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A tale of taters and techies -A remote corner of Idaho (Ida-who?) may give Silicon Valley a run for its money

IDAHO FALLS, IDAHO–The 40 miles of Interstate 15 that stretch between the mini-metropolises of Idaho Falls and Pocatello testify to the spud state’s agrarian heritage. The air hangs heavy with the pungent aroma of manure, a roadside sign beckons drivers to visit the Potato Expo mu- seum, and, against the backdrop of the snowcapped Rockies, a Budweiser brewery logo proudly proclaims a predilection for "Idaho Barley." Yet the future of the cities–which house about 100,000 people in Idaho’s Snake River Valley–depends more on computer chips than potato chips. Pocatello, whose major claim to fame is building the country’s first domed college football stadium, boasts AMI Semiconductor, one of the nation’s top chip manufacturers. And downtown Idaho Falls–where the counter help at the cozy D. D. Mudd coffee shop know patrons’ names and salad-dressing preferences–hosts a number of high-tech firms like cybersecurity leader Nitro Data Systems.

BY JOELLEN PERRY U.S. News & World Report

(Thanks to Lorraine H. Roach of The Hingston Roach Group, Inc.for passing this along)

That’s right, french-fry fans: In Idaho, silicon is starting to supplant spuds. "We think we could be the next Silicon Valley," says Ray Smelek, who kick-started the starch state’s digital revolution in 1973 by choosing Boise as the site for Hewlett-Packard’s laser-printing division. "All the basic seeds are here," says Smelek, now CEO of a Boise technology consultancy, the Network Group. Among them: surprisingly strong venture-capital growth, a population that churns out the most patents per capita of any state in the union, and a cost of doing business that’s among the nation’s lowest. The last is a particularly poignant perk for coastal digerati accustomed to the sky-high prices of Boston and San Jose.

Idaho’s jaw-dropping scenery–the "purple mountain majesties" line could have been written here, and Montana has no monopoly on the West’s big skies–does its part to entice new recruits as well. "The most spiritual moments I’ve ever had in my life have been in Idaho," says Mark Solon, managing partner of Boise venture-capital firm Highway 12 Ventures, which Solon cofounded after moving from Boston in 2000. Plus, he notes, Idaho’s famously accessible outdoors mean "I can leave work at 5 and be on the ski slopes by 6."

OK, Idaho’s Silicon Valley is nowhere near as big as the original–the state’s high-tech workforce numbers fewer than 30,000. Still, a technological legacy is one of Idaho’s best-kept secrets. Natives proudly point out that the cathode-ray tube that makes TV pictures possible was invented in tiny Rigby, near the Wyoming border. And Boise has been a tech wallflower for years. Micron Technology, the nation’s largest semiconductor manufacturer, followed HP to Boise in 1978 and now, with 11,500 in-state workers, is Idaho’s biggest private employer. The two tech giants have spawned at least 60 spinoffs in Boise alone, including software firm Extended Systems and start-up Telemetric, which sells wireless monitoring systems to utilities. "Brand-name companies like that hire a lot of smart people," says Tom Loutzenheiser, a managing partner at Akers Capital, a Boise venture-capital firm.

Ph.D.’s and pickups. The remote southeastern corner is also home to a portion of the state’s technology brain trust. The Idaho National Engineering and Environmental Laboratory–an 890-square-mile tract of land called simply "the site" by locals–has studded the area with nuclear physicists and engineers. Jason Larsen, an INEEL computer security specialist whose software program Hogwash set international standards for cyberdefense, says a visiting friend described the area as "the strangest combination of Ph.D.’s and pickup trucks" he’d ever seen. It’s the doctoral element of that equation that lures firms like Nitro Data, a cybersecurity software developer that moved from Minneapolis to Idaho Falls in 1999. "The area’s strength is its close proximity to talented technical individuals," says President Howard Stewart. To date, the region boasts over 100 tech firms.

To be sure, Idaho hasn’t been exempt from the tech sector’s battering; but some evangelists still see tech as the state’s salvation. From 1995 to 2001, the state’s technology employment grew by 60 percent. "We’ve seen only moderate growth since then," concedes Jim Bowman, CEO of the Eastern Idaho Economic Development Council. "But, most importantly, our firms have survived the last two years." Some 60 Idahoans per 1,000 now work in the private tech sector, which accounts for nearly 40 percent of the gross state product–more than agriculture, lumber, and mining combined. "Our thought is that if we work tech right," says Georgia Smith of Idaho’s Department of Commerce, "we can save agriculture." To that end, broadband communications technology recently helped Idaho Falls snare a $64 million malting-plant deal with Mexican brewer Grupo Modelo.

So far, attracting talented techies hasn’t been hard. "I can hire any fly-fishing engineer I want," says Bill Shipp, INEEL’s president. Many homegrown tech firms, in fact, have refused to leave. David Hempstead, CEO of Pocatello start-up TetriDyn Solutions, which designs wireless software for the medical industry, turned down a Seattle venture-funding offer that would have required his firm to move out of state. Clad in blue jeans and cowboy boots, the former INEEL engineer turned businessman gestures out his office window to the mountains in the distance. "Why would we want to leave, when this is our backyard?" To keep TetriDyn local, regional development organizations chipped in with $500,000 in financing and a year’s free office space. High-tech jobs pay an average of about $66,000 in Idaho–the state’s average pay is $28,000–so lawmakers are increasing such inducements to draw more tech firms.

Christine King, the new CEO of AMI Semiconductor, didn’t need economic incentives. A 23-year IBM veteran, King dumbfounded AMI’s investors–who recruited her last year with the promise that she could relocate the headquarters to tech centers like Dallas or Boston–by opting to move to Pocatello. "I love the outdoors and [horseback] riding," says King, who also wanted to be near the firm’s manufacturing plant. Sitting in her Pocatello office beneath a poster-size model of a semiconductor, King talks up the benefits of small-town living. Buying a car during her first weeks in town, for example, King blanked on her new address. "The salesman said, ‘You moved into the old Morgan place, right? I know where you live.’ "

Go west. Such familiarity might not appeal to everyone, King concedes, but since taking AMI’s helm last year, she has recruited a slew of execs and engineers to the mountains. And judging by AMI’s recent $93,000 United Way gift–the town’s biggest ever–most transplants are sold. "Sure, there’s a percentage of people who just won’t move here," says King. "But there’s a similar percentage who would never move to Austin or San Jose either."

While semiconductors and nuclear spinoffs have been the backbone of Idaho’s technology economy, the state is poised to take advantage of at least one big upcoming tech boom: homeland security. Idaho State University, for example, is one of 36 schools currently certified by the U.S. government to train cybersecurity professionals. Says associate dean Corey Schou, also an adviser to President Bush’s cyberczar, Richard Clarke: "Our students will be the ones defending the nation’s digital borders." Other ideas on Idaho’s technological tap include an INEEL pitch to turn farm-waste products into alternative energy sources and spinoff Positron Systems’ plan to use radioactive beams to detect weakness in metals.

But if the Snake River Valley really does turn into another Silicon Valley, will it become just one more BlackBerry-toting, nerd-infested, smog-ridden tech corridor, destroying the natural glory that seduced so many in the first place? Akers Capital’s Loutzenheiser isn’t worried. Such is the beauty of the West’s wide-open spaces, he says. "There’s lots of room here."

http://www.usnews.com/usnews/issue/021202/biztech/2idaho.htm

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