Destination: Central Texas
Lower costs, high quality of life make the Austin area an appealing alternative for companies seeking to grow.
Sunday, December 04, 2005
year, ArthroCare Corp. CEO Mike Baker moved the headquarters of the
surgical device company to Austin from Sunnyvale, Calif.
"We keep a company presence in California," the East Texas native
said. "But I moved here. I have a house here. I even voted this
Corp., a surgical device company, moved its headquarters to Austin last
year from Sunnyvale, Calif. 'It's one of the few places you can
convince Californians to move (to) willingly,' CEO Mike Baker said. At
the rate ArthroCare is growing, staying in California would become too
expensive, he said.
ArthroCare still has 170 employees at its California research
facility, compared with 30 at its downtown Austin office. But Baker
said the pace of the company's growth meant that staying in California
would become too expensive.
So like a handful of companies, in industries from food to fitness, Baker transplanted ArthroCare's roots to Texas.
Most of the companies that have decided to call Austin home are
small and privately held. ArthroCare is an exception. The 12-year-old
company is traded on the Nasdaq National Market and has a market value
of about $970 million.
The company designs surgical instruments that use plasma technology,
which makes them more precise than traditional tools. The technology
allows surgeons to operate on tiny joints and helps improve recovery
times for common surgeries such as tonsillectomies.
As noninvasive medical procedures have become more popular, ArthroCare has reaped the benefits.
Sales have jumped from $6 million in 1997, when Baker took over the
company, to $225 million this year. Two years ago, the company opened a
Costa Rican manufacturing plant to handle its growing sales. Then Baker
brought ArthroCare to Austin to grow its administrative staff.
In a bid to cut costs, companies have moved customer call centers
and manufacturing plants to cheaper locales, even overseas. But
companies had been reluctant to shift their headquarters because they
often are entwined with their home cities for reasons both symbolic and
"Historically, corporate headquarters were off-limits," said John
Boyd, president of The Boyd Company, a Princeton, N.J., firm that
advises corporations on relocations. "Now all bets are off."
And Austin probably will be sitting pretty in the coming corporate
relocation game. That's because Austin "fits the profile of an emerging
headquarters city," Boyd said. "It's smaller, more manageable, less
costly, less congested."
The limited number of nonstop flights from Austin-Bergstrom
International Airport has been a disadvantage in the region's corporate
But since Sept. 11, 2001, that has changed. Security measures have
created long lines and delays at major hubs, but Austin's airport is
relatively easy to get in and out of, Boyd said. And the city is
getting nonstop service to New York and Boston.
Though Austin wasn't the cheapest place that ArthroCare looked at,
the city's quality of life made it an ideal spot to recruit employees,
"It's one of the few places you can convince Californians to move (to) willingly," he said.
About five employees moved from California, and the rest of the
Austin staff mostly has been hired locally. Baker hired one employee
from Detroit who would not have made the move to California.
"You couldn't pay them enough to go to California and buy a house,"
he said, adding that within two years, the size of ArthroCare's Austin
operations could rival its California campus.
Matt Schankel bought his first house within a month of moving to
Austin from San Diego when his employer, Liberty Fitness Holdings LLC,
relocated this past September. At first, the company's 28-year-old
franchise operations coordinator was hesitant to leave Southern
California, where he had lived most of his life.
"I was in absolute shock. I thought I was going to have to find a new job," he said. "Then I weighed my options."
Even though his entire family lived in the San Diego area, Schankel figured that he would never be able to buy a house there.
Four employees moved from Southern California, while two stayed
behind, said Liberty CEO Linda Burzynski. And she expects to add three
to five employees a year over the next five years as the women's health
club pursues its ambition to balloon from 60 franchises to 1,500,
including one soon in Austin.
Corporate headquarters may not bring the same level of investment as
a manufacturing plant, but they are still important for a city, said
Andy Carlson, director of corporate recruitment at the Greater Austin
Chamber of Commerce. But the jobs they do bring typically require
skilled employees and pay high wages.
"Also (a move) adds a stature to Austin," Carlson said. "Frequently,
once they get to a decent size, they are a contributor to the society"
with internships and donations.
Burzynski already plans to kick off a campaign with the American Heart Association.
When she became CEO in July 2005, Burzynski was living in Austin as
a major owner of CM IT Solutions, a computer support franchise. Liberty
Fitness, founded in 2001 by entrepreneur Liberty Harper, sought
investors including Concentric Equity Partners to help it grow rapidly.
Familiar with Burzynski from CM IT, the group asked her to take over as
At first, Burzynski considered moving, flying back and forth between
Carlsbad, Calif., and her home in Austin. But when the company's office
lease ran out, she made the company come to her.
"It's cost-prohibitive to do business in California," she said.
She estimates that her workers' compensation costs are 10 times
lower in Texas and that rent is about 35 percent less. Plus, the move
had other benefits. Because Liberty has franchises all over the
country, being in the Central time zone made it easier to talk to
Moving makes sense
Even the company's founder, Liberty Harper, moved to Austin last month with her new husband.
"At first, I did the whole hesitation thing, but only for an
evening," she said. "All the reasons for moving the company made
Such moves still remain relegated to the ranks of smaller, growing
companies. Large companies are much less likely to consider a
headquarters move unless they are looking to jazz up their image, Boyd
He points to Newell Rubbermaid Inc., which moved from a Chicago
suburb to Atlanta in 2003, and Boeing Co., which shifted from Seattle
to Chicago in 2001.
Two of Austin's Fortune 500 companies, Dell Inc. and Whole Foods
Market Inc., were founded in Austin. Another, Temple-Inland Inc., moved
its headquarters from Diboll, in East Texas, to Austin in 2000 after
University of Texas graduate Kenneth Jastrow was promoted from chief
financial officer to CEO. Jastrow had been running the financial
operations in Austin and wanted to consolidate the headquarters
Austin had to fight to hold on to its fourth Fortune 500 company,
Freescale Semiconduc- tor Inc., which considered moving to Chicago or
another location earlier this year. The new CEO, Michel Mayer,
eventually decided to keep Freescale in Austin.
With its relatively lower-priced real estate and highly educated
work force, Austin has been an ideal location for companies considering
a new branch or plant, said Chris Engle, vice president and senior
analyst at AngelouEconomics.
"As Austin grows in size and stature, we will naturally become a
more viable option for corporate headquarters locations," he said.
Mirabel Medical Systems Inc. choose to leave the biotech and
pharmaceutical hub of New Jersey for Austin in 2002. CEO Ronny Ginor
looked at other traditional medical device hubs such as Massachusetts
and California, but settled on Texas one year later.
"We wanted to make a smaller, efficient patient-oriented product,"
he said. So we moved to "Austin, the bastion of well-made gadgets. They
know how to make small, robust, computer-driven technol- ogy."
Since 1997, Mirabel has sold its machines in Europe with Siemens AG.
The device, which measures electronic signals across a patient's breast
to see whether she needs to consider a mammogram, is mostly used for
young, healthy women as a low-risk way to prescreen for cancer.
But Ginor realized that in order to be successful in the U.S.,
Mirabel needed to shrink and refine the product, focusing more on the
technology than the medical aspects.
While looking to relocate, Ginor spoke with Dell Inc., one of the
few computer makers with certification to make medical devices. Now
Mirabel is testing a new device built around a customized Dell
It's expanded from four employees two years ago to 22 mostly local
hires now. In Austin, the company could attract employees with
high-technology experience for a fraction of what it would cost on the
East Coast, Ginor said.
If the Food and Drug Administration approves the device, which could
happen within 18 months, Mirabel plans to expand its staff to 100.
And being away from a biotechnology hub actually made it easier to attract patients to Mirabel's study.
"Physicians in Austin are not inundated with other trials," he said,
adding that they are open-minded about trying new treatments.
About half of the 2,000 patients in Mirabel's study live in Austin, including 350 patients of one doctor.
Ginor still laments not having more nonstop flights to the
Northeast, which has given the company trouble hiring qualified
Now with the added flights, "I can fly to Boston and back in a day."
Drawn to Austin
Some other companies that have recently moved their headquarters to Austin:
Caseta Technologies Inc.
President: Glenn Deitiker
Moved: November 2005
From: New York
Electronic toll collection
ETS Global Chauffeured Services Ltd.
CEO: Michael Dunne
Moved: May 2005
From: San Antonio
President: Scott Nietschmann
Moved: Early 2005
From: Beverly, Mass.