Widespread sighs of relief, but IBM’s disk drive plant gives cause for concern
The first reaction of the computer and semiconductor industries to Tuesday evening’s 6.9 force earthquake was sighs of relief that most of the buildings that house Silicon Valley’s precision chip, disk drive and instrument manufacturing businesses came out superficially undamaged, and chip companies that put out messages generally talked of losing only a shift or two. But the earthquake, with its epicentre between Santa Cruz and Hollister – where a Pacific Telesis exchange was knocked out (see map), was very uneven in its impact, and the initial assessment is that Oakland, much further from the epicentre than Santa Clara county, which has the highest density of high-tech firms, suffered the most damage. The problems that may be discovered over the next two or three days are highlighted by the formal announcement from IBM on its mainframe disk drive plant in South San Jose, which finally came through just before 9pm UK time. The company said that the facility suffered some damage but is expected to resume operations gradually over the next several days. Clean-up operations at the plant were under way, but it is really too early at this point to assess the extent of the damage, IBM said. We know that there is some damage, some broken water pipes were causing flooding and ceiling damage, but no major structural damage has been detected. An eyewitness reported that there was no apparent stuctural damage to the plant except for the parking lot and an area with some corregated structures. Hewlett-Packard Co and Intel were both closed on Wednesday, and many of the wafer fabrication facilities have automatic shutdowns in the event of tremors because of the arsenic and hydrogen that is floating around. They expect to be out for at least 72 hours because it takes time to restart a fabrication line, and the first few tens of wafers of the line usually have very low yields. Broken water pipes will clearly have caused severe damage to critical equipment in some plants, and, ironically, sprinkler systems set off by the earthquake may have been the cause of much of the damage that has been sustained. Some companies are also concerned about damage to roads making it difficult for them to ship products out at the rate they had planned, and others will have suffered damage to the computer systems that are critical to the running of their businesses.
Disaster recovery share prices soar
First market reaction to the earthquake was focussed on insurance companies that were likely to have to bear the brunt of the claims, and on construction companies that will benefit from the surge in repair and rebuilding activities, and as soon as high technology companies began reporting only very limited damage, the sector was largely ignored, although IBM, which announced a potentially share-boosting buy-back programme, saw its share price dip 75 cents to $101.875 on its guarded comments about the damage to its disk drive plant. Shares of Hewlett-Packard Co, most of whose activities are in Silicon Valley, on the other hand, were a shade firmer. One tiny sector that was the focus of investor excitement was disaster recovery. Shares of SunGard Data Systems Inc and Comdisco Inc traded sharply higher on heavy volume, on the hope that foolish virgins would be wise after the event and sign up for service against the next earthquake.According to one insider, a partial count of the disaster recovery activity found Comdisco with seven declared emergencies, while SunGard had four and expected three more, and El Camino had one.
Scotts Valley seems to be hardest hit
It seems that companies that suffered the worst damage were in Scotts Valley, midway between Santa Cruz and Los Gatos on the map and close to the epicentre. As well as Borland, which was forced to operate out of its parking lot (see front), disk drive maufacturer Seagate Technology Inc said that it was closed to assess what appeared to be minor damage to some of its 20 buildings – but minor damage to sensitive d
isk drive manufacturing equipment can mean major headaches. Any problem for Seagate would have been much more severe a few years ago now most of its manufacturing is offshore. National Semiconductor in Santa Clara reported that piping in a waste treatment plant needed quick repair.
Apple, others: business as usual
Apple Computer Inc, Cupertino was preparing to resume all critical business operations as we closed yesterday. The company had closed all San Francisco Bay Area facilities on Wednesday to assess physical damage to its buildings in order to ensure safety of staff before allowing them to return to work. Other companies reporting business at near normal were Advanced Micro Devices, which was able to resume normal operations on Wednesday; Amdahl Corp, which was due to resume business yesterday with all its computer systems running, after finding no structural damage. LSI Logic was expecting to resume full operations by last night and other companies that reported with relief that they got off lightly – provided there are no aftershocks – included Tandem Computers, Sun Microsystems, Wyse Technology, Everex Systems, 3Com Corp, Anacomp Inc, Oracle Systems, VLSI Technology and Quantum Corp.
Pacific Telesis loses its figures
One unlikely casualty of the earthquake was Pacific Telesis Group Inc’s report of its third quarter figures, which were due out yesterday. The phone company said it expected to have to postpone the figures and hadn’t set a new release date, because an earthquake-related power failure shut down its computers and prevented it wrapping up the figures.
Our man on the spot shaken but unhurt
Our San Francisco correspondent was clearly very shaken by the experience, as can be read from his dispatch. I hope that this message gets through, communications is very patchy at the moment. We got through the earthquake without too many problems. The office is a mess with books and computer disks all over the place. Most of my news wires are down and it’s difficult getting a phone connection and electric power has only recently come back up. I’ll send an update as soon as I can.
