High-Tech Firms Ambivalent About Staying in California
At first glance, it seems like conflicting testimony.
On one hand, many high-technology companies in California say they plan to move part of their manufacturing out of the state. On the other hand, three-fourths of the 200 executives surveyed see their payroll numbers increasing here over the next few years, according to a study recently conducted by the accounting firm KPMG Peat Marwick.
So while high-tech companies are on the lookout for areas of the nation and world that offer lower taxes and fewer regulations, in general they want to keep the bulk of their operations here. And they are optimistic that their companies will grow in coming years.
The survey was released Wednesday at a conference at the Hyatt Regency Irvine, where a panel of executives with three of Orange County’s top computer companies discussed the findings.
Eighty-two percent of the respondents now manufacture products in California, but that figure is expected to decline to 63% by 1998, the survey showed.
“There is an appalling lack of understanding (by state government) of even the fundamental nature of what it takes to be successful in this industry,” said Roger W. Johnson, chairman and chief executive of Western Digital Corp. in Irvine.
Steve Hamerslag, chief executive and president of Micro Technology in Anaheim, said that Orange County, despite the regulatory and tax burdens, remains an attractive setting for his company because of its cluster of talented employees. He noted, however, that the advantage could be “fleeting” as other cities such as Portland, Ore., and Las Vegas develop their own high-tech communities.
“In the long term, there will be fewer reasons to stay here than there are today,” Hamerslag said.
Other statistics gleaned from the study:
* Three-fourths of the companies surveyed said they are manufacturing, selling or distributing products internationally. “It spreads the risk,” said Mark St. Clare, chief financial officer of FileNet Corp. in Costa Mesa. “That way, we’re not reliant on just the U.S. economy.”
* Fifty-nine percent of respondents ranked quality in design as the most important factor affecting profitability. The panel members argued that quality is a given, however, and that pricing is a bigger factor in maintaining a competitive edge.
“Quality has become just the entry point for being in the game,” Hamerslag said. “I wouldn’t even put it on the chart--it’s not optional.”
* The time required to develop, market and sell a new product in the rapidly changing computer industry decreased from 17 months three years ago to 13 months today. “The risk of financial failure is going up exponentially as the window of opportunity to get a product out becomes smaller,” Johnson said.
Hamerslag compared computer products to fish: “If you’re late to the market, the stuff stinks.”
