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Facebook taking Sun headquarters? Schumpeter’s creative destruction at work. January 5, 2011

Posted by Bob Cook in Company Case Studies, Corporate HQ, Financial Planning & Analysis, Silicon Valley.
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Economist, 1883 - 1950

Joseph Schumpeter, Economist, 1883 - 1950

The Mercury News reported yesterday that Facebook is close to buying the former Sun Microsystems headquarters in Menlo Park CA for its own.

It’s all part of economist Schumpeter’s “creative destruction”.  With innovation, there are those who rise and those who slide.  Over the last decade, Facebook has risen, Sun has slid.

Sun built its million-square-foot Menlo Park campus during the dot-com boom of the late 1990’s (remember that?), back when its Unix-based servers sizzled and allowed Sun’s boastful advertising slogan: “We’re the dot in dot.com”.   Sun even built a couple more million-square-foot campuses in Silicon Valley and made one its official headquarters address.  The Menlo Park campus, though, was never displaced as home of executive management, and it continued to be the “real” headquarters until “the end”. 

“The end” began when the internet boom busted and, as the IT market moved away from Unix, Sun’s revenues busted even more.  Last year, the remnant of the once-proud company was bought by Oracle for $7.4 billion, a paltry sum given Sun’s much-loftier market capitalization ten years earlier.   Sun’s management is largely gone.   When Oracle closed the purchase, Sun’s last CEO Jonathan Schwartz famously haiku’d: “Financial crisis/Stalled too many customers/CEO no more“.  Oracle whose headquarters campus is down “the 101” about 10 miles, apparently, figures it can do without the old Sun headquarters.

As Sun has slid into the tech horizon, Facebook has risen towards the tech heavens.  Founded only a few years ago, in 2004, with a handful of employees, the company now has about 2,000 workers … still small compared to the nearly 40,000 that Sun had at one time, but other stats are superlative:  Its market cap is estimated to be about $50 billion … a staggering amount for a company that is still privately-held … and it claims to have 500 million users!  It even has a movie made about it.  Facebook’s trajectory is strongly upward, and undoubtedly it feels it will fill the former Sun headquarters, which can probably house at least 3,000 workers, in no time.  It’s earned the right to have everyone under one roof … to have its own campus.

A loser, a winner:  It’s the Schumpeter Way.

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