Will Xerox Shut the PARC?

Yet another titan of American capitalism is teetering near the brink of breakup. Following weeks of speculation that phone giant AT&T is planning to spin off various business units, the nearly bankrupt Xerox is reportedly considering selling off parts of itself, including the world-famous Xerox PARC research center in Palo Alto, Calif.

In recent weeks, Xerox has been rumored to be near bankruptcy, prompting speculation about moves the company will make. Xerox won't comment on reports in the New York Times (NYT) that it is in talks to sell the institution to venture capitalists, but such a sale would almost surely spell the end of the venerable research center as it exists today.

It's now a Silicon Valley legend - how in the early days of the computer industry, Steve Jobs visited the PARC, where he was shown the prototype Alto computer. From that, he "borrowed" ideas like the mouse and the graphical interface for his company Apple Computer Inc. and became a billionaire. Meanwhile, Xerox completely failed to get into the personal computer business, missing one of the biggest business opportunities in history.

In the past few decades, Xerox has been trying to prove it could capitalize on the research done at PARC. The company won't say exactly how much the PARC costs to run, only saying that it spends $2 billion on research and development annually, though that figure is spread out among seven different research facilities. John Seely Brown, the center's head, figures that the cost of running Xerox PARC only accounts for one-third of 1 percent of Xerox's corporate revenues.

At Xerox, the scientists are trying to do work that leads directly or indirectly to advancements in the company's core businesses, including copiers and printers. "Our job is to make money for Xerox, just like AT&T Labs' job is to make money for AT&T," Brown said in an interview earlier this year. "We're asking fundamental questions that will help us destabilize the competition."

But should the PARC be sold off, that type of research, which is focused on general theories and problems, not on inventing specific new products for the marketplace, would end. Especially if, as reports have it, the group is sold to venture capitalists. In the venture capital world, there is no time to wait for innovations to trickle up into the economy. Venture capitalists demand financial results as quickly as possible, which runs counter to the projects Brown and his cohorts are working on.

So far, venture capital and pure science have not mixed well. Paul Allen poured $100 million and eight years into his Interval Research Center, only to pull the plug in April. "Research has to be allowed some room for failure," said Brown. "We don't report quarterly results. There has to be a degree of predictability. If I had to meet more specific revenue expectations, I'd commit suicide after the third week."

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