Rough times in Silicon Valley...
 

The stock market isnt helping things much now...

SAN JOSE, California (AP) -- Social worker Luisa Chavarin thought she had left unemployment and crime behind when she emigrated from Guadalajara, Mexico, to Silicon Valley, the epicenter of the global technology industry.

But a four-year economic slump, combined with draconian reductions in state and federal funding, shuttered her 13-year-old son's after-school program. Because of budget cuts, trash piles up at her local park, and graffiti doesn't get painted over.

Everywhere around her are signs that her neighborhood is regressing, from abandoned cars to sidewalks blocked by rusty grocery carts.

"Nobody in our community is feeling optimistic," said Chavarin, 38, who coordinates youth programs at a San Jose community center. "Cars are in the streets, abandoned. Crime is up. If you call the non-emergency police number, it takes forever. I'm very worried about the future."

Silicon Valley's optimistic entrepreneurs and venture capitalists insist a rebound is around the corner, despite all the shuttered office parks and business plans that anticipate hiring more employees in India, Russia or China than in California.

They point to nebulous indicators: Traffic jams are returning. Office vacancy rates have stabilized at about 17 percent. The moneyed crowd has to wait for seats again at posh Palo Alto restaurants.

But others are skeptical. Workers in the Bay Area are the most pessimistic in the nation, with 27 percent worried about losing their job, according to a July survey by staffing firm Hudson Highland Group. Only 18 percent of workers nationwide share that fear.

Santa Clara County -- which comprises San Jose and the corporate hubs of Cupertino and Palo Alto -- has lost 231,000 jobs since the peak of the dot-com bubble in December 2000, according to a recent report from San Jose Mayor Ron Gonzales.

By contrast, the entire state of Ohio has lost about 200,000 jobs in the same period.

Some say that unlike Midwestern manufacturing jobs, Silicon Valley's lost positions were little more than "bubble jobs" -- superfluous titles given to caffeinated college grads and programmers during the dot-com boom. But restaurants and retailers still miss the ripple effect of those high-tech paychecks.

Seattle, Boston, Denver and Austin, Texas -- all of which attracted technology companies during the boom -- also are facing longer and sharper busts than cities with more diversified economies, said Creighton University professor Ernie Goss.

"Cutting-edge tech hubs have to reinvent themselves every cycle," said Goss, a scholar-in-residence at the Congressional Budget Office studying the economic impact of technology. "That reinvention and dynamism give them life -- and death. This is a natural cycle that can be ... brutally painful to workers and residents."

San Jose's unemployment rate in June dropped to 6.2 percent from a peak of 9.1 last year, but that may reflect job seekers leaving the area or giving up, since the number of jobs in the county hasn't grown since 2000. The national unemployment rate in June was 5.6 percent.

Partly because of tax cuts and the Iraq war, San Jose's city manager forecasts that annual revenue from the federal government will plunge 80.6 percent, to $1 million. Gov. Arnold Schwarzenegger's new budget, which removes $1.3 billion from local governments, wipes out $11 million more from San Jose's $725 million general fund.

The cuts are forcing the nation's 11th-largest city to charge an emergency response fee of $1.75 per phone line per month to support 911 dispatchers. San Jose's new budget eliminates about 50 jobs, reduces graffiti abatement and park maintenance and closes eight community centers.

San Jose had planned to close its Olinder Neighborhood Center, which houses the nonprofit Northside Theater Company, until protests and $100,000 in independent funding saved it, according to Meredith King, 31, who helps run the theater.

"This being Silicon Valley, people think even social programs need to show a profit or be self-sufficient to exist," said King. "Having well rounded, cultured kids, or making sure elderly people have bread to eat -- where's the immediate monetary benefit of that?"

Tens of thousands of high-paying engineering jobs have emigrated to lower-cost countries, and economists say they won't return. Cynthia Kroll, senior regional economist at the University of California, Berkeley, said one in six jobs in Silicon Valley -- one in nine nationwide -- could be vulnerable to offshoring.

That means residents can't rely on bellwethers such as Hewlett-Packard Co., Intel Corp., Cisco Systems Inc. and Adobe Systems Inc. for job creation.

"We hope we're seeing at least a bottoming out," said David Vossbrink, Gonzales' spokesman, who noted that the county has lost only 13,500 jobs in the past year. "These days, that counts as optimism."

What state and city officials should do is lower the cost of living, bolster the University of California and community college systems, and otherwise welcome entrepreneurs and small businesses, said Sean Randolph, president and chief executive of the Bay Area Economic Forum. But California's latest budget only narrowly avoided steep cuts to higher education.

"In the next rebound, the jobs won't be created here in the same proportion as the tech industry as a whole," Randolph said. "We need to get our act together. There's no room for complacency."

Diane Greene, president of Palo Alto-based software company VMware Inc., acknowledged that consolidation in her industry has shrunk the job market. But like other executives, she points to the expected initial public stock offering of Mountain View, California-based Google -- which will likely make hundreds of employees millionaires -- as an example of the valley's irrepressible resilience.

"I know I exist in a fairly sheltered high-tech world, but to me all the signs are optimistic," said Greene, whose company was acquired by Hopkinton, Massachusetts-based EMC Corp. "Certainly in the tech community people have good reason to believe that, even if the economy is still a bit difficult, people executing valuable new technology will not hit any roadblocks."

http://www.cnn.com/2004/TECH/08/09/s....ap/index.html

I smell opportunity.....

there's tons of money still here. the gatekeepers are still afraid to release it, however. a lot of it is going overseas too. this place is still a hotbed of VC activity and other types of investment and entrepreneurship. but what happened in 1998-2000 probably won't happen again. a huge percentage of the startups at that period were created for the sole purpose of deceiving investors and flipping IPOs. there were obviously some legitimate companies (yahoo, google, ebay etc). but people aren't as ignorant as they were back then - however, never underestimate greed.

it will happen again it already started

i guess that depends on what your definition of 'it' is.

:)

it = private investors (joe schmoes) investing in PPM's
it = VC's falling in love with BS ideas and throwing cash on it

Seems people cant just keep cash in the bank and are desperate to become the next bill gates

I'm assuming with growing desperation, you could pick up a decent sized office for very cheap or at least get a good deal on it...there are some skilled, qualified tech workers out there desperate for a job......hmmm

it's not nearly as insane as it was in 1999 though. yeah, friendster got a hot beef injection of VC dough, but that was just to boost up the valuation to get more money from a potential acquisition. now we see 50,000 friendster clones. they should have sold to google when they had the chance.

i think the next wave of major stocks/companies will be the AdSense clones. however, there's still a lot of anti-fraud work to be done here.

there's more skilled, qualified tech workers in sweatshops overseas. that's the problem many around here are facing. if a VC gives your company money, they demand that you offshore as much as possible.

Best thing I ever did in my life was leave Silicon Valley in 2001. I was born in Sunnyvale in 67 and lived in Saratoga from 76-85 and around Mountain View, Santa Clara, Palo Alto, etc until 2000. Moved to Foster City and decided that it wasn't what I wanted for my life. Struggling to make my $1800/month rent. Never being able to get ahead.

Moved to Washington and bought a huge house on half an acre near Seattle for what I'd pay for a crappy 1 bedroom condo in San Mateo. Now I have Puget Sound, Olympic and Cascade views from my gardens and home and I love living here.

My neighbors are wonderful and there are so many great things to do around here. I'm outside every weekend, even in the rain! I wouldn't go back to Silicon Valley for anything. I don't even want to go there to visit my sister, who is still in San Francisco. :)

i'm strating to feel your pain. i've only been here 6 years, but it's really putting a hurtin' on my soul. i'm in the south bay and - god it sucks. but there are reasons i have to stay for now. sounds beautiful where you are. silly valley is one big strip mall.

well everybody knew that would happen ... didn't we ?

Everything slow down after a while .

I wasn't even speculating about VC money :)

remember, the overseas workers are cheaper but not ALWAYS better...

you're absolutely right about the quality. however, when financial people are calling the shots, it's really hard to justify paying a stanford grad java developer 30 times more than some guy with the same credentials in bangalore. it's even harder to do this when the project is sort of experimental and higher risk. investors want to limit the initial cost as much as possible.

re: opportunity knocking.
correct

re: the bubble repeating itself
it has already started.

re: VC falling in love with BS ideas.
not the case at all. VCs dont LOVE anything. it's all about the "overhang". the VCs have so much of other's ppl's money in their funds, if they don't spend it, which they are supposed to do, they have to give it back and lose management fees,etc and other opportunities. VCs are currently raising more than they ask. Startups are getting funded again, and yes, everyone is looking for the next google. Current OVERHANG is estimated at 80-100 BILLION dollars that is just sitting there right this second. If you've got a startup, now's the time to tap into VC. One of my projects is banking on it. These guys invest a 10 little paper boats in the hopes that just 1 makes it across the water to it's planned liquidity event, be it ipo or acquisition. Whether or not Google's ipo succeeds or fails has no impact on the new IPO wave, because google made too many mistakes and tried to re-invent the ipo wheel w/their dutch auction ($120+/- per share) and no longer considered a true ipo. Also, the domain market is a small indication that VCs (via startups) are starting to spend again. and even business incubators are back.

btw,

Google and Yahoo Patch Up Their Differences
[August 9, 2004] On the eve of Google's IPO, the company issues 2.7 million shares to its rival.
http://www.clickz.com/news/article.php/3392531
The issuance of shares brings Yahoo!'s stake in Google up to 8.2 million shares, worth about $996.3 million if Google's stock prices at the mid-point of its range. Previously, Yahoo! owned 5.5 million shares, worth an approximate $668.3 million.

there's more money than ideas right now.