The California energy crisis is taking a toll on companies' plans for the future, with a few declaring they won't expand in Silicon Valley and dozens of others considering moves to neighboring states.
San Jose-based optical equipment maker ONI Systems recently decided that its major expansions will be outside California, a fact that company president and chief executive Hugh Martin blamed on the energy crunch.
"Multiple times in the recruitment process, we have been getting concerns from recruits about the power issue," Martin said, adding that prospects are worried about investing in already expensive San Francisco Bay-area real estate. They are worried about buying at the peak of the market, Martin said, and are asking, " 'Is the power crisis the beginning of the end in terms of housing values?' "
In January, Intel CEO Craig Barrett said that there was "not a chance" his company would expand in California until the energy mess is resolved.
In addition, there appears to be growing concern among California's small-business owners. A survey released last month by the National Federation of Independent Business found that nearly two in 10 small-business owners are considering moving to other states.
"All the calls that we are getting from California are energy-related," said Somer Hollingsworth, president and CEO of the Nevada Development Authority. The volume of calls from California to the agency's Las Vegas office has doubled since mid-January, and the development authority is negotiating with about a dozen tech companies representing some 600 jobs, Hollingsworth said.
In northern Idaho, economic development officials are negotiating with a pair of Silicon Valley companies that could mean several hundred jobs to that state. In Arizona, leaders of the Greater Flagstaff Economic Council said visits from Silicon Valley companies interested in relocating have more than tripled. A half dozen Silicon Valley companies are considering moves to Salt Lake City and "the power issue is on everybody's mind", said Rod Linton, executive director at the Utah Silicon Valley Alliance, a state agency that recruits and nurtures high-tech businesses in the state.
While some companies may flee, some of Silicon Valley's biggest companies are expanding. Cisco Systems is building a giant campus in San Jose. Software giant Oracle and Internet equipment and software maker Sun Microsystems are planning major campuses near Dublin in Alameda County. Exodus Communications is expanding in Santa Clara and may build a cogeneration facility to assure that it has reliable power. "Exodus builds data centers where our customers are," said K.C. Mares, director of energy and utilities at Exodus.
But those expansion plans and others could cool off this summer. "Will we experience rolling blackouts this summer?" asked Dan Hoffman, design and construction manager at Network Appliance. "If we can avoid them, companies will stay."
If they can't, Hoffman predicted, look for lots of moving trucks.