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Re-booting and Rebounding

In the early months of 2007, the San Jose Mercury News was proclaiming a wide-scale Silicon Valley rebound. Although 200,000 jobs had been lost here in the tech downturn, 50,000 jobs had been regained since 2005 and total employment in the region was more than 1.2 million, nearing the approximately 1.4 million at the height of the boom. Home values continued to climb, despite declines elsewhere in the nation. Silicon Valley household income topped an estimated $81,000.

The Silicon Valley Index, compiled by Joint Venture: Silicon Valley Network, said that the technology hub had rebooted, shaking off post-crash doldrums.

The number of publicly traded companies in the valley continued to shrink, with the majority of those disappearing by being acquired by others. Maxtor was bought by Seagate. Siebel Systems was bought by Oracle, which announced it also would swallow up Hyperion Systems and tried to add BEA Systems, as well.

The valley’s power to generate new startup companies and new technologies remained unabated.  A study conducted by Robert Fairlie of the University of California-Santa Cruz found that the creation of startups was accelerating. And a study for the U.S. Small Business Administration pointed out that entrepreneurship was higher after the dot-com bust in Silicon Valley than during the boom period.

“The idea that we are an entrepreneurial hot spot is true,” said Doug Henton of Collaborative Economics, a Mountain View research firm that conducted the SBA study. “I don’t think we’ve been a large-companies place.”

Big or small, Silicon Valley was back. And much of its focus was on the new generation of Internet communications, widely dubbed “Web 2.0.” While that term quickly became an overused umbrella description, the effects of Web 2.0 technologies were quite real. No less a big player than Adobe Systems, for instance, announced that it was adding Web-delivered services to its line of products. CEO Bruce Chizen, who would retire at the end of the year, noted that his company had developed an online video editor, Photoshop Express, and was developing an online version of image editor. Adobe had acquired Macromedia, the maker of Flash and Web development tools, and was using that expertise to shake up the packaged software business.

One of the poster children for Web 2.0, Facebook CEO Mark Zuckerberg, led the charge by announcing his company would release code that would let third-party developers create applications to run within his service.  Startups devoted to such embeddable social-network widgets leaped into being, and other social networks decided to follow suit. MySpace, LinkedIn, Bebo and others also opened their services to developer applications. And Microsoft put the cherry atop this social sundae by announcing that it would invest $240 million in Facebook, which placed that site’s value at an estimated $15 billion.

Smaller social networks also created considerable buzz. Perhaps most notable was Twitter, founded in nearby San Francisco by Biz Stone and Jack Dorsey, which specializes in microblogs of no more than 140 characters each called “Tweets.” Users said they found such brief, top-of-the-head comments, almost addictive.

Privacy and safety issues continued to be concerns for social networks, though. Both Facebook and MySpace had to grapple with questions from state attorneys general over concerns that young people could be making themselves vulnerable to online threats. As CNet noted, the states’ efforts “didn’t do much to stall either site, but served as a continual reminder that even though Silicon Valley might tout a company as the ‘future of communication,’ legal authorities might beg to differ.”

Intel begged to differ with AMD’s 2006 assertions that it was the future of chip-making, and by the end of 2007 had regained momentum. AMD delivered its integrated quad-core Barcelona chips six months later than hoped, while Intel’s strategy of packaging two dual-core chips paid off by reaching the server market more quickly. Intel also expanded its lead in manufacturing by introducing 45-nanometer chips with a new transistor design that it was represented the first change to the basic materials of the transistor since the 1960s.

But the biggest public development of 2007 was Apple’s introduction of the iPhone. The company’s first attempt at getting into the mobile telephone market was a home run, as customers lined up all over the country in June to get their hands on one of the sleek new devices. By the end of September, Apple had sold 1.4 million iPhones and expanded its sales to the United Kingdom, Germany and France.

It wasn’t a totally smooth introduction, though. There was controversy over a $200 cut in price of the iPhone announced just months after the launch. And Apple’s retaliation against hackers who had unlocked some of the first iPhones rankled some early adopters. But overall, the new touch-screen phone shook up the mobile phone industry, which scrambled to introduce competing products with appealing user interfaces.

Apple also completely redesigned its iPod lineup, adding the iPhone’s interface to the iPod Touch and tweaking the iPod Nano to be more video friendly. Six years after its introduction, the iPod still was Apple’s single most successful product ever.

Google introduced its Street View service, opening up everyone’s home neighborhood to onlookers around the world. Microsoft introduced its long-awaited operating system, Vista, to a somewhat less-than-enthusiastic public. Computer-aided design software even reached into the world of haute couture.

All in all, Silicon Valley seemed to riding yet another up-curve. The Renaissance was alive and well.

 

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