It’s A Rough Ride On The High-tech Highway
BOSTON — In the foyer of the Massachusetts High Technology Council hangs a poster, a spinoff of the celebrated New Yorker magazine cover by artist Kirby Scudder showing the world as three-quarters New York City and one-quarter everything else.
This one’s titled “Route 128,” and it’s drawn with as much myopic egotism as the original. Squeezed into a narrow, barren strip of space at the top is all of America west of the Berkshires. Given only slightly greater attention at the bottom is the city of Boston.
And displayed prominently in the middle is Route 128, flanked by the boxy buildings and corporate logos that have made this ribbon of concrete famous the world over: Digital Equipment and Stratus Computer, Alpha Industries and Cullinet Software, Compugraphic and dozens of others.
“A lot of these companies don’t exist anymore,” council president Howard Foley lamented last week as he surveyed the poster’s geography. What he didn’t add was this: A lot of those that still exist are in serious trouble.
How changed this picture is for Massachusetts’ vaunted high-tech highway. Far more than just a road looping around Boston, for nearly a decade Route 128 has been a separate entry in the public lexicon, defining all the breakneck, razzle-dazzle innovation of an industry that seemed to go only up, up, up.
A sign posted along the highway said it all: America’s High Technology Corridor.
But this year the headlines from Route 128 have been depressingly down: contractions instead of computers, plummeting profits rather than soaring sales. Prime Computer Inc. chose a leveraged buyout over a hostile takeover and saddled itself with more than $1 billion in debt. Cullinet Software Inc., once the software industry’s darling, was sold to Computer Associates Inc. of New York. Apollo Computer Corp. was bought out by Hewlett-Packard Co.
In recent months, nearly 15,000 layoffs have been announced by seven firms.
The numbers probably will climb still higher because Wang, in desperate shape after a $424.3 million loss in its latest fiscal year, is expected to slash additional staff this week.
Overall, high-tech employment in the state is down about 30,000 jobs from a few years ago. Even Foley, a big booster of the Route 128 corridor, does not
deny that many companies seem to be hemorrhaging money.
“I guess the short answer is yes,” he said. “And the question is, where’s the silver lining?”
To be fair, the region for which Route 128 is shorthand is not just computers. The high-tech corridor is home, too, to defense firms such as Raytheon Co., the state’s largest corporate employer. The corridor is biotechnology, too.
Moreover, the corridor’s troubles parallel, to some degree, problems that the maturing computer industry is having nationwide. Sales are sluggish all over. Customers are wary. Layoffs are a nationwide phenomenon.
“What’s happening (here) in the computer business is the inevitable cycle of what happens in any business,” said David Lampe, an assistant director in the Industrial Liaison Program at the Massachusetts Institute of Technology.
Still, Massachusetts computer companies may have heard their last hurrah for quite a while.
“It used to be,” said Charles Foundyller, president of Daratech, a research company in Cambridge, Mass., “you’d go to California and you’d sit down at some meeting, and they’d say, ‘Where are you from?’ And you’d say ‘Boston’ or ‘Cambridge,’ and everyone would sit up. There’d be this silent homage paid because you were in the center of where it was happening.
“Now, you don’t get anyone laughing at you, but you don’t get that same respect.”
According to Foundyller and other consultants, the main problem is that hardware and software makers here simply failed to keep up with the times. While the demand for computers was shifting toward computer workstations and personal computers, they hung on with more expensive minicomputers. Instead of modifying their machines to use common industry designs, they stuck with their proprietary systems.
“A lot of very good companies get lulled into complacency,” he said. ”Certainly, a lot of the companies did around 128.”
Even with aggressive restructuring and paring, some experts believe that several of the state’s bigger computer firms will not survive. John McCarthy, an analyst with Forrester Research in Cambridge, predicts that within five years there will be only one survivor among Prime, Wang and Data General Corp., which together employ 51,000 people worldwide.
“The business is changing, and they are way behind,” McCarthy said. “The red ink they’ve been flowing in the last four years has significantly eroded consumer confidence.”
Coming on the heels of Gov. Michael Dukakis’ failed presidential bid, in which Route 128 held star billing in his economic-miracle message, today’s problems are of more than just industry interest.
Economists continue to disagree over how high high-tech’s star really should have been. They also differ on how much the high-tech industry’s troubles are to blame for state government’s budgetary crisis. On Friday, DRI/ McGraw-Hill, the respected economic forecasting firm in Lexington, Mass., declared that Massachusetts was in a recession.
But no one presumes that Route 128 will not rebound.
“128 is still a very fruitful incubation ground for start-up,” said Boston University economist Peter Doeringer. “One could even make the argument that the decline of some companies, either because of the freeing up of manufacturing space or the freeing up of engineers and technical personnel, is making it a little easier for start-up.”
That, over at the High Technology Council’s offices, was almost exactly Howard Foley’s point.
“A lot of these people laid off in these companies have connected in high tech,” he said. Many have been hired by small, new companies. Some have begun their own.
Foley took another look at that Route 128 poster. Yes, Automatix Inc. is out of business, and GCA Corp. and Adage Inc. are struggling. M/A COM Inc. has been bought by a former competitor, and now the French and the Japanese own pieces of what used to be Honeywell Information Systems.
But hundreds of companies out there are “percolating up,” he said. And therein, he suggested, may lie the silver lining.