Bankruptcy

Hard Times for High Tech: Silicon Valley Bankruptcy Rising

By meaghano

At the showrooms of the Silicon Valley Auto Group, circumstances have forced a few operating changes.

The cars in the showroom are the same, luxury brands of all types surrounding the centerpiece?a red Bugatti costing $1.6 million, but they aren?t selling.

To save money, Ryan Dohogne, general manager of the dealership, says that his staff now take care of the window washing and plant watering on their own.

No Such Thing As Recession-Proof

Similar stories crop up all over this stretch of California.

Until recently, high-tech centers like Silicon Valley were thought to be ?recession-proof? given the industry and related economic activity centered nearby.

Last fall, however, previously invested funds ran out, and capital, normally provided by investment firms and venture capitalists froze up.

The result?
Santa Clara County, home to Silicon Valley, has seen bankruptcies increase 59 percent over the past year, and that number is projected to increase before the recovery catches up with the industry.

Not Just California

In other tech centers, things are no better.

Near Raleigh, North Carolina, unemployment has doubled, and is now at 10.7 percent.

The state has lost nearly 200,000 jobs since early 2008, and one out of every five has come from the Research Triangle, a tech sector near Raleigh and Durham.

In Boston, home to several tech centers, foreclosures have tripled since last summer and are on track to break records.

Venture Capital on Shaky Grounds?

Professor Ed Malecki, a digital economy expert at Ohio State University, explains the dilemma.

?Venture capital,? essentially money invested in exciting ideas, ?lives off of private wealth. There?s simply less of [that] around right now.?

In Silicon Valley, bankruptcy is a growing reality.

Sam Taherian, a bankruptcy attorney, says he is seeing a growing number of prospective clients visit and take advantage of a free consultations.

After that, he says, people typically take a month or two to decide whether or not to file, but just the number investigating the option suggests to Taherian that his caseload is about to get heavier.

The Foreclosure Market

Foreclosures are harder to spot in such a wealthy area, but even in a new complex of townhouses near Santa Clara, 10% of the units for sale are available because of foreclosures.

Robert Lei holds a master?s degree in semiconductor device physics, but he has bowed to the reality of the times?now he is a specialist in foreclosure sales.

?They don?t hang out signs because they want to be discreet,? he says. ?They don?t want so many people to see so many ?for sale signs? and get scared away, like there?s something wrong here.?

Recession Weighing on All

Workers with master?s degrees are lining up at local food pantries and employment centers.

The recession took a while to reach Silicon Valley, but now that it?s here, things feel just about the same.

Recovery should be just around the corner, particularly with the emphasis on green jobs that will be fueled by the spirit of innovation and entrepreneurship that has made this region famous, but in the mean time, people are taking a cue from the rest of the country and simply trying to whether the storm.

Source: The Associated Press

Full post as published by The Bankruptcy Blog on July 11, 2009 (boomark / email).