In Seattle, Optimism Tempers Indignation
For nearly a century, this city’s economic fortunes and identity have been linked to a dominant industry and company, first timber and Weyerhaeuser, later aerospace and Boeing.
Microsoft Corp. bulled its way into that elite club during the last 15 years and--rewarding its large and growing work force with stock options--generated more wealth than Weyerhaeuser and Boeing combined.
Therefore, it’s no surprise that people here are upset that the federal government is attacking the hometown company. Many believe Microsoft is guilty only of competing aggressively and has not violated antitrust laws.
Chairman Bill Gates generates mostly favorable reviews among the business community here. He’s the proverbial local-boy-makes-good and most residents give him and his company the benefit of the doubt when it comes to the antitrust case.
“The local consensus is that Microsoft is guilty of being competitive and aggressive in its behavior but not monopolistic,’ said Roger Qualman, an executive vice president of a Bellevue firm that tracks commercial real estate trends. ‘And the root of their problems were created by their competitors who found friendly ears in the Justice Department.”
The respect grows bigger in the suburbs east of Seattle, home of Microsoft’s Redmond campus.
“Gates is put on a high pedestal here for the way he conducts business and for his enormous contributions to the community,” said Michael O’Brien, owner of an east-side Lexus dealership and several other high-end car businesses.
Microsoft is the Northwest’s latest and perhaps greatest example of a dominant home-grown company, said Glenn Pascall, a senior fellow at the Institute for Public Policy, who studied Microsoft’s impact on the local economy.
“This is going to turn out to be good, which is contrary to the local Seattle theology that says it’s an insult for the government to go after such a great company,” Pascall said.
When Boeing went into a downturn in the early 1990s, the local economy remained relatively strong instead of sinking into a recession. That was because of Microsoft’s emerging influence on the region’s economic fortunes, Pascall said.
‘Bill Gates came along with his daring style and brashness that sort of set this sober, hard-working city of engineers and blue-collar workers on their ears with a whole new value system,’ Pascall said. ‘The challenge was become a high roller or die. It created an image problem for Seattle, because we moved from one extreme to the other. Coming down in the middle would have been healthier.’
It’s easy to see why the locals might want to overlook Microsoft’s business practices, ones that U.S. District Judge Thomas Penfield Jackson said violated antitrust laws and ‘kept an oppressive thumb’ on the competition.
Microsoft’s wealth has been very good to the region. While its breakup could bring the good times to an abrupt end, people here don’t appear worried--at least not yet.
‘Brien’s car dealerships, for example, have profited handsomely from Microsoft’s growth. O’Brien counts nearly 400 Microsoft employees, including Gates, as Lexus customers.
Business is so good that he has daily shuttle service to the company’s Redmond campus while employees’ cars are being serviced.
‘I don’t feel a breakup would have an impact on my business,’ O’Brien said. ‘Gates’ business philosophy and intensity will not change if he’s forced to break up his company.
Indeed, many are optimistic that Microsoft ultimately will remain intact.
‘Microsoft has a great track record and we would continue to have confidence in their software development,’ said Redmond Mayor Rosemarie Ives. ‘We’re not slashing our wrists here.’
A lot would be at stake for the Seattle region if Microsoft’s fortunes were to ebb.
While the software industry employs only about a quarter as many people as the aerospace industry, it generates more wages: about $6.8 billion compared with $5.5 billion, according to a 1998 study by the state’s Employment Security Department.
And roughly 40% of the wealth generated by Microsoft is rooted in the Seattle area. Last year, the value of stock options cashed in by employees of King County software companies--namely, Microsoft--was $7 billion, an amount equal to 14% of all wages paid to employees in the county, a state labor economist calculated.
All of this could change with a breakup. Seattle economist Dick Conway, co-publisher of Puget Sound Economic Forecaster, said the judge’s ruling is going to hurt Microsoft and Seattle-area ‘dot-coms’ in the short run.
“The uncertainty Microsoft faces in the future makes it difficult to do joint deals and motivate its employees,” Conway said.
Microsoft’s stock already is down by more 45% from its all-time high of nearly $120 reached late last year.
The software giant has lost more market value than the combined worth of the next 25 companies based in the Northwest, including Boeing and Amazon.com.
Also unclear is how the boom in housing and office space would be affected. Already, the residential housing market has cooled from two years of red-hot growth, but commercial construction still is booming.
Office buildings have been sprouting in Seattle and on the east side, attempting to capitalize on a 2% vacancy rate, officials said.
Microsoft alone last year added 1 million square feet of office space, and is rumored to be in the market for an additional 1.5 million feet. The company employs about 17,500 people in the region and is looking for about 2,000 more.
On the Microsoft campus in Redmond, most employees are aghast at the idea that they could be forced to move to retain their jobs. They believe the company will prevail.
But the trial and the judge’s ruling have taken their toll.
“I just wish it was a problem we didn’t have to deal with,” said Craig Mundie, Microsoft’s senior vice president for consumer strategy. “But we don’t have a choice. For the most part, every day we try to go forward.”
