THE TIMES 100 / THE BEST PERFORMING COMPANIES IN AMERICA : THE BOTTOM LINE : A Bushel Full of Change
IT IS ONLY WALL STREET talking, and science has yet to identify the air those people breathe. Still, as a symbol of economic transition in California, the news on Page 16 of this section seems just about perfect.
We’re talking here about the phenomenon of Intel Corp., chip maker extraordinaire, surpassing Chevron Corp., stepchild of the late monopolist John D. Rockefeller, as the California-based company most highly valued by the financial markets.
No surprise, perhaps. Oil is both unfashionable and finite, while the potential for the microchip seems infinite, and Intel is on a tear. But the seeming inevitability of the occasion makes it no less arresting.
Here is one of those early Silicon Valley start-ups conquering the recession with a vintage California focus on marketing and R&D;, eclipsing one of oil’s Seven Sisters by turning nearly four times as much profit on one-fourth the revenue.
“It tells you that if Rockefeller were alive today, he’d be in chips, not oil,” says Joel Kotkin, a veteran California economic historian and author.
It is certainly a serendipitous development for the drawing of conclusions from this 1994 edition of The Times 100, an annual ranking of California’s publicly held companies by sales, profit, market value, growth, productivity and other yardsticks.
Santa Clara-based Intel and San Francisco’s Chevron are quintessentially Californian, their stories central to the way the state’s economy has developed.
Chevron--formerly Standard Oil of California--is the biggest of the surviving empires launched from California’s once-vast oil reserves. Intel is arguably the premier product of high-technology’s postwar entrepreneurial caldron, a national treasure that continues to call California home.
By itself, of course, it is of little import that on March 31--the cutoff date for the Market Value 100 list--the investment community pegged Intel’s value at $28.2 billion to Chevron’s $27.4 billion. (Market value is computed by multiplying a company’s stock price by the number of shares outstanding.) A good-sized refinery fire in Singapore could send oil prices up a dollar or two, reversing the standings overnight.
But in direction, this new California hierarchy represents a tidy affirmation of what Japanese economist Taichi Sakaiya calls “the knowledge value revolution” in his likewise-titled book.
Attempting to sort out where we’re all heading, Sakaiya calls the petroleum era--launched by Chevron when it discovered the first of the incredible Saudi Arabian oil fields in the 1930s--the zenith of an industrial age that is fast becoming a reflection in the rear-view mirror.
After an age of material acquisitions made possible by cheap and abundant oil, Sakaiya says, we are becoming a society in which the abundant commodity will be knowledge--the more the better. That’s Intel: The more information on one of its little chips, the higher the price.
Of course, words themselves are still cheap, and futurists rattle on. The question at hand is what this says about California.
It’s hardly news that Intel--and, more important, the hundreds of Intel wanna-bes and the thousands of enterprises that are part of the semiconductor-based universe it dominates--have become central to the state’s economy.
What seems especially striking about the vast array of information contained in this year’s Times 100 is the dynamism that held sway in parts of the economy in 1993, a year when California’s future seemed dark and foreboding and the recovery more distant than it has turned out to be.
It was, in fact, a year when California surpassed New York as the place with the most companies on the Fortune 500, thanks to the addition of four technology firms the average American has never heard of:
* Cisco Systems Inc. of Menlo Park.
* Solectron Corp. of Milpitas.
* Synoptics Communications Inc. of Santa Clara.
* 3Com Corp., also of Santa Clara.
“Even as the old economy declines, the new economy gets stronger and stronger,” says Kotkin, who believes California’s pessimism is largely unwarranted.
The new economy, as everyone knows, is heavy on technology and health-related industries--and that’s where profitability is greatest, according to The Times 100 list of companies with the highest average two-year return on equity.
So everything’s going to be OK? Unfortunately, it’s not that simple.
Intel also became a symbol last year of California’s failure to maintain a friendly business climate: It opted to build a $1-billion semiconductor plant--with 1,000 jobs--in New Mexico rather than here.
To James O’Toole of Los Angeles, author and senior fellow at the Aspen Institute, these lists portray a California whose evolving economic face represents exactly what some social thinkers were warning about in the 1980s: a growing gap between the haves and have-nots.
“The interesting question is, when you look at all this stuff, do you feel good about California’s economy? I don’t come away feeling good,” he says. “The companies that are doing well tend to employ small numbers of highly educated people. They are not companies that employ large numbers of people with average educations. This portends greater disparities in income in the future.”
While the social and political engineers wrestle with that, the electronic engineers are already nipping at Intel from several directions. Powerful coalitions and nimble semiconductor cowboys are challenging its dominance, forcing prices ever downward.
Already, Intel’s profit margins are re-entering the atmosphere. One day an oil refinery will explode. And Chevron could be back on top of this list.
Says O’Toole:
“Intel is one hell of a success story. But everything is flux, everything is change.”
