How important will its current home in Northern Virginia be to America Online Inc. when it completes its merger with Manhattan-based Time Warner Inc.?
It's a significant question for Virginia's technology community. The answer may come by watching what happens to a few key people--not just AOL Chairman Steve Case and President Bob Pittman, but also Jonathan Sacks and Miles Gilburne.
Sacks, senior vice president of programming operations, heads a group of more than 1,000 programmers and technicians who are the creative team that puts AOL's content on its customers' computer screens. If that team continues to grow, as AOL says it will, it's a clear plus for the region.
The same is true for Gilburne, senior vice president for corporate development. He runs a smaller group of dealmakers who have made Dulles a necessary destination for many entrepreneurs who hope to put their creations online.
AOL watchers say as long as those teams stay (and, of course, Case's commitment to stay helps, too), Northern Virginia will be important to the merged AOL Time Warner for a long time.
David Birch, president of the Cognetics Inc. research firm in Cambridge, Mass., says that in the technology world, the "headquarters" of a company isn't necessarily the place listed in corporate documents. It's the place you go to do your business.
"It depends where I have to fly to visit AOL, to sell it something or buy something. If I still have to go to Dulles, it's a Dulles company," Birch said. If the technology crowd starts heading to New York for its AOL meetings, then that's headquarters, he said.
There's no question AOL has attracted entrepreneurs to this region. Take Eric Kuhn, a lawyer in Miami who had the idea for an online business selling textbooks to college students. Kuhn could have planted his start-up anywhere, but he settled on the Washington area to join a growing technology community anchored by AOL.
Kuhn said it was his ability to hop in his car and meet nearby AOL executives face to face that greased a deal to put a link to his VarsityBooks.com Web site on an instant-messaging service at college campuses nationwide.
Kuhn's company is just one of thousands of information technology outfits that have basked in the collective glow of AOL's phenomenal growth. While few have direct business contacts with the region's online granddaddy, still fewer would downplay AOL's centrality to Northern Virginia's economy and image of itself.
AOL officials say the company's position won't change.
Case, by all accounts, plans to continue building his force in the Washington region. "I'll be overseeing the policy initiative, investing in new companies," he said in a CNN interview last week. "I'll be overseeing the venture portfolio, the technology strategy. The [chief technical officer] of AOL will report directly to me."
"The core things we do, we'll do more of," said Ted Leonsis, the head of AOL's Interactive Properties Group, whose personal ties to the region include co-ownership of the Washington Capitals hockey team. "We have just expanded the opportunities for the region." He describes the intellectual base of the region as "a rich primordial soup" that will become richer in new-media creativity.
AOL's physical plant in Northern Virginia would make it difficult and expensive to move a significant amount of operations out of the area. The company employs about 3,500 locally, all in facilities in the Dulles area and Prince William County, and that number is expected to explode in the coming months as new facilities come online here. In addition to its sprawling 154-acre headquarters campus at Dulles--its current building plans call for a half-dozen or more buildings housing 6,000 employees--AOL broke ground last year on a $550 million computer center in Prince William that will house 150 employees.
And one key regional relationship between Time Warner and AOL will be Road Runner Service Co., Time Warner's broadband venture. AOL needs access to broadband to get the speed its customers will want in the years ahead, and in Road Runner it has one right down the road. Road Runner is based in Reston.
Melding Corporate Cultures
The task of fitting AOL and Time Warner together has been given to an "integration" committee of four men--all of whom have strong ties outside the Washington area: Pittman has a home in Great Falls, but tends to socialize in New York City, where he lived before joining AOL. AOL Vice Chairman Ken Novack lived in the Boston area when he was recruited by AOL, and he has remained there since. Time Warner President Richard Parsons and Richard Bressler, president of Time Warner Digital Media, its online division, are both New Yorkers.
Whether the team's makeup foreshadows an ultimate shift of some top-level decision-making to New York remains to be seen. Their reorganization recommendations will go to Case and Gerald Levin, Time Warner's chairman and chief executive, who hope to consummate the merger by the end of the year.
In recent years, as AOL has gobbled up companies, it has generally allowed those companies to operate independently. Witness Netscape Communications. After Netscape became a part of AOL in March, the headquarters of Netscape stayed in Silicon Valley, but Netscape founder Marc Andreessen started spending time in Dulles as AOL's chief technology officer. Netscape's talent, however, left throughout 1999, ending with Andreessen this fall quitting AOL altogether to start his own company.
On the other hand, in early 1999 AOL bought New York-based MovieFone, a movie listing service, and has let the founding Jarecki brothers run it relatively independently. Last year AOL bought online music sales companies, a Seattle wireless-device software maker and has a pending deal to buy MapQuest, the Pennsylvania Web-based map provider.
Most Washington area technology leaders believe the AOL-Time Warner merger will ultimately help the region, either because AOL expands here or because more of its best and brightest elect to leave the company to start their own businesses here.
It is hard to overstate the importance of AOL as a symbol of a technology presence around the nation's capital, countering the region's widespread image as the home of stodgy bureaucrats and dodgy politicians.
Except for MCI Communications Corp., the region's pioneer telecommunications firm, the Washington area has had no nationally recognized technology brand names (and "MCI" will disappear from view if the planned merger between MCI WorldCom Inc. and Sprint Corp. takes place).
Case, former AOL chairman James V. Kimsey, Leonsis and Pittman are the "founding fathers here," says Raul Fernandez, founder and chairman of Proxicom Inc., an Internet business services firm in Reston. AOL was Fernandez's second major customer, five years ago, after he overheard Leonsis talking with seatmates on a flight from Las Vegas to Washington about AOL's need to expand from its dial-up service to the Internet.
"I said, 'Can we help you?' " Five days later, Fernandez's firm was building a Web site for AOL. "Every region needs a beginning. AOL was that for us. . . . There is nobody else like them. But there are lots of others following in their footsteps," he said.
"For a long time, AOL and MCI were the region's electronic poster children, and that will change, I guess," said April Young, senior vice president of Los Angeles-based Imperial Bank, which set up an office in Reston to join in the region's technology rush.
The paradox is that the next round of children isn't likely to look much like AOL at all.
While maybe a poster child, AOL is by no means the only tech game in town.
The Washington region hosts a smorgasbord of technology: wireless communications, space and satellite ventures, biotechnology, radar and defense systems, government technology contractors, Web designers, network builders, business software developers and Internet service providers.
A recent census of the Washington area's technology industry identified 12,183 companies. The number of firms tied to the Internet can't be determined because the government business classifications used in the survey predate the Web.
But the greatest concentration of tech expertise here resides in the companies that provide the infrastructure that carries the Internet.
"What this region is, if it's anything, is [a] global center of electronic infrastructure," Young said, "the pipes, rather than content. . . ."
MCI WorldCom's UUNet division in Fairfax, PSINet Inc. in Reston and Cable & Wireless, with a U.S. headquarters in Vienna, form a trio of carriers whose fiber-optic networks, switches and routers carry a major portion of the Internet's traffic.
PSINet's goal is to become an Internet "super-carrier," and it has embarked on a $1.4 billion expansion of its fiber-optic network, banking heavily on the Internet's growth.
Beyond networks, PSINet is building 2 million square feet of data centers, 20 percent of that in Northern Virginia, to store and manage customers' Web pages and Internet activity.
"This area is mainly infrastructure," says Mark Fedor, PSINet's vice president of engineering. The content created for the Internet can sit anywhere and the Washington region will have more than its share on computer equipment in a growing number of data centers, he predicts.
"In Washington the Metro area and the three states--D.C., Maryland and Virginia--probably 500 square miles is the headquarters of all the major players in the Internet [infrastructure] stakes," says PSINet Chairman William L. Schrader.
"If they're not here, they are studying every day what goes on here," he adds. "And I believe, unless something weird happens, it will always be the case."
Beneath the Internet-connection companies in the food chain are equipment companies such as the former Yurie Systems in Landover, now part of Lucent Technologies Inc., a manufacturer of advanced equipment for transmitting data, voice and video over the Internet. Yurie founder Jeong Kim sold the firm to Lucent for $1.1 billion in 1998 and now is president of the Lucent division that includes his former company.
There are Salix Technologies Inc. of Gaithersburg and Torrent Networking Technologies in Silver Spring, both manufacturers of advanced, high-speed switching and routing gear for the Internet. Their Maryland owners have followed Kim's path, selling their companies to powerful industry leaders while staying on to run them as divisions of the bigger firms.
Nextel Communications Inc. in McLean is a leader in the Washington region's growing wireless communications industry, providing digital mobile phone service to more than 3.5 million customers. Aether Systems Inc., American Mobile Satellite Corp., LCC International Inc. and Teligent Inc. are part of the wireless cluster--in some cases helping bridge the Web to the wireless world.
There is a smaller list of companies that are attempting to follow AOL's footsteps directly as originators of Internet content.
None of these locally headquartered companies, of course, is close to AOL's preeminence in its field. And none is a household word, but some are trying. One of them, MicroStrategy Inc. in Vienna, is developing a Web site that aims to supply customers with personalized information on travel, weather, news and investments.
And the region's tech leaders express confidence that out of this group, some new stars will emerge.
"AOL is an important part of the community, but we've got a broad enough community that no single company can affect the momentum that we have," said Mark Warner, a principal with Alexandria-based Columbia Capital, an investor in technology firms around the region.
The community will grow larger if the AOL-Time Warner merger prompts more AOL employees to cash in their stock options and form their own businesses.
Bill O'Luanaigh is the founder of a networking group for former AOL employees, many of whom either quit or were fired after the completion of AOL's acquisition of Netscape Communications at the end of last March.
He says he can name at least 15 local companies that were founded by ex-AOLers, including Exit1 Inc., a Web design start-up in Reston; WorldVoice.com a telecommunications software company in McLean; and the EDM Group, an Internet marketing agency.
"With AOL's infusion of cash and talent simultaneously, you can't help but make this area more of a hotbed for technology," O'Luanaigh said.
Big Wheels on AOL's Wagon
Ted Leonsis, president of AOL's Interactive Properties Group, in 1999 bought a majority stake in the Washington Capitals NHL hockey franchise.
A large portion of the data traffic that powers AOL's customer relationships travels on the cables and complex electronics of UUNet, a Fairfax company headed by Chairman John W. Sidgmore and owned by MCI WorldCom, which has a new major operations center right up the road from AOL's Dulles headquarters.
AOL has put together marketing relationships with some local tech companies. Reston-based Talk.com, headed by Chairman and CEO Gabe Battista and partly owned by AOL, is the exclusive long-distance provider on AOL's service until 2003 under a $150 million marketing deal.
Proxicom Inc., a Reston business Internet company, signed a deal last year to offer Web services with AOL to Fortune 500 companies. Proxicom CEO Raul Fernandez is also a minority owner of Leonsis's Capitals.
Beginning in 1998, AOL executives became more involved in local civic and industry groups. CEO Steve Case serves on Virginia Gov. James S. Gilmore III's newly formed council on technology. Human resources head Mark Stavish ran for chairman of the Loudoun County Chamber of Commerce. Corporate investment chief Lennert Leader serves on the board of the Northern Virginia Technology Council. And General Counsel George Vradenburg, left, was active in the Potomac KnowledgeWay Project, a now-defunct regional network of tech businesses. AOL has also become a vocal advocate for local educational improvement.
Washington Area Tech Workers
A breakdown of the top tech jobs and the number of people in them*
Systems analyst 44,250
Computer programmer 28,640
Computer support 15,700
Technology manager 14,490
Life scientist 7,600
Programmer aide 4,650
Computer scientist 4,100
Database administrator 4,010
* Figures for 1997
SOURCE: Bureau of Labor Statistics, Occupational Employment Statistics
Does not include self-employed tech workers.