Annual Silicon Valley Study Says Local Government Must Become Key Catalyst in Driving Region's Growth.

Business Editors/High Tech Writers

PALO ALTO, Calif., October 11, 2000 --

As other regions in the U.S. and around the world become more

attractive, 30 percent of Valley's Internet companies

say they would consider relocating

Will location - specifically, Silicon Valley - continue to matter as the Internet economy becomes increasingly global? The answer is "yes," according to Internet Cluster Analysis 2000, the second annual study analyzing Silicon Valley's role in the Internet economy. However, to maintain the region's position as the hub of the Web economy, Silicon Valley's local governments must become more proactive and innovative in efforts to attract, retain and nurture Internet businesses.

The study, performed for Joint Venture: Silicon Valley Network by the Silicon Valley office of global management consulting firm A.T. Kearney, includes results from a survey of more than 100 Internet executives around the nation. The key findings:

-- Proactive government has emerged as a significant new Internet cluster
characteristic. In addition to the five key attributes that surfaced last year
as essential to attracting high-tech businesses to a particular region (talent,
pillar companies, universities, capital, and support services), this year,
government surfaced as a significant new cluster characteristic, cited by 63
percent of Internet executives surveyed.

-- Internet clusters overseas offer compelling location alternatives. This
year's study reports that non-U.S. Internet clusters have become increasingly
attractive as local, state and national governments around the world are
devising innovative ways to attract both emerging and established Internet
businesses. These initiatives include workforce development programs,
simplified tax laws, financial investment incentives, building technology parks
and incubators, and direct financial support for technology companies. And, as
the appeal of international clusters increases, top U.S. Internet companies are
expanding their operations overseas: Today, 59 percent have operations in
Europe, 43 percent in Asia, 19 percent in Latin American and 7 percent in
Africa.

"As the World Wide Web gets wider, Silicon Valley must adopt a global perspective," said Ruben Barrales, president and chief executive officer of Joint Venture. "Business, education, government and community leaders must work together to ensure that Silicon Valley continues to wield global influence without compromising the natural beauty and vibrant community of our region."

"Silicon Valley's local governments need to remove the barriers that stand in the way of implementing change," said Ben Smith, vice president in A.T. Kearney's Silicon Valley office. "We're at a critical turning point, where we must move beyond the planning stage and actually begin implementing growth initiatives that will deliver the best environment for companies and residents alike."

Among the study's other key findings:

-- Thirty percent of Silicon Valley Internet companies would

consider relocating. Top choices for new locations were

Austin, the Pacific Northwest, and Washington, D.C.

-- Talent continues to be an important factor, but has less

influence on location choice. Although finding and retaining

talent continues to be the number one challenge facing

Internet companies, 58 percent of executives surveyed this

year said talent was key when choosing a new location -- a

significant drop from last year, when 86 percent cited talent

as the most important factor

-- Increased merger and acquisition activity has expanded

Internet companies' reach into other clusters. The dramatic

surge in "M&A" activity over the last few years has enabled

Internet companies to increase their geographic reach to

access more talent and capitalize on growth opportunities in

potentially lower-cost regions. In fact, 84 percent of

Internet M&A deals involved companies from different

geographic regions.

-- More capital is flowing overseas. Although the U.S. still gets

the bulk of private venture dollars, other countries,

particularly in Europe and Asia, are beginning to benefit from

a vastly increased cash flow. Last year, venture capital

investments in European tech companies topped $7 billion and

were close to $9 billion in Asia. At the same time, financial

markets similar to NASDAQ in other countries are a major

source of capital for international Internet companies. For

example, Germany's Neuer Markt and the UK's TechMARK are an

important liquidity tool for Internet start ups overseas.

Internet Cluster Analysis 2000 and its implications for Silicon Valley will be discussed today in Palo Alto, Calif., by a panel of high-level officials from government and the high-tech industry, including Debra L. Dunn, vice president, strategy and corporate operations for Hewlett-Packard; Dan L. Eilers, general partner at Vanguard Venture Partners; and Rosemary Stasek, Mayor of Mountain View, among others.

In addition, Joint Venture will sponsor four roundtable meetings next month in San Mateo, Santa Clara and Alameda Counties, which will address how public and private sectors can work together more effectively to address the region's growth issues. More details will be provided during the Internet Cluster Analysis 2000 event.

The full text of the Internet Cluster Analysis 2000 and a downloadable PDF version are available on A.T. Kearney's Web site at www.atkearney.com or at Joint Venture's Web site at www.jointventure.org.

Joint Venture: Silicon Valley Network (www.jointventure.org) is a civic incubator working to ensure that all people in our region have opportunity to succeed in the new economy. Joint Venture introduced to Silicon Valley a model of regional collaboration that is now being replicated across the United States and around the globe. A non-profit organization, Joint Venture is supported by investors representing government, community organizations and industry.

A.T. Kearney (www.atkearney.com) is one of the world's largest and fastest-growing management consulting firms. With a global presence that includes 59 offices in 35 countries, spanning major and emerging markets, A.T. Kearney provides strategic, operational, organizational and information technology consulting and executive search services to the world's leading companies. A.T. Kearney is the high-value management consulting subsidiary of global information technology services leader EDS.

EDS is a recognized global leader in providing E-business and information technology services to 9,000 business and government clients in about 55 countries around the world. Having founded the IT services industry more than 35 years ago, EDS delivers high value management consulting, electronic business solutions, business process management, and systems and technology expertise to help clients simplify complexity and achieve superior value in the digital economy.

The company brings deep industry practice knowledge to solve challenges in a wide variety of industries, including communications, energy and chemicals, financial services, government, healthcare, products and retailing, and travel and transportation. EDS reported revenues of $18.5 billion in 1999. The company's stock is traded on the New York Stock Exchange (NYSE:EDS) and the London Stock Exchange. To find out more about the EDS vision, visit EDS via the Internet at http://www.eds.com.