All's Dell

So long to slackers and laid-back lifestyles. Now that cash-rich techies have taken over, can Austin survive the great digital divide?

Unlike Vignette, whose market valuation is based primarily on wishful thinking, Dell's wealth-building has been backed by matching business success. Vignette, for instance, posted a paltry $89 million in 1999 sales while losing a nonpaltry $42.5 million. Meanwhile, its peak market valuation topped $12 billion. Vignette has 1,100 employees and an impressive client list including Citicorp, Land's End and Hoover's Inc., a local Austin Internet information service. Its StoryServer software is generally acknowledged as one of the best for managing information on complex Web sites. But its stock value clearly doesn't make sense. Dell is something else completely.

Dell's sales last year grew more than a third, to $25.3 billion, enough to rank it 56th on the latest Fortune 500, between GTE and United Technologies. It knocked Houston-based Compaq Computer Corp. from its longtime position as the largest PC maker in the United States. Dell is a Web-selling pioneer, generating $35 million daily -- nearly half its revenues -- from customers who shop for computers via The stock market, not surprisingly, valued Dell north of $130 billion. Locally, Dell's 22,000 workers make it Central Texas's largest employer, ahead of perennial leader Motorola. Another 10,000 or so people work at companies serving Dell and its workers -- components suppliers, restaurant employees and the like. Last year, according to Angelou Economic Advisors, Dell built 1.5 million square feet of commercial buildings in the area, equal to a fifth of the city's stock of downtown space. Even more incredible, in one stretch of several years in the mid-1990s, Angelou says, Dell accounted for $1 out of every $10 in regional building permits.

Dilum Chandrasoma is not a builder, he's a car salesman. His lot at Team Motorsports on North Lamar is packed with three dozen or so high-dollar vehicles, ranging from Rolls-Royces and Dodge Vipers to BMWs and Ferraris. Business, Chandrasoma reports, has been good, if a little odd. "It's amazing," he says. "We're getting guys 20 to 25 years old walking in here and buying $40,000 cars. We've sold Ferraris and Lamborghinis to people walking in here with cutoff shorts. You'd never see that five or ten years ago."

Sterling Lands says high-tech firms need to provide more jobs for minorities.
John Anderson
Sterling Lands says high-tech firms need to provide more jobs for minorities.
Harry Pape has yet to hit gold in the dot-com quest.
John Anderson
Harry Pape has yet to hit gold in the dot-com quest.

Along with doctors and lawyers, people who have done well in the tech stock boom make up virtually all his clients nowadays. "We've had a lot of Vignette guys," Chandrasoma says. "Most of them like the sports cars." Hot movers include two-seater Porsche Boxsters, at $40,000 and up, the $75,000 mid-engined Acura NSX and six-figure Ferrari Testarossas. Dell clients are more numerous, and their tastes are different when it comes to the rolling stock. "They're a little bit more conservative than your Internet people," says the car salesman. Many of the biggest spenders are not techies at all, but stockbrokers prospering in the market. "Right now we're trying to find a 2000 Bentley for a stockbroker," he says. "Those are up in the $200,000 range."

Car lots aren't the only beneficiaries of high-tech hedonism. It's hard to find a successful real estate agent, for instance, who doesn't boast of having sold a home in the hills to a Dell executive or a twentysomething Internet entrepreneur. On a more prosaic level, all Austin homeowners are looking at 20 percent increases in the appraised value of their homes for property tax purposes in 2000, simply because of appreciating home values.

The increasing price of just about everything in Austin is one of the major concerns of those watching the way the tech boom is changing the city. "Austin used to be such an affordable place to live," recalls Peter Zandan. He came here to attend UT in 1977 and stayed to found a market research company, Intelliquest, which he took public and sold in 1997. Now he has a new startup, Zilliant, doing Internet pricing research, and is also a venture capitalist. But he still yearns for the old, inexpensive days.

"If you just wanted to be a student or a musician or a writer or an artist, you could make ends meet," Zandan says. "Housing, food, getting around, it was all relatively inexpensive, and that's what most people were doing: making ends meet. Now, if you're a struggling artist, it's a difficult town to survive in because things have gotten very expensive."

Expensive, of course, is a relative term. The largest component of living expenses, housing, has indeed risen sharply. JBGoodwin Company, an Austin real estate broker, reports that the median price of a home there in 1999 was $129,000, up 7.5 percent from the previous year. By comparison, however, the percentage increase was slightly higher for home prices in Houston and Dallas, the company reports. As for Silicon Valley -- forget it. The median home price in the Bay Area was nearly three times Austin's, and had risen a whopping 12 percent. All told, Austin home prices were about 3 percent lower than the national average.

Perhaps of more concern than the rising price of things in Austin is the fact that the rising tide of the tech boom isn't lifting all boats. "Everyone is not benefiting from the economic prosperity in Austin," Zandan frets. Indeed, a 1998 study by Intelliquest found that while 42 percent of white Austinites were very satisfied with the city, just 28 percent of Hispanics were that pleased, and only 12 percent of blacks were very satisfied. Part of the reason for that dissatisfaction, Zandan believes, is that minority communities are having to cope with the costs, without getting the benefit of the bucks.

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