Where have all the big public companies gone?
When Hampton-based Fisher-Scientific International folds into Thermo Electron Corp., which is based in Waltham, Mass., New Hampshire will lose its only remaining Fortune 500 company with headquarters within its borders, leaving behind two companies – Timberland Company and PC Connection Inc. – that just barely earn spots the Fortune 1000.
Indeed, during the last six years the number of public corporations with headquarters in the Granite State has shrunk by a third. And the size of the companies that remain — with some exceptions – has shrunk even more.
For instance, in 1999, according to the 2000 New Hampshire Business Review Book of Lists, there were 27 public companies based in the state, with some $21.6 billion in sales and 12,620 New Hampshire employees.
In 2005, according to the 2006 NHBR Book of Lists, there were 17 public companies (minus the soon-to-be-gone Fisher Scientific) with $5.2 billion in sales and 3,489 employees.
In fact, the total number of New Hampshire employees working at all of the remaining public companies don’t employ as many people as the former Cabletron Systems did alone seven years ago.
What’s going on? Are CEOs fleeing New Hampshire in droves? Has the New Hampshire tax advantage been eclipsed by Bermuda, the Bahamas or even our southern neighbor, known affectionately here as Taxachussetts? Can our uniquely New Hampshire “quality of life” compete with New Jersey (the U.S. headquarters for five of the departed companies)?
Let’s not jump to the wrong conclusions, says Business & Industry Association President Jim Roche. New Hampshire still “stands out in the Northeast as a welcoming place for business.”
Just because large companies aren’t headquartered here doesn’t mean they don’t contribute to our economy, he said. For instance, BAE Systems (the multinational British military contractor that took over what was originally the home-grown Sanders Associates) “has a huge presence,” says Roche.
But he does acknowledge the trend and says much of the change can be blamed on the globalization and merger mania.
“The economy of sales and cost savings drive a lot of mergers and acquisitions, and if the acquiring company is from another states – well, that’s just the nature of the beast,” says Roche.
Indeed, 12 of the 16 companies that moved their headquarters from New Hampshire since 1999 left as a result of various mergers and buyouts. But that’s not such a bad thing, since starting up a company, going public and selling out — that was all the rage at the end of the millennia.
Remember Silknet Software? The Manchester firm was only public for a year before it was gobbled up in 2000 by Kana for $4.2 billion. While Kana’s corporate headquarters are in California, no one could say that this wasn’t a New Hampshire success story.
You could say the same for Diatide (bought out by Berlex Laboratories for $100 million) and White Pines Software, whose videoconferencing technology eventually wound up in the hands of Radvision, an Israeli firm.
This, says Patricia Gallup, chief executive officer of PC Connection, is all part of “evolution of the tech industry” — the “dot-com boom and downturn phenomena” that happened everywhere.
Indeed, she says, the anomaly might not be today, with so few public companies based in New Hampshire, but in 1999, when there were comparatively so many. Indeed, NHBR’s 1992 Book of Lists has 19 public companies, just a few more than today.
They’ll take New Jersey
In the case of the biggest and most recent merger of them all Fisher Scientific, the acquiring company – Thermo Electron – isn’t moving its headquarters, explains spokesperson Gia Oei.
“Thermo’s headquarters is in Waltham,” she says. “That’s where the headquarters already is. That’s where it will continue to be in the future.”
Fisher’s Hampton headquarters will remain for at least three years – according to the merger agreement. Still, that doesn’t mean that the jobs will stay, if history is any harbinger.
Take Hadco Corp. When Sanmina took over the Salem electronics manufacturer in 2000, the headquarters were consolidated in San Jose, Calif. The 2,000 New Hampshire jobs didn’t move at first, but today Sanmina-SCI (the name reflecting yet another merger) employs 376 people in Manchester.
Or take an even more extreme example — Cabletron Systems, the Rochester-based firm that was once the state’s largest employer and was tied for first with Sanders Associates (then a subsidiary of Lockheed Martin) in the 2000 Book of Lists list of largest manufacturing employers.
Cabletron didn’t leave after a merger, but the spinoff subsidiaries that remained after it split itself up disappeared in the midst of an accounting scandal following the break-up.
The Rochester high-tech firm certainly had New Hampshire roots, with its co-founder – Craig Benson – even going on to serve a term as governor. It was in 2003, during Benson’s administration, that the company’s major spinoff – Enterasys Networks — moved its headquarters to Andover, Mass. Riverstone Networks — Cabletron’s other spinoff, composed largely of a California company it acquired a few years early, headed back to the West coast shortly after its initial public offering in 2001.
Kevin Flanagan, an Enterasys spokesperson, says the company opened the Andover office even before the Cabletron split itself up to tap into the talent pool coming out of Boston universities. And it took advantage of the proximity to Logan Airport to set up a demonstration center
And, says Flanagan, the Andover location was actually more convenient for those who lived in southern New Hampshire to hop on Interstate 93 rather than navigate the smaller roads to Rochester.
“It was in no way anything negative about New Hampshire,” Flanagan says, although he adds that “Rochester doesn’t have the features that made Andover a desirable place to be.”
Today, Aprisma Management Technologies is the only firm remaining from the Cabletron split-up that employs people in New Hampshire.
The state’s biggest corporate fish, Tyco International, moved its headquarters from Exeter to Bermuda in 1997 after its merger with ADT. Bermuda’s tax climate is attractive to a lot of giant corporations – which is why White Mountains Insurance moved its headquarters from Exeter to Bermuda shortly thereafter.
The 2003 move of the Tyco’s U.S. headquarters from Exeter to New Jersey, was partly related to the scandal surrounding its former chief executive officer, Dennis Kozlowski, and chief financial officer, Mark Swartz, who were eventually convicted of looting the company.
“We really took a major overhaul and consolidated the whole management team, and all that was part of the transformation,” says Sheri Woodruff, a Tyco spokesperson.
New York, where the company already had a facility, was too expensive, and New Hampshire was simply too far from major East Coast metropolitan areas, she says.
“It (New Jersey) was positioned between Washington and New York and had good access to airports,” she says. “It was the right thing for us to do at the time.”
Several other companies also have found New Jersey attractive. One of them, White Mountains, moved its U.S. headquarters there earlier this year because its CEO lives there. And when you have such a tiny management team of such a large holding company, it makes sense to follow the CEO.
‘Dedicated’ to N.H.
So what large companies remain in New Hampshire? Fisher was 389th on the latest Fortune 500 list, released last April. That leaves Timberland, ranked 941st, and PC Connection, at 992, on the Fortune 1000. While both firms are growing, they have been slipping on the Fortune list because it is simply hard to keep up through organic growth with companies leapfrogging with mergers and acquisitions up the list.
Both Timberland and PC Connection are much bigger than they were seven years ago. Timberland, the Stratham-based footwear company, recently told the Business Review that it has grown to $1.6 billion in worldwide sales, almost twice the amount of seven years ago. And the company reported some 800 New Hampshire employees, compared to 650 in the 2000 Book of Lists.
PC Connection – at $1.3 billion – also has nearly doubled its sales over the same period, and it is nearly approaching 1,000 New Hampshire employees. And PC Connection doesn’t have any attention of moving anywhere, according to founder and CEO Patricia Gallup. (NHBR was unable to connect with Timberland before deadline.)
While the Internet and mail order retailer long ago moved out of Marlow, where it started in 1982, it has kept its Keene call center, while moving its headquarters to Merrimack and has another call center in Portsmouth. The company has since opened call centers in Texas, Connecticut, Massachusetts, Maryland and Florida, and has all of its warehousing operations in Ohio.
But, says Gallup, “we are dedicated personally to New Hampshire. The upper management team is from here. And also, for our business culture, the quality of life works very well. We have a very well-educated and loyal staff. Longevity with employment is very high here.”
While the state’s anti-income tax policy and well-educated workforce are still a draw, the state could do more to encourage companies to come and stay here, says Roche of the BIA. Passing a research and development tax credit might help. So would tweaking the way manufacturers’ interstate sales are taxed to benefit those firm that make most of their sales out of the state.
“Given the amount of global competition, not taking proactive steps is a way of putting our head in the stand,” Roche says.
Still, he adds, we shouldn’t expect New Hampshire to be a magnet for large corporations and their CEOs.
“We are a small state, and we will always be a small state,” says Roche.