The Siren Call of Silicon Valley

The morning paper reports that Dell is the latest major IT company to be lured by the sirens of Silicon Valley. I suspect it won’t be much more successful than any of its predecessors.

The Merc leveraged Dell’s Tuesday press release to extend their report last week that the company was leasing 240,000 square feet in Santa Clara, and had 341 open jobs posted in the Bay Area.

The Dell news release summarized the decision:

Dell today announced plans to open the Dell Silicon Valley Research and Development Center, a new facility that will support Dell’s strategic expansion of solutions capabilities, including the areas of networking design and development, storage development and cloud computing. The new site complements Dell’s Israel Research and Development Center, announced last month in Ra’anana. Dell believes that with recruitment of additional staff, its workforce at the Silicon Valley site will grow to more than 1,500 team members over the next five years.

The new facility will allow Dell to consolidate much of its current Northern California operations in phases over the next several quarters. It will combine the operations of several area companies Dell has acquired, including Zing (Sunnyvale), Ocarina (San Jose), Scalent (Palo Alto), and Everdream (Fremont) into approximately 240,000 square feet of leased space in two adjacent buildings on Great America Parkway in Santa Clara.

In other words, Dell’s decision to expand here was largely motivated by the need to more effectively manage its SV acquisitions.

This is exactly parallel to Qualcomm’s decision almost four years ago to buy a 320,000 square foot campus to consolidate its own Bay Area acquisitions, notably SnapTrack (which later made Steve Poizner a household name) and most recently Atheros. The only difference is that Qualcomm bought its land — and thus appears here for the long haul.

The older Merc story notes two foreign telecom companies expanding here recently: Huawei and Nokia (although Nokia’s research center has been in Palo Alto for at least five years). Motorola, British Telecom and Deutsche Telekom are also here, as are most of the Japanese electronics companies and SAP of Germany.

But will it matter? Perhaps the sirens of Silicon Valley won’t be luring Fortune 500 (or Global 500) companies to their deaths, but will they actually help these firms succeed?

Digital Equipment Corp. (DECWRL) and Xerox (PARC) had major research labs in Palo Alto 30 years, but they did nothing to stem their eventual declines. IBM invented the disk drive and the floppy disk in San Jose, but then dumped that operation to Hitachi in 2002 and now the Cottle Road facility is a strip mall. (The still have their 1977 Santa Teresa Lab and their 1986 Almaden Research Center, but both are at the edges of the valley and not closely integrated into it.)

So for Dell, Qualcomm and others, the Silicon Valley branch office provides a convenient way to integrate acquisitions (and for the startups to find a friendly acquirer.) But I can’t think of a single example of a foreign or US company whose SV operations have made a significant difference in their ultimate success: the key decisions are made elsewhere, and most of the value is added elsewhere as well.