Silicon Valley isn't sharing Facebook's misery
Menlo Park, Calif. • Silicon Valley, it turns out, doesn't revolve around the stock prices of Facebook and its playful sidekick, Zynga.
By most indications with a couple of notable exceptions beyond the two social media misfits tech companies in this hub of innovation are humming along, even as two of its rising stars endure steep declines in their stock prices that have wiped out more than $60 billion in wealth in the past six months.
Companies catering to mobile devices, business software and data management products are mostly thriving, while longtime Silicon Valley stalwarts such as Apple Inc. and Google Inc. remain among the most revered brands in the world.
"Nothing has fundamentally changed about the opportunities that are possible," said Aaron Levie, CEO of Box, an online data-storage company based in Los Altos, Calif.
The optimism in Silicon Valley, an area that covers roughly 40 miles from San Jose to San Francisco, can be seen in a variety of ways:
Entrepreneurs still count • Silicon Valley startups raised $3.2 billion from venture capitalists during the April-June quarter, far more than in any other part of the U.S as tracked by the National Venture Capital Association. Venture capital flowing into Silicon Valley increased by 4 percent from the same time last year, while it dropped 12 percent nationwide.
Apartment rents are soaring • In San Francisco, rents have topped the lofty levels of the original Internet boom more than a decade ago. This time, it's being driven by well-paid software engineers and Web designers who are flocking to Silicon Valley.
San Francisco apartments rented for an average of $2,734 in June, up 13 percent from a year ago and well above the average of $2,128 when technology stocks were at their peak before the dot-com bubble burst in 2001, according to the research firm RealFacts. Renting in San Jose the region's largest city is less expensive than San Francisco, but even there the average lease cost $1,811 a month in June, a 10 percent increase from last year.
Engineers in demand • Computer coding programmers still command top dollar for their services because there aren't enough of them to meet demand.
Jeremy Stoppelman, CEO of the 8-year-old online reviews service Yelp Inc., said his company is always behind on its hiring goals for software engineers.
"There is no one who is like, 'Oh, we have all the engineers we need,' " he said. Competition is fierce from all sides massive companies such as Google and Facebook, tiny startup incubators and everything in between.
Software engineers working in the San Francisco area are paid an average of about $115,000, up from $106,000 in 2008, according to Glassdoor.com, which analyzed compensation figures collected from users. The average salary for software engineers in the Bay Area is about 17 percent higher than the national average for the same occupation, according to Glassdoor.
Google pays its engineers an average of $142,000, up from just under $104,000 in 2008, Glassdoor calculated. During that time, Google's workforce has swelled by 70 percent, to about 34,000 employees, including thousands of engineers working at or near its headquarters in Mountain View, Calif.
Even Facebook and Zynga remain on hiring sprees.
Facebook plans to transform its Menlo Park headquarters into the equivalent of a small town that is supposed to eventually house 6,000 workers. The social networking leader has hired famed architect Frank Gehry to design a 420,000-square-foot warehouse that will feature a garden growing across its roof. Plans also call for a town square featuring restaurants, a bike shop and health clinic.
Levie moved Box from Seattle several years ago because he believed his company had to be in Silicon Valley to succeed. Box employs about 500 workers and raised $125 million this summer. Levie is just 27, a few months younger than Facebook founder Mark Zuckerberg, who turned 28 the week his company went public in May.
Echoing an oft-repeated Silicon Valley ethos, Levie says startups are much more focused on their long-term prospects than their performance from one quarter to the next.
Wall Street, though, isn't known for its patience. Investors' fixation on short-term results has left Facebook's stock trading at about half of its initial public offering price, while Zynga's stock has lost more than two-thirds of its value.
Driven by the hype leading up to its IPO, Facebook Inc. opened with a stock price of $38 and a market value of $104 billion. Less than four months later, share prices have lost half their value.
Investors have been unhappy that Facebook's revenue growth is slowing, seen as a sign the company won't be able to make as much money as more people use Facebook on mobile devices, where there is less room to show ads. The worries have hammered Facebook's stock, even though many analysts still see the company as a solid long-term investment.
Zuckerberg spoke to a hometown conference Tuesday, acknowledging his company's "disappointing" performance on Wall Street, hinting at new moneymaking strategies and casting his company as one that continued to build new things in the face of criticism.
In a jocular, half-hour question-and-answer session with the blogger-turned-investor Michael Arrington, Zuckerberg talking at top speed and dressed in his usual gray T-shirt and jeans dropped a few hints about Facebook's plans and said that the site was handling up to a billion search queries by users a day.
Search is Google's principal advantage, but Zuckerberg said a team of engineers within Facebook was working on improving Facebook's search tool to vet, for instance, restaurant recommendations from friends.
Zynga Inc., the maker of "FarmVille," "Mafia Wars" and other games that first became popular on Facebook, appears to face more uncertainty.
The San Francisco company is losing money and players, while facing stiff competition as more games are played on mobile devices instead of personal computers. CEO Mark Pincus insists the company will rebound, although many analysts consider Zynga hopelessly adrift. Zynga's shares are hovering around $3, down from a peak of nearly $16 in early March.
Zynga isn't the only Silicon Valley company facing an uncertain future.
Hewlett-Packard Co. is planning to cut about 2,000 more jobs than it had previously announced as CEO Meg Whitman tries to turn the company around.
In a regulatory filing last week, the computer and printer maker said it will eliminate 29,000 jobs by October 2014, up from the 27,000 cuts it announced in May when HP employed about 350,000 people.
The company, which is based in Palo Alto, didn't explain why it had raised the number. The revision comes amid signs that the already slumping personal computer market may weaken even further as an increasing number of sleek smartphones and tablet computers win over consumers.
Intel, the primary maker of computer chips, also recently warned investors that revenue would be lower than expected, as would profit margins. The company cited weak demand in what had been growing economies, such as China.
What Intel sells to manufacturers such as HP and Dell in the third quarter of the year typically ends up on store shelves and office loading docks in the fourth quarter, inside desktop PCs, laptops and computer servers. If Intel feels pain now, it could signal that PC manufacturers are lowering their expectations for the holiday shopping season or are noticing that their business customers have become cautious.
Nonetheless, there are nothing but good vibes emanating from many other technology companies in Silicon Valley and San Francisco.
Even as Zynga employees watch the value of their stock options deflate, the 65 or so workers at Pinterest are settling in to the online scrapbooking service's new San Francisco headquarters just a block away. Around the same time Facebook went public, Pinterest raised $100 million from investors who valued the company at $1.5 billion, according to several media reports.
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