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Shadow Of The Valley


Frontier -- My Company

Shadow of the Valley

Why would an old-line manufacturer dwell in a high-tech haven, with its traffic jams and pricey talent? Well...

Every now and again I read the local papers and wonder: What the hell am I doing in the printing business? With all the cash sloshing around Silicon Valley--a mere 30-minute drive from my factory--why aren't I part of the dot.com madness?

Certainly, the case can be made that my proximity to the valley does me no good. My rent and labor costs are about 20% higher than my Southern California competitors, and high-tech companies make off with my best workers. Meanwhile, friends and neighbors who have cashed in on the boom buzz around in Porsches buying big estates. I have one family member whose personal net worth, at age 40, is several times larger than my entire company's, thanks to his recent initial public offering.

Yes, I'm living in the shadow of the valley, and it's easy to wallow in Silicon envy. I even sit back sometimes and fantasize about putting together a company I've dubbed packaging.com. The mood usually passes quickly, though. I know I have no talent for the dot.com world. I don't deeply understand the technology, and I have no path-breaking ideas to grab the attention of financiers on Palo Alto's Sand Hill Road. And besides, I actually enjoy the brick-and-mortar world, the whirl of our machinery, the fact that we make things.

Still, the infernal valley poses thorny business problems quite apart from my emotional state. For instance, I compete hard for skilled workers, especially maintenance mechanics and electricians. Last year, one of our electricians was offered 30% more money by a Sunnyvale company that did high-tech manufacturing for Intel and Hewlett-Packard. I was floored. While talented, this young man had little formal education and no background in computing. But we needed him, so we matched the offer and he stayed. However, I suspect at some point he'll get a deal that will price him beyond our reach.

Our location just north of San Jose poses problems for holding on to our less marketable employees as well. The housing market in the Bay Area is the hottest in the country, with prices up 20% annually over the past three years, thanks to the success of dot.com stock option programs. Although our average wage of $13.60 an hour puts us in the top echelon among manufacturers nationally, it isn't enough to buy a home around here. So, we've had to step in and help some employees with downpayments. And our company has joined two credit unions to help workers finance home and car purchases.

Human resources problems aren't the only ones posed by Silicon Valley. Rents in Union City, where our factory is located, have jumped 15% over the last year as computer and Internet companies have swung into the area. Traffic jams through San Jose sometimes hold up shipments to our customers in Salinas, 45 minutes south. And the local government often seems more inclined to woo clean dot.com startups than help us through the prosaic permit process to expand our less sightly operations, like our new, 30,000-square-foot warehouse.

Living in the dot.com universe does have some benefits. I think the area's high-tech expectations have made us more likely to adopt cutting-edge ideas. We were among the first in our business to have e-mail, a network, and to go online, all of which vastly improved our customer service. No doubt this will give us a leg up as our industry, like most others, consolidates. I also think we're more innovative in our approach to human resource issues because of the surrounding market. Hiring bonuses, housing loans, and tuition reimbursement have become part of our arsenal, just as they are part of Apple's or Intel's. As a result, I think we have the most talented collection of employees we've had in years.

It's also true that with a population of 5 million-plus, not everyone wants to, or can, work for the valley's high-tech companies. As many manufacturers have moved out of the area to save money, they've left a well-trained pool of workers. As one of the last package printers remaining in the area, that has left us in surprisingly good shape. Still, I can't stop wondering: Why can't an old-line manufacturer like us cash in on the IPO craze? Hey, we're a packaging company. Maybe we just need a new wrapper.By Kevin Kelly; Kelly Is an Officer of Emerald Packaging in Union City, Calif. Do You Have Dot.com Envy? E-Mail Us at Frontier@businessweek.com


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