Bacon's Rebellion

Democracy Thrives in Sunlight

I’ll Take Apple over Amazon Any Old Day

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by

James A. Bacon
in

Amazon.com Inc. isn’t the only West Coast technology giant shopping for a new community to build a large corporate campus. Apple Inc. is looking to make a big investment as well, although it hasn’t drawn nearly much attention to itself. As with the Amazon project, Northern Virginia appears to be in the running.

From a trophy hunting view, Amazon would be the big prize — $5 billion in investment plus 50,000 new employees. The Seattle company has narrowed the list of candidates to 20 localities, and only one can win. But Apple would make a nice consolation prize. Its history of expansion in Austin, Texas, suggests that a new corporate campus could well entail an investment of $1 billion or more and the hiring of 1,000 or more employees.

If Apple wants an East Coast location, North Carolina might have an edge in the fact that CEO Tim Cook graduated from Duke University’s business school and COO Jeff Williams grew up in Raleigh. Last week, reports the Wall Street Journal, North Carolina legislators changed the state’s incentives package targeting technology companies that pledge to invest at least $1 billion in the state and create at least 3,000 jobs. Could Apple be heading to the Research Triangle?

Definitely a possibility, but the company also is eyeing Northern Virginia. Apple representatives have spoken to Virginia officials about options near Washington, D.C., the Washington Post has reported. Says the Wall Street Journal: “Northern Virginia could be attractive to both Apple and Amazon given its deep pool of talent, strong fiber network, and proximity to political leaders, location experts said.”

Bacon’s bottom line: So far, there is no indication in published reports that Apple is seeking tax breaks and subsidies on the same massive scale that Amazon is. Assuming that incentives are not a decisive consideration in Amazon’s location decision — an assumption that needs to be confirmed — Apple would constitute a far more preferable corporate citizen. The Amazon project looks too big to digest comfortably: The company’s expectation of giant subsidies will strain the ability of state and local governments to build the infrastructure needed to accommodate the resulting surge in development. Apple’s campus, though large by any other standard and a plum in any metro’s cap, would be more modest in size and far less disruptive.

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11 responses to “I’ll Take Apple over Amazon Any Old Day”

  1. Steve Haner Avatar
    Steve Haner

    The highly-touted announcement made by the Governor in SW Virginia last week turned out to be an information technology call center, nice but not big. A day or two before the legislative calendar included a meeting notice for the joint legislative subcommittee which needs to bless major incentive packages and I thought perhaps that indicated a major project was in the offing. Clearly it does – but it was not Friday’s announcement.

    That group meets behind so many FOIA protections that rumors are all you get to go on. Perhaps it was about Amazon or Apple, but that is speculation. It’s called the MEI Commission and I think that stands for Major Economic Incentives….

    The stories about North Carolina noted that its basic corporate income tax rate continues to decline and I think will soon reach 2.5 percent, compared to 6 percent in Virginia. That is a delta that no corporation can just ignore. And of course NC then adds incentives beyond the low tax rate for projects it really wants. Virginia is not that aggressive and shows no inclination to change its taxing or marketing behavior. I just wrote last week about how it is tightening up on incentives. Moret was quoted saying Virginia’s biggest shortfall is in incentives.

    Apple and Amazon have to be drawn to the DC area, to the attractive locations open up there, and might look on Metro as an asset (sounds rather shaky to me.) I hope we do get one of them at least. But if Virginia is in this game at all it goes back to the deal that brought the US Capitol to the Potomac River so George Washington could go home on weekends. Virginia is NOT that good at this, not in my opinion.

    1. djrippert Avatar
      djrippert

      LOL. George Washington died before either the White House or the US Capitol was open. He and Jefferson did push very hard to get the US capital where it is currently located although they did that far more as far-sighted Virginians than as guys who wanted to go home on the weekends! I assume you were writing tongue in cheek. The man who never told a lie told a whopper to help cement a swamp between Virginia and Maryland as the site of the new capital. It seems the master surveyor convinced people that the Potomac River was navigable to either the St Lawrence or the Great Lakes (I forget which). In fact, the mighty Potomac starts as a tiny freshwater spring somewhere in what is now West Virginia.

      1. Steve Haner Avatar
        Steve Haner

        Yes, I’m aware that GW had left office before that first draining of the swamp was complete, and never lived in the White House, but he was in the thick of the deal making. You gotta admit now that was one aggressive and visionary economic developer. Short term thinking reigns in Virginia these days and I worry that Amazon and Apple can see that.

        1. djrippert Avatar
          djrippert

          GW was God’s own economic developer. He knew how capital cities work and he damned well wanted one for Virginia, preferably in the vicinity of Mt Vernon. There was no accident to DC being where DC is.

        2. djrippert Avatar
          djrippert

          Virginia is a throwback state. Old south vs New South. Take the advice of somebody who spent the last 38 years traveling all over the US and all over the world – Virginia is a legend only in its own mind. And specifically in the minds of the Richmond elite. To everybody else Virginia looks more like Mississippi or Alabama than Texas or Georgia.

          Outside of NoVa there are no success stories in Virginia (thanks again, General Washington). North Carolina has RTP and Charlotte (with Asheville in reserve), South Carolina has Greenville – Spartanburg and Charlestown with Myrtle Beach in reserve. Tennessee has Nashville. Texas has Austin. Georgia has Atlanta and Savannah with Sea Island in reserve. Even confused Maryland (dragging the boat anchor of Baltimore) has managed to turn its part of the Eastern Shore into an economically useful area.

          Twenty or thirty years ago Virginia was seen as the vanguard of the New South. Prosperity and development came to the south but bypassed Virginia. We’re now in league with Mississippi and Alabama with a trend line to take us to West Virginia.

          Virginia is structurally broken. An all powerful General Assembly where the legislators get paid $18,000 per year and everything they can steal isn’t helping. The “Richmond elitist attitude” isn’t helping either …

          1. The legislature should be all powerful.
          2. Localities should have no right of home rule.
          3. Cities are bad and should not be part of counties and should not be able to annex more land.
          4. State government should squander billions but be unwilling to invest millions in intelligent catalysts to urban growth like mass transit.
          5. Top quality higher education is best executed far off the beater path of civilization, in isolation from economic development in quiet academical villages.

          This state is a train wreak buoyed only by its proximity to the US Federal Government.

  2. djrippert Avatar
    djrippert

    There is a lot about these deals I don’t understand. First, 50,000 jobs? Only 26,000 people work at The Pentagon. Amazon has a huge employee base but I’d have to guess they are mainly in distribution centers, logistics operations, call centers and not headquarters. They need 50,000 people at their secondary headquarters? Doing what?

    “If Apple wants an East Coast location, North Carolina might have an edge in the fact that CEO Tim Cook graduated from Duke University’s business school and COO Jeff Williams grew up in Raleigh.” That makes no sense. Nobody locates major corporate functions to where they went to graduate school or where they grew up. It’s one thing for the founders of an embryonic company like Microsoft to take the company from Albuquerque “back home” to Seattle but quite another for the COO of Apple to push a huge publicly traded company like to Raleigh because he grew up there. How sad for Virginia since Eric Schmidt was born in Falls church and grew up in Blacksburg. North Carolina’s incentives might make a difference but the COOs hometown won’t.

    I’d also point out the cultural differences between Apple and Amazon. Amazon is still culturally a start-up. It’s still run by its founder. They like downtown urban locations where the Amazon employees can mix and mingle with others. Apple is a decades old company. Their founders are long gone. Tim Cook cut his teeth at IBM during the corporate hey days of that company. Apple’s new HQ in Cupertino is alternately called a fortress or a spaceship. Isolated, secretive and security conscious. Loudoun County might look attractive to Apple. Downtown DC might look attractive to Amazon.

    I’ll reiterate my prediction of Amazon to Atlanta and add a prediction of Apple to somewhere in the Dallas area.

    Now the good stuff – the misconceptions of Virginia’s politicians and business development folks (and Jim Bacon). Why would I want Amazon more than Apple? Amazon is a very entrepreneurial company. They are not only into online retail, they are the world’s largest public cloud company, the world’s largest publisher, probably the world’s largest supply chain company, a major original entertainment company, a force to be reckoned with in logistics. Apple makes phones. Ok, that’s unfair, Apple does more that make phones but Apple is relatively narrow and deep. Amazon is broad. The big draw to getting one of these two headquarters has little to do with the jobs at the headquarters. Rather, it is a chance to develop a technology ecosystem of local universities, venture capitalists, etc. People leave big technology companies to form start-ups all the time. While Amazon’s secondary headquarters would be interesting the hundreds of start-ups formed by erstwhile employees of that secondary headquarters would be fascinating. In my opinion, Amazon is likely to spin off a whole lot more entrepreneurs than Apple.

  3. Izzo Avatar
    Izzo

    Yep. Virginia, compared to North Carolina was blessed with the Chesapeake Bay, great natural harbors, the national Capitol on its border, navigable rivers that run West to East, fine farming land in the Valley, an earlier start on industrialization and higher education, huge federal investment in DC and Norfolk, the legacy of notable founding fathers. . . and look where we’ve gone comparably since.

    I’m sure North Carolina lucked into some things like having three major universities located in close proximity and getting tobacco baron money invested in the state, but I think they’ve been more progressive overall.

    Let’s hope Virginia can pull one of these off without giving away the farm.

    I agree with DJ that Amazon is the company that is ambitious, innovative, and riding a hot streak these days. I could possibly see them going close in to D.C. I see it as a bit of a long shot, though.

    1. djrippert Avatar
      djrippert

      In 1970 Charlotte was smaller (in population) than Richmond. Both had a potentially rosy future in banking. Today, Charlotte has 841,000 people while Richmond has 223,000. Charlotte has quadrupled in population since 1970 while Richmond has shrunk.

      You see it over and over and over and over again … Richmond vs Charlotte, Greenville / Spartanburg, SC vs Roanoke / Blacksburg, VA, anywhere in Virginia Beach vs Charlestown, Maryland’s Eastern Shore vs Virginia’s EAstern Shore, the list goes on.

  4. Steve Haner Avatar
    Steve Haner

    DJ: You left off “6. Whatever the monopoly utility company wants to do to its customers is fine with us as long as the campaign donations and checks to our favorite local charities continue to flow.”

  5. LarrytheG Avatar
    LarrytheG

    I agree with DJ also with respect to Amazon versus Apple.

    Apple makes top-notch proprietary products but it’s tiny compared to Android phones on a worldwide basis.

    So the point is that Apple is not seeking to expand their business at the expense of other phones… they just want a profitable niche.

    The other thing is that Apple phones are made overseas not the US so ask yourself exactly what Apple is doing in the US with it’s major employment centers? They’re basically tending to their proprietary product – not really competing to increase their share of the cell phone market.

    I do not pay $500-900 for a phone. I pay about $125. I respect and admire those who are willing to pay the premium to get the Apple phone – but the vast majority of people in the US and World seek lower cost phones even if those phones are not quite what Apple phones are.

    I just don’t think Apple’s basic business model is one that will do much more than just maintain their current market share.

    Amazon on the other hand – sees no such limits in their expansion… they clearly want to sell anything and everything INCLUDING “unlocked” phones…. Apple and Android!

    Some day – perhaps sooner than later – Android phones will be the equal of Apple phones for 1/3 or less the cost and at that point Apple is going to lose market share.

    They’re basically a company that is sitting on their product much more so than they are looking to expand.

  6. LarrytheG Avatar
    LarrytheG

    The chart below shows where Apple sits in the Smartphone world:

    https://apple.insidercdn.com/gallery/23621-30019-Screen-Shot-2017-11-09-at-92427-AM-l.jpg

    Apple has positioned itself as the Cadillac of Smartphones – not the Chevy or Toyota.

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