The new tech palaces: visionary HQs, or cursed trophies?

Mon May 27, 2013 9:43am EDT
 
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By Bill Rigby and Alistair Barr

SEATTLE/SAN FRANCISCO (Reuters) - While much of corporate America is retrenching on the real estate front, the four most influential technology companies in America are each planning headquarters that could win a Pritzker Architecture Prize for hubris.

Amazon.com this week revealed plans for three verdant bubbles in downtown Seattle, joining Apple's circular "spaceship," Facebook's Frank Gehry-designed open-office complex and a new Googleplex on the list of planned trophy offices.

"It signals a desire, a statement, to say that we're special, we're different. We have changed the world and we are going to continue to change it," said Margaret O'Mara, associate professor of history at the University of Washington, who has written about the building of Silicon Valley.

"It's also a reflection of robust bank accounts. They have a lot of cash."

Historically, however, when a company becomes preoccupied with the grandeur of its premises, it often signals a high point in its fortunes. These fantastical buildings may end up as little more than costly monuments to vanity and a loss of focus on the core business that made for success in the first place.

"I've been thinking the Apple spaceship is going to get nicknamed the 'Death Star' because the project is so big and the timing is so bad," said hedge fund manager Jeff Matthews of Ram Partners. The building is coming to fruition just as Apple's product cycles may be maturing, he explained. "It is such a classic contrary indicator that you just get the shakes." He no longer holds Apple stock.

Walter Price, who runs technology investment funds at RCM Capital Management LLC, shares the outlook: "When companies build big headquarters it's usually when they're doing really well and have strong outlooks, and that often coincides with a peak in their stock." Apple, Amazon, Google and Facebook are battling to recruit tech talent, and attractive campuses help with that, he added, but Apple's plan has not gone down well with investors. RCM's tech funds no longer hold shares.

PROJECT RUNAWAY   Continued...

 
The proposed Google corporate headquarters in Mountain View, California, is pictured in this artist's rendering courtesy of NBBJ. NBBJ/Handout via Reuters