Xylan Could Be a Windfall for Calabasas

In this era of cyberspace, it’s fashionable to think that it doesn’t matter where a company is physically located.

Try telling that to the city of Thousand Oaks, which has reaped a financial windfall as the home base of Amgen Inc., the nation’s largest biotechnology company.

In the same vein, the city of Calabasas stands to gain if one of its young corporate residents--Xylan Corp.--is as successful as Wall Street is now projecting.

Xylan went public last Wednesday, selling more than 4 million shares at $26 apiece. The stock immediately rocketed, closing at $58.375 on Nasdaq on Tuesday and ending the week at $55.75.

The stock’s first-day gain of 125% made it the fourth-hottest new stock issue in Nasdaq history.

Three-year-old Xylan is the brainchild of entrepreneurs Steve Y. Kim, 46, and Yuri Pikover, 34. The firm’s product is a high-capacity computer switching system designed to replace older networking technologies, allowing computer users in local area networks to communicate much faster.

Silicon Valley has been buzzing about Xylan for months. “Every once in a while a new technology platform emerges,” says Michael Haines, manager of the Founders Frontier stock fund in Denver.

He likens Xylan’s potential to that of Cisco Systems, the current leader in networking. Cisco’s sales have soared from $28 million in 1989 to nearly $2 billion last year.

Of course, there is no guarantee that Xylan (1995 sales: $30 million) can duplicate Cisco’s success. But investors’ confidence is obviously high. It helps that Xylan is already partnered with such tech giants as Digital Equipment Corp., Hitachi and France’s Alcatel.

If Xylan’s growth is as strong as expected, the Calabasas area could benefit in the same ways that Thousand Oaks has benefited handsomely from Amgen’s success.

Amgen, with 1995 sales of nearly $2 billion, has more than 3,500 employees, many of them on the Thousand Oaks campus.

Aside from providing a tax base, one of the spillover benefits from fast-growing young public firms is the stock wealth that they generate. Amgen, whose shares have exploded from $3 in 1989 to $62.125 today, has created dozens of millionaires among its executives, and many not-quite-millionaires-but-very-wealthy rank and file.

At Xylan, which now has 209 employees, Chief Executive Kim drew a salary of just $112,500 last year. But his family’s 6.46 million shares of Xylan stock are now worth $360 million.

Pikover, with 2.89 million shares, is worth $161 million.

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Amgen is a good role model for Xylan. After all, many venture capitalists in the 1980s would have assumed that the leading biotech firm would have sprung up in one of the three major biotech centers of San Francisco, Boston or San Diego--not in Hollywood’s backyard.

Similarly, the “next big thing” in computer networking, what Xylan hopes to be, by all rights should have emerged from Silicon Valley.

Touche, L.A.