Having the headquarters of a major American business has always been a defining element in a community’s success and progress. Milpitas is lucky to have a number of them from large and small, start-ups to mature ones. Where the principle decision makers are located often does mean a city benefits from corporate generosity and greater involvement by key company officers and staffs in local affairs.
That certainly has been true of two outstanding companies here, SanDisk and KLA-Tencor Corp. While the acquisitions of both firms will likely have important benefits to stockholders, customers and others, the news is bittersweet.
It must be recognized that semiconductor companies and other high-tech businesses have always gone through periods of consolidation as founders move to retirement or competitors find that joining rather than fighting makes more sense, even if the dollar price is high. Changing worldwide trends often call the shots.
KLA-Tencor will become part of Lam Research Corp. in Fremont. Both make semiconductor equipment but don’t overlap much in what they produce. Becoming one entity therefore could solve problems for customers of each. Lam employs 6,500 and KLA-Tencor almost as many. KLA-Tencor shareholders will receive $10.5 billion in cash and stock and retain a 32 percent interest in the merged companies when the deal is completes in 2016.
SanDisk’s situation is different. It is a one of a kind company whose flash memories have become part of a huge consumer market in addition to serving industry. This data storage technology was avidly sought by Western Digital, a maker of hard drives. The shift to flash memory in smart phones and in data centers was triggered by SanDisk’s rapid innovations. It was well worth the $19 billion price tag on the Milpitas company.
An added international factor contributed to the decision. A 15 percent owner of Western Digital is the company Unisplendour, a subsidiary of Tsinghua University in China. It opens the way for the Chinese to build a domestic chip industry.
The two big acquisitions don’t foretell any changes as far as local employment is concerned. Milpitas still finds itself in the hub of a power and growing economy that will keep right on humming.
But losing these twos flagship headquarters does cut down a bit on the bragging rights.
