By Bill Rigby and Alistair Barr
SEATTLE/SAN FRANCISCO, May 28 (Reuters) – While much of
corporate America is retrenching on the real estate front, the
four most influential technology companies in America are each
planning headquarters that could win a Pritzker Architecture
Prize for hubris.
Amazon.com last week revealed plans for three verdant
bubbles in downtown Seattle, joining Apple’s circular
“spaceship,” Facebook’s Frank Gehry-designed open-office complex
and a new Googleplex on the list of planned trophy offices.
“It signals a desire, a statement, to say that we’re
special, we’re different. We have changed the world and we are
going to continue to change it,” said Margaret O’Mara, associate
professor of history at the University of Washington, who has
written about the building of Silicon Valley.
“It’s also a reflection of robust bank accounts. They have a
lot of cash.”
Historically, however, when a company becomes preoccupied
with the grandeur of its premises, it often signals a high point
in its fortunes. These fantastical buildings may end up as
little more than costly monuments to vanity and a loss of focus
on the core business that made for success in the first place.
“I’ve been thinking the Apple spaceship is going to get
nicknamed the ‘Death Star’ because the project is so big and the
timing is so bad,” said hedge fund manager Jeff Matthews of Ram
Partners. The building is coming to fruition just as Apple’s
product cycles may be maturing, he explained. “It is such a
classic contrary indicator that you just get the shakes.” He no
longer holds Apple stock.
Walter Price, who runs technology investment funds at RCM
Capital Management LLC, shares the outlook: “When companies
build big headquarters it’s usually when they’re doing really
well and have strong outlooks, and that often coincides with a
peak in their stock.” Apple, Amazon, Google and Facebook are
battling to recruit tech talent, and attractive campuses help
with that, he added, but Apple’s plan has not gone down well
with investors. RCM’s tech funds no longer hold shares.
PROJECT RUNAWAY
Amazon’s design, presented to Seattle city planners
last week, includes three steel and glass spheres almost 100
feet (30 meters) high, which will serve as the centerpiece for
three new skyscrapers that will house a rapidly growing
workforce in downtown Seattle.
The plans call for “a series of intersecting spheres with
ample space for a wide range of planting material, as well as
individuals working alone or in groups.” Amazon declined further
comment.
Google Inc, the world’s largest Internet search
company, has outgrown its original headquarters in Silicon
Valley’s Mountain View and is planning to build a 1.1 million
square foot Googleplex nearby.
Called Bay View, it will have nine rectangular buildings,
horizontally bent, with living roofs surrounded by courtyards
and connected by bridges. No employee will be more than a
two-and-a-half-minute walk away from any colleague, a design
aimed at encouraging collaboration. A Google spokeswoman
declined further comment.
Facebook Inc is taking the collaborative idea a step
further, with plans for Facebook West, an addition to its main
campus in Menlo Park, California, that will be the size of
seven-and-a-half football fields.
Facebook hired Gehry to bring his trademark style of
unexpected angles and understated drama to what is essentially
one enormous open-plan office, where a worker can wander from
one end to the other without ever going through a door. The
rooftop serves as a park.
An earlier version of the building plan featured flares on
the ends of the structure like butterfly wings, but Facebook
decided not to go ahead with them, said Rachel Grossman,
associate planner for the city of Menlo Park.
Facebook spokesman Tucker Bounds said the expansion will be
“extremely cost-effective” and is needed to help the company
develop new products for its users. He declined to comment
further.
Apple has the most ambitious idea, a 2.8 million square foot
glass ring on 176 acres. It would be in part a monument to
former Chief Executive Steve Jobs, who described it as like a
spaceship and was closely involved in the plans before he died
in 2011.
The project, which could cost up to $5 billion according to
reports, would house about 12,000 Apple employees. An Apple
spokeswoman declined to comment.
TEMPTING FATE
The technology sector has amassed large cash piles in recent
years, leaving many companies over-capitalized, said Bill Smead,
head of Smead Capital Management, which oversees $465 million in
assets and does not own shares of Apple, Amazon, Facebook or
Google. “Over-capitalized companies often don’t perform well,
and leaders of over-capitalized companies sometimes squander the
money,” he said.
Apple, Amazon and Facebook are not getting tax breaks or
other similar financial incentives for their plans, according to
local officials. It is not clear if Google is receiving any
incentives.
While these plans radiate optimism, they risk bringing down
a curse that has befallen big companies just as they construct
pyramid-scale palaces.
AOL-Time Warner started building the Time Warner
Center, a 2.8 million square foot structure on the edge of New
York’s Central Park featuring two towering glass skyscrapers,
right as the tech stock bubble popped in 2000, destroying more
than three-quarters of the Internet and media company’s value.
The New York Times Co, Wall Street bank Bear Stearns
and chemical company Union Carbide also built ambitious
headquarters just before their businesses hit tough times.
The “campus curse” has claimed several tech victims as well.
In the early 1990s, Borland Software – once the
second-largest independent software company – spent more than
$100 million on offices just south of Silicon Valley that
featured ponds, tennis courts and a swimming pool. By 2008 the
company had been hammered in the market by Microsoft
and was worth less than the cost of the complex.
Since then, Yahoo Inc, MySpace, Inktomi, Sun
Microsystems and Silicon Graphics have either hatched
plans for or moved into swaggering headquarters, only to hit the
skids. Google moved into Silicon Graphics’ campus and Facebook
took over Sun’s headquarters.
Salesforce.com Inc got the shakes in time. In late
2011 the stock had fallen from a July high, and analysts were
criticizing the company for excessive spending on sales and
marketing. Earlier approved plans to build a $2 billion
high-tech campus in San Francisco were canceled by the following
February.
PRODUCTIVITY PREMIUM?
Despite these cautionary tales, some say the new breed of
tech companies are smart to construct their own buildings, which
match the collaborative way they work and can yield long-term
productivity and energy-efficiency benefits.
“As they see energy prices going up they recognize that
these buildings have to last longer, and they need to be more in
control of the operation costs of these buildings. A property
developer does not focus on such long-term things,” said John
Barton, director of the architectural design program at Stanford
University.
“Employees are more productive in the right kinds of
environments. That may be more expensive, but if it pays back in
a 5 percent productivity increase, that may be really smart,” he
added.
O’Mara at University of Washington suggests the new tech
giants are emulating the workplace innovations of the famous
Bell Labs, the historic research arm of AT&T; that gave birth to
the transistor, the laser and technology behind mobile phones
over many decades.
Bell’s legendary facility, designed by modernist architect
Eero Saarinen in the late 1950s, might not be the right role
monument.
Now owned by global telecom giant Alcatel Lucent, the
quarter-mile-long mirrored box lies empty, and is likely to end
up being turned into a medical center – or razed.
(Additional reporting by Poornima Gupta. Editing by Jonathan
Weber, Mary Milliken and Prudence Crowther)
