`SILICON ALLEY' IN STEEL CITY : PITTSBURGH GIVING COMPUTER MECCAS RUN FOR MONEY.

Byline: Bruce Stanley Associated Press 

Equipped with a master's degree in business and one ``fairly ancient'' personal computer, Sunil Wadhwani launched a software services company from a spare bedroom in his suburban Pittsburgh home.

Wadhwani's struggle to get the firm off the ground exhausted his savings and led one of his two partners to resign in despair.

``We were running on credit cards and willpower,'' he said.

A decade later, Mastech has bloomed into an international company with 1,600 employees and $121 million in annual sales. A public stock offering in December made Wadhwani, 44, a multimillionaire.

Inspired by his success, scores of other high-tech entrepreneurs are transforming a regional economy that once beat to the blue-collar pulse of coke ovens and steel mills.

Like Wadhwani, many studied or taught at Carnegie Mellon University and other Pittsburgh colleges, and they chose to hatch their projects here instead of relocating to the computer meccas of Boston or Northern California's Silicon Valley.

These businessmen say scientific research at Pittsburgh universities and hospitals, together with investors who are increasingly willing to gamble on high-tech startups, provides fertile ground for risk-takers. Heartened by a proliferation of local software companies, optimists even speak of a ``Silicon Alley'' to rival the nation's existing computer capitals.

``Pittsburgh has made tremendous progress,'' said John Thorne, a Carnegie Mellon business professor. ``We're not a Boston or a Silicon Valley . . . but the high-technology area has gone a long way toward replacing the jobs lost in the steel industry in the late 1970s and early 1980s.''

Businesses in the city and its suburbs have created about 60,000 high-tech jobs since 1979, according to Tim Parks, head of a business consortium called the Pittsburgh Regional Alliance. The area lost some 100,000 steel manufacturing jobs during the same period.

Growth in the city's high-tech sector has accelerated in the 1990s. The Pittsburgh High Technology Council, a trade association, has seen its membership multiply from 145 firms in 1983 to more than 1,300 today.

This entrepreneurial growth is all the more unusual for a city whose traditional business culture has favored large, established companies such as H.J. Heinz Co. and Westinghouse Electric Corp.

Robert Unetich, who studied electrical engineering at Carnegie Mellon and business at the University of Pittsburgh, told his parents in 1982 that he wanted to quit his job at the former RCA Corp. and strike out on his own.

``They were very surprised,'' he recalled. ``They said, `You have a good job with a big company. Why would you leave that?' ''

Unetich said his plan provoked similar reactions from others. Undeterred, he started a company to build television transmitters.

Today, his ITS Corp. employs 350 people and sells $30 million a year in telecommunications equipment from a base in Washington County, 15 miles south of Pittsburgh. Unetich, 50, credits some of his success to a $200,000 grant he obtained under a state program that finances promising new technologies.

Investors outside the region are starting to pay attention. Pamela Clark of the Baltimore-based venture capital firm New Enterprise Associates said some investors used to be biased against high-tech projects in nontraditional places.

``They're trying to evolve away from that,'' Clark said.

Investors based outside southwestern Pennsylvania funneled $16.5 million into Pittsburgh technology companies in 1995, up from $2.3 million in 1993, according to the Enterprise Corp.

Eric Cooper, a former computer science instructor at Carnegie Mellon, financed his company's growth from its own profits when he failed to attract venture capital.

With half a dozen secondhand computer work stations - ``they were destined for the Dumpster'' - Cooper, 37, and his partners began working in an office above a beauty salon. Six years later, Fore Systems is a leader in asynchronous transfer mode technology, which is used in computer networks, and its stock is now traded on the Nasdaq Stock Market.

Some of the area's most successful companies emerged straight from the classroom. Sean McDonald, 36, was studying business at Carnegie Mellon when he designed a project that combined robotics with health care. He quit his job as an engineer at Westinghouse in 1989 and developed an automated pharmacy for use in hospitals.

Like many of his counterparts, McDonald decided to try his luck in Pittsburgh largely because of the personal contacts he had formed here.

In May, California came to McDonald. He sold his company, Automated Healthcare Inc., to San Francisco-based McKesson Corp. for $65 million.

Industry analysts rank Pittsburgh in the second tier of high-technology hubs, along with Austin, Texas and Washington, D.C. Because of the smaller size of its high-tech community, companies can afford to collaborate.

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PHOTO Sean McDonald, former president and owner of Automated Healthcare Inc., built his company in Pittsburgh.

Associated Press