Another big Bay Area company this week announced they would move their headquarters out of California, to the chagrin of local leaders who say the state Legislature has the power to stanch the outflow of businesses.
Align Technologies, the medical device company behind Invisalign braces, announced this week the formerly San Jose-based company officially moved its headquarters to Tempe, Arizona on Jan. 1. Its San Jose presence will remain, but as a “Digital Innovation Center,” the company said.
“This change will afford many new opportunities for Align to expand its industry-leading digital capabilities through innovation in San Jose while achieving greater, long-term operating efficiencies in Arizona,” Align CEO Joe Hogan said in a statement this week. “We chose Tempe for our new corporate headquarters for many reasons, including its proximity to San Jose, favorable corporate operating environment, low cost of living, and overall quality of life.”
Meanwhile, 150 of the company’s corporate and administrative employees have been offered a relocation package to join the company in Arizona. If they choose to stay in California, they’ll be allowed to work from home. None of the employees are at risk of losing their jobs, the company assured in a prepared statement.
Even so, the announcement didn’t sit well with San Jose Mayor Sam Liccardo after Hewlett Packard Enterprises announced they, too, were moving their headquarters last month.
“The pattern from two Silicon Valley long-standing companies, Hewlett Packard Enterprises (HPE) and Align Technologies, is instructive: both employers are investing in expansions of their San Jose technology-skilled workforce while deciding to move their headquarters and top administrative staff out of California,” he said in a statement. “The lesson for our friends in the state legislature: companies continue to want to employ our high-skill talent, but they don’t want to subject themselves to California’s taxes or regulations. Most importantly, they don’t have to.”
Jim Wunderman, president and CEO of public policy advocacy organization Bay Area Council, agreed with Liccardo Friday. The Bay Area Council has advocated for the state to halt tax increases as the economy rebounds from the pandemic.
“The high tax rates in the state are in part responsible for this,” he said. “It’s taxes and regulations and they're causing companies, given the environment, to strategize about how best to deploy their resources and [they’re] making some decisions. ... Headquarters moves are not something one would do lightly.”
A Trend Forms
The corporate headquarters exit comes exactly a month after HPE announced it would move its headquarters from North San Jose to the Houston, Texas area. The company will leave some of its operations in the South Bay city, including the headquarters of its Aruba Intelligent Edge business.
The benefits of that decision, the company said in a prepared statement, included the chance to attract more diverse workers and money.
“We also anticipate long term cost savings associated with this move that we can reinvest in key areas of our business and innovation,” Antonio Neri, HPE’s president and chief executive officer said in a blog post at the time. “Given our company’s long history in the region, this move makes sense for HPE. The world has changed, and we are changing with it for the benefit of all of our stakeholders.”
Oracle last month also said it would move its headquarters from its pastoral Redwood Shores campus to Austin, Texas. The decision for the move came in the face of high taxes, other costs and commutes for employees, according to Bloomberg, which first reported the move.
Before that, Palantir Technologies, a controversial data analytics company, quietly moved its headquarters from Palo Alto—one of the costliest cities in the region to buy or rent office space and housing—to Denver, Colorado. Last May, Tesla founder Elon Musk, frustrated by county orders that all “non-essential” business shutter in an effort to slow the spread of Covid-19, announced he was planning his departure.
"Frankly, this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately. If we even retain Fremont manufacturing activity at all, it will be [dependent] on how Tesla is treated in the future. Tesla is the last carmaker left in CA,” Musk tweeted.
While the electric car manufacturer still has much of its operations in the Bay Area, Musk himself has moved to Texas where he'll have a chance to see a personal tax benefit, he confirmed last year.
Despite the apparent exodus in recent months, many of the country's largest and most well-known tech companies, including Google, Apple, Facebook, Nvidia, Intel and more, continue to grow in the region and show no signs of packing up their headquarters anytime soon. Some researchers even argue spreading out tech companies would be good for California and the rest of the country.
But Wunderman is not convinced that the level of movement the Bay Area is seeing today is a good omen for the region’s long-term economy.
“The bottom line is talent is going to be moving away,” Wunderman said. “Talent is what really drives the economy in a knowledge-based economy, so there's a lot of risk here.”