Intel’s Stalled Dream in Utah

Start with a booming economy, fed by consumers in love with the Internet and demanding more and faster computers to surf the Information Superhighway. Add a ready-and-waiting pool of tech-savvy workers.

BY BOB MIMS
© 2003, THE SALT LAKE TRIBUNE

Add to that millions of dollars in loans and tax incentives, and it becomes clear why in the heady days of 1998, Intel Corp. saw in the wind-swept high desert plains outside Riverton such stuff as cyberdreams are made of.

It was a vibrant vision the world’s leading memory chip-maker offered: From 150 acres of farmland at 3740 West and 13400 South would rise a sparkling, $500 million research and development campus of between five and seven buildings. Within 20 years, hungry-eyed city and state officials were told, the site would employ 8,000, the majority earning $50,000 or more.

For then-Riverton Mayor Sandra Lloyd, whose city anted up $11.6 million in tax incentives to lure Intel, the project was "not a big deal for just the city of Riverton, it’s a big deal for the state of Utah," a development to "serve this community for generations to come."

At the time, Gov. Mike Leavitt, who chipped in a $5 million Industrial Assistance Fund (IAF) loan guarantee to seal the deal, agreed and offered a prediction of his own: "The real beneficiaries of this will be our children and our grandchildren and our families."

Flash forward five years and that dream is all but dust, indefinitely shelved by an Intel that watched the bottom drop out of the tech sector not long after its first and only building was completed in October 2000. Instead of an 8,000-strong work force, Intel’s Riverton site today employs 400.

Even that is about half of what the company employed a year and a half ago. In May 2001, Intel cut 100 of its 700 to 750 workers. Last September, another 150 jobs disappeared from company payrolls — but at least remained in Utah — when Intel sold its LANDesk Group to a group of Utah and San Francisco venture capitalists.

But Intel, state and Riverton officials agree: Blame the death of the Riverton dream on the bursting of the dot-com bubble, a stubborn and prolonged recession and the economic blows still echoing from Sept. 11, 2001’s terrorist attacks.

While the tech-heavy Nasdaq index has plunged nearly 75 percent from its 5,049 high in March 2001, Intel shareholders endured their own share prices tumble from $75 levels in late 2000 to a low of $12.95 last October. Intel stock was trading in the $15-$17 range last week.

"Sure, things haven’t gone as projected," said city administrator Mark Cram. "But none of us have control over the economy, threats of war and terrorism. We all do the best we can and try to be resilient, to make the best of the situation."

Riverton is grateful for the reality that remains: It still has hundreds of new jobs, along with the potential for further development — by Intel, or newcomers attracted by Intel presence — when the economy recovers.

"Intel is a good corporate citizen for the entire [Salt Lake] valley and state," Cram said. "Any community would be glad to have Intel . . . and Riverton will continue to look to attract business in addition to Intel."

Indeed, Intel-Riverton boasts of its contributions to the community. In all, $750,000 was spent in 2002 in cash and equipment, mostly to improve science, math and tech education in the public schools. The company also sponsors seminars and engineering scholarships in higher education, and contributed $40,000 in employee and company donations to the United Way.

Intel also offers incentives for the hundreds of hours of community service its Riverton employees contributed yearly, Intel spokesman Jason Bagley said.

And while truncated, Intel’s Riverton development still earns the rank of major. The company spent $70 million to build its one existing four-story, 330,000-square-foot building, and the site’s work force — while a fraction of what was hoped for — is a stable one, dealing with a variety of employee and internal corporate programs such as payroll, training, hiring and relocation, mergers and acquisitions.

"When the site was planned, it was envisioned in a business climate not here today," said Bagley. "We don’t have the design and engineering components expected. But Intel’s presence in Utah, primarily employee services, still is a critical company operation."

Will an Intel R&D campus still some day rise in Riverton? Impossible to say, but probably not, said Bagley, who noted the company has not claimed any of the city’s proffered tax incentives, and has returned the $2.5 million in IAF loans it initially accepted.

"I would be very conservative in my optimism that Utah now will ever see that [expansion]," Bagley said. "The semiconductor industry has lost 35 percent of its revenues during this current economic downturn. Intel itself has been flat, and for the foreseeable future we see ourselves remaining flat."

For its 2001 fourth quarter, Intel reported net income of $998 million, a 62 percent year-over dip. By the end of fiscal 2002, things had improved some — $1 billion in net income, 3 percent better from the previous year — but still far from heralding another tech boom.

"Hey, I was glad we were able to keep [400 Intel jobs] in Utah," said David Harmer, executive director of the IAF administering Department of Economic and Community Development. "They can’t control the economy and business outlook any more than we can."

Chris Roybal, president and chief executive of the Economic Development Corporation of Utah, said he still thinks Intel will emerge as a major player for an eventual tech market turnaround.

"When we go out and meet with corporate site selectors, we let them know that Intel selected their facility here. That can have a huge impact," he said. "And if their expansion here takes 20 years, instead of 15, that’s OK . . . we view this all from a little broader perspective."

That is also how Leavitt sees it, said gubernatorial press secretary Natalie Gochnour.
"Certainly, it is a disappointment to the state and the governor that [Intel has] not been able to reach [its] full potential here," she said. "But it is completely understandable in the market technology finds itself in today.

"We continue to seek every way possible to develop the state as a center for technology," Gochnour added. "And when the inevitable recovery occurs, we will be in a good position to take advantage of it."

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http://www.sltrib.com/2003/Feb/02022003/business/business.asp