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Silicon Range feels tech slump's pain

Small cities and regions often are more vulnerable to downturns because smaller job markets mean tech workers must go jobless for longer.

BOULDER, Colo.--Bruce Hofmann signed the paperwork for construction on his Colorado dream home in April, only two days before he got laid off from his software sales job. Disappointed but not discouraged, he told his wife and three daughters he'd find new work within 48 hours.

After two months of trolling online job databases for software sales jobs in Boulder and in Denver's northern suburbs, he began considering offers requiring an hour commute or longer. After three months, he contemplated sales jobs outside of software; he even received an e-mail bulletin for a used-car salesman gig.

"It sucked," Hofmann said of his jobless stint. "A year ago, it was an employee's market; we could dictate what we wanted. Now, it's a totally different market."

Hofmann found a new sales job in the Denver office of another software company after four months of searching, but his peers in Colorado's once booming tech niche are likely to find themselves out of luck. The number of unemployed workers in Colorado shot up 30.8 percent from January to August, from 57,824 to 83,578, and layoffs have disproportionately stung the region's tech sector.

Research labs, software developers and telecommunications companies from Colorado Springs to Fort Collins are downsizing or closing. In June, Broomfield, Colo.-based Level 3 Communications cut 25 percent of its workers, axing 1,400 jobs worldwide and 500 statewide. Vancouver, British Columbia-based 360Networks, which occupied prime real estate in Colorado's Interlocken Business Park, laid off 44 percent of its work force and declared bankruptcy in June.

The situation is hardly unique to "Silicon Range"--a moniker that hopeful politicians and developers used during the late '90s tech boom.

National media have focused attention on the sharp economic downturn in tech meccas such as California's Silicon Valley and New York's Silicon Alley. But smaller cities and regions--from tech hubs in Texas to North Carolina to Michigan--often are even more vulnerable. Smaller job markets mean tech workers must go jobless for longer, and aggressive courting of tech companies in the 1990s has resulted in vacant office space and depressed real estate prices in 2001.

"The tech downturn already hit San Francisco, and now we're seeing it in Atlanta, Boulder and Austin (Texas)--even in Omaha (Neb.), Kansas City (Mo.), St. Louis and Ann Arbor (Mich.)," said Ernest Goss, an economics professor at Creighton University of Omaha and an expert on regional economic forecasting. "It's the other shoe dropping. We're just starting to see the aftermath of this in places like Colorado, and it's gut-wrenching."

Rocky Mountain low
Boulder--a funky, sunny college town that attracted hordes of technology workers in the late '90s--is an extreme example of how the tech downturn stings regional economies.

Boulder County's tech-savvy work force

27,601: Tech workers countywide
6,300: Jobs added between 1993 and 1998
$63,600: Average wage for tech worker
846: Tech companies countywide
$652 million: Venture capital investment countywide
63: Percent of homes with computer
50: Percent of homes with Internet access
20.1: Percent of residents who are tech workers

Source: AeA Cybercities report, December 2000

Roughly one out of five working residents in Boulder County is employed by the tech industry, according to a recent study by the American Electronics Association (AeA). That makes this mountain hamlet second only to San Jose, Calif., for the percentage of tech workers to the total work force.

Boulder's layoffs began at the end of the ski season last year, when the stock market tanked, and have come in a steady stream since then--not from one giant employer but from scores of boutique software companies, corporate divisions and small businesses.

One of the largest employers in downtown Boulder, GE Access, cut its staff by 15 percent in April, eliminating 126 local workers from the e-commerce services division of General Electric. Before that, Bozeman, Mont.-based manufacturer ILX Lightwave halted its fiber-optics plant in Boulder and cut two-thirds of its 300-person work force.

The effects of the layoffs have been broad--hurting pizza vendors, commercial real estate developers, architects and others who relied on wages from tech workers and investors. The average tech worker in Boulder County earned $63,600, according to AeA--66 percent more than Boulder's average private-sector wage.

One apartment complex popular with computer programmers and engineers in nearby Superior, Horizons at Rock Creek, reduced rent by 15 percent for some residents who were laid off. The Inn on Mapleton Hill, a Boulder bed-and-breakfast that caters to visiting business people, has had a 20 percent downturn in reservations in the past month; the terrorist attacks of Sept. 11 accelerated a sputtering local economy that had been slowing for months.

"The investment bankers, the executive training candidates, the salesmen--they're just not coming," said innkeeper Judi Schultze. "I'm working hard on the marketing and networking. We're just going to hang out and hope we make it."

It's unclear how Boulder could have gotten through the tech downturn unscathed. Mayor Will Toor still scratches his head when contemplating what he could have done to avoid the boom and bust cycle.

San Jose, Calif.'s tech-savvy work force

252,888: Tech workers
67,200: Jobs added between 1993 and 1998
4,773: Tech companies in city and suburbs
$85,100: Average wage for tech worker
$7 billion: Venture capital investment in city and suburbs
77: Percent of homes with computer
66: Percent of homes with Internet access
25: Percent of residents who are tech workers

Source: AeA Cybercities report, December 2000

"We don't have an economic development committee, and we don't give subsidies to corporations. I'm not sure what we could have done to prevent this," said Toor, who may cut some of the city's middle management jobs if the downturn is sustained. "Despite some people calling this the People's Republic of Boulder, we are a part of the U.S.A. and aren't immune to broader economic trends."

Consumer confidence suffers
One broad economic trend mirrored in Boulder is a declining consumer confidence and outlook concerning the job market.

Kevin Andresen lost his sales management job at Rapidigm in May, and the 41-year-old Louisville, Colo., resident is caring for his 2-month old daughter with his wife, who is on a three-month maternity leave from GE Access. He's busy teaching tai kwan do classes and isn't in a hurry to find a new job--in part because few companies are hiring. He says many of his peers have stopped looking after months of fruitless job searches.

"Here in Colorado, it's obscene," Andresen said. "The telco people, the dot-coms--there are a lot of people out of work. They're basically just licking their wounds, saying, 'This is crap.'"

The downturn is also putting the brakes on one of the hottest regional housing markets in America: Home prices in Boulder County skyrocketed 147 percent in the past decade. But new home sales dropped 45 percent from January to June compared with the same period last year, according to Englewood, Colo.-based Genesis Group.

Commercial real estate developers are bracing for a sharper decline. In December, the region's high-tech corridor along Highway 36 between Westminster and Superior had a vacancy rate of 1.64 percent. At the end of the first half of 2001, it was 29.3 percent--higher than many research parks in Silicon Valley.

Developers there are also constructing 1.37 million square feet of new office space. If no new tenants come forward, according to a recent analysis by the Rocky Mountain News, the corridor's overall vacancy would soar to 48.7 percent.

Upbeat undercurrent
But some residents are confident that Boulder will shake off the economic flu--avoiding the fate of many Colorado mining towns that are now boarded-up ghost towns or the haunts of downscale casinos.

Unlike in the San Francisco Bay Area, where many laid-off tech workers are leaving because of the high housing prices and sour job market, many jobless people in Boulder have no plans to uproot. They say they're willing to increase their commutes, work for less money, even reroute their career to stay in this charming mountain town.

The same quality of life that provided the fuel for the local tech boom could help buoy Boulder during a downturn. Boulder was No. 1 in the AeA Report for quality of life, which ranked 60 cities based on air quality, violent crime rates per capita, average commute time, unemployment rate, access to arts and culture and the number of sunny days per year.

Quality of life is why Dan Spiegler, a 32-year-old organizational engineer who was laid off last month from GE Access, won't consider job offers outside of Boulder for at least six months--until the end of the skiing season. After that, if the New York native can't land another job in Boulder, he may open up his job search to coastal cities in New England or the Northwest.

"I haven't lived here for nine years because I've had the best jobs," said Spiegler, who spends his days job searching and biking. "I moved to Colorado because I liked to ski and I had friends here...I've had gaps in my employment--not because I was laid off but because I needed time off. People here understand that. They don't understand that in New York or San Francisco."

For people who aren't heavily invested in the tech niche, the downturn has had pleasant consequences: Traffic is down and tables at popular restaurants are easier to find. Waitresses, shoe salesmen and other service industry workers can afford to live nearby as rents drop. Jobless students, ski bums, artists and hippies have reclaimed some of the city.

Those who missed Boulder's tech boom--or feared they got out too early--now say they're thankful they stayed in the Old Economy.

Bob Gall, president of Boulder-based SPS Studios, says it's easier to find people willing to work for his greeting card company since Web design firms and electronic arts companies stopped paying high salaries.

Excite@Home bought the electronic greeting card portion of Gall's company, formerly Blue Mountain Arts, for $780 million in October 1999. Last month, American Greetings acquired Blue Mountain Arts from Excite@Home, which recently filed for bankruptcy protection, for $35 million in cash.

"We were thinking, 'Let's wait a year and see what happens, see what we can do with the Internet,'" Gall said, referring to the December 1999 deal closure. "We only had to wait three months before the stock market bombed. Even in hindsight we couldn't have timed it much better."