in-the-dark mousepads, economic development officials across the country are poking fun at California’s power crisis in hopes of luring high-tech businesses away. 

But cutesy radio ads and other come-ons to Silicon Valley companies are unlikely to cause a mass exodus from the self-proclaimed capital of technology, even though rising electricity prices and an unstable power supply are legitimate concerns. 

“It sounds like it’s a waste of their money,” Thayer Watkins, an economics professor at San Jose State University, said of the other states’ pitches. 

While the valley’s humming stacks of servers and data storage centers are notorious power-suckers, nearly all electricity-intensive manufacturing is done elsewhere. Many tech companies have been expanding into other states for years for a variety of business reasons. 

Despite all of Silicon Valley’s problems, such as high real-estate costs, mind-blowing traffic, the threat of earthquakes and a tight labor market, technology companies and venture capitalists like being located near each other, in an area famed for entrepreneurial innovation. 

“There’s a great deal of electric power capacity scheduled for development in the next few years,” Watkins said. “I’m pretty sure Silicon Valley companies would be conscious of that. The story’s overplayed.” 

Still, economic boosters elsewhere aren’t about to let even a perceived opportunity pass by. 

On Feb. 1, the 17th straight day California grappled with a Stage 3 power emergency, Utah Gov. Mike Leavitt dropped by Silicon Valley to remind techies about the room to grow in his state. 

The Michigan Economic Development Corp., has been sending 4,500 glow-in-the-dark mouse pads to high-tech companies and airing ads on San Jose and San Francisco radio stations. 

“Happy birthday, Mr. President,” a Marilyn Monroe-esque voice croons in one ad. 

“Some things are a turn on,” the announcer intones. 

“Power will be shut down for two hours today in the following counties,” a not-very-realistic-sounding newscaster sputters. 

“Some things are a turn off,” the announcer intones again. “The state of Michigan is big on turning things on.” 

It’s too soon to gauge whether the ads are having any effect, said Jennifer Kopp, a spokeswoman for the Michigan agency, though she said in general, the power crisis has made companies more receptive to the state’s courting. 

Michigan can offer tax credits to high-tech companies and is building “smart zones” — industrial parks with built-in fiber-optic lines, day care centers and video conferencing capabilities, she said. 

Like the radio ad, Kopp boasted that Michigan was recently named No. 1 in attracting new business by Site Selection magazine. 

“Blew your state out of the water, I guess,” she said. 

The Greater Raleigh Chamber of Commerce sent 9-volt batteries and letters to 89 Silicon Valley companies, reminding them of the bountiful power, lower cost of living and high-tech experience in North Carolina’s Research Triangle. 

“In the dark about where to grow your business?” the letter asks. 

Four companies have already responded, and one plans to go check out a North Carolina site, said Demming Bass, vice president of communications for the Raleigh group. Bass said the goal is not to take businesses away from California, just to encourage them to expand into the Raleigh area. 

“It’s not like a natural disaster. No one would ever take advantage of that,” he said. The power crunch is “man-made. It’s a business issue.” 

Michelle Montague-Bruno, a spokeswoman for the Silicon Valley Manufacturing Group, said her trade organization’s blue-chip member companies are used to being wooed. But she said she’s found some of the recent ads a little strange. 

“We’ve got concerns of transportation and housing, and energy is an issue that is quite important,” she said. “But companies want to be here, and they’ve weathered these things before.” 

However, she added: “We do not know specifically of companies moving elsewhere. But any smart company has a backup plan.”