Flat-panel monitors pop up from the surfaces of long, cherry-finished tabletops, displaying data and maps for commanders. On the wall nearby, a display screen shows every vehicle moving on a battlefield, in this case Kosovo.
Another screen shows a video feed from an unmanned Predator aircraft. Mock-ups of the interiors of command-and-control aircraft, flying information centers, stand ready to allow participants in a simulated battle to work in the environment in which they would operate in a real conflict.
Northrop knows the field. In Melbourne, the company has "engineers who participated in every military action of the last 10 years," Doshier says. To top off the show, he has video of a new Northrop technology that sends positioning signals five times a second for minutes on end to steer a traditional-type bomb for 35 miles to spear and obliterate a tank clanking down a road -- delivering smart-bomb results at dumb-bomb prices.
Say this for the bursting of the tech bubble and the dissipation of internet hype since 2000: It's made clear that Florida's real tech muscle is in defense, and that muscle is flexing.
Three years ago, defense spending was down, and startups such as Orlando-based Epik Communications dominated the tech mindset in Florida. An offshoot of Florida East Coast Industries, Epik took $350 million of its parent's money to build a fiber-optic network on FEC railway rights-of-way to cater to the boom it anticipated in high-speed voice, data and video transmissions business.
Over in Tampa, meanwhile, software company Kview, whose senior executive had the hip, New-Economy title of "Big Chief Daddy," promised to bring multimedia content to companies' training and user manuals. In Orlando, Triton Network Systems looked for kingship in high-speed wireless access. In Winter Park, DigitalOwl was going to bring books to the web by allowing online publishers to protect their copyrights. In Sunrise, consumer lender mortgage.com aimed to revolutionize the home loan business.
Along with scores of other wunderkinder, they've all gone to the New Economy remainder bin. The future looks to be dominated by the likes of old-school firms such as Melbourne-based Harris, founded in 1895, and Northrop Grumman, whose presence in Florida dates to the days of the lunar lander.
Both firms sustain a host of local subcontractors and suppliers. Both -- Harris, in particular -- spin off technology and management. Ask Michael Roman of the Florida's Space Coast economic development commission to name a tech startup in the area that doesn't have a Harris veteran with it: "I can't think of one," he says.
Farther west, defense spending boosts corporations such as Lockheed Martin, which will get $1 billion over the next 10 years for developing the military's next generation fighter. Also benefiting from military spending are Raytheon in the Tampa area, aerospace companies in Palm Beach County and entrepreneurial outfits in the simulation industry that feed off the military's vibrant simulation, training and instrumentation commands in Orlando.
In all, Florida in the last year reaped $6.7 billion in prime contracts from the military. War and rumor of war and homeland security demands from domestic agencies presage even better times ahead. Those agencies are "going to put up for bids a lot of things Florida companies can take advantage of," says Coral Gables economist J. Antonio Villamil, who chairs Gov. Jeb Bush's Council of Economic Advisors.
That's especially important given the condition of private investment in Florida after the tech fall. Venture capital funds generally have turned inward, focusing on sustaining companies in which they've already invested instead of looking for new firms to support.
Venture capital funds invested $345 million in Florida through the first three quarters of 2002, the worst since 1995. That came on the heels of a 70% drop in 2001, and "we never were a big player to begin with from a venture capital perspective," says Marty Donsky, who managed marketing for PricewaterhouseCoopers' Florida technology practice until he transferred to Washington, D.C., at the end of the year.
Florida's piece of the national venture pie in 2000, its boom year with $2.38 billion invested, was just 2.2%, (10th nationally) down from 3.7%, or fifth in the nation, in 1996. (In 2002, the state was ranked 14th with just 1.8% through the third quarter.) While the rising tide of venture funding lifted all boats nationally, Florida sat low in the water.
What's worse, much tech investing in Florida was in telecom, the sector hardest hit by overbuilding. Overcapacity claimed Epik, Fort Lauderdale's Viasource and a raft of others. And while Florida, as
economic development officials like to point out, is fifth among the states in tech employment, according to Cyberstates, the state also is 26th in average high-tech wages.
WHAT HAPPENED TO ...
SportsLine, Fort Lauderdale. Mike Levy started well capitalized and weathered the storm by slashing expenses and head count. Fantasy football brought in $8.8 million, putting the 8-year-old company's first quarterly operating profit at hand.
Mortgage.com, Sunrise. The plug was pulled on Seth Werner's 793-employee company in 2000. ABN-AMRO purchased the domain name and began assembling a staff in Sunrise from ex-mortgage.com people. In October, it did $1.3 billion in loans.
Yupi.com, Miami. The Latin content channel eyed a $172-million IPO in 2000 but got to the window just as it slammed shut. It was acquired by a Telmex-Microsoft joint venture and now is yupimsn.com.
NAP of the Americas, Miami. Backers liken the network access point to an airport or seaport for internet traffic. But any significant tech gain for Florida in job or company creation hasn't arrived. NAP owner Terremark Worldwide itself has struggled.
Milcom Technologies, Maitland. It's been a mixed bag for the company that commercializes military technology. Of its 12 companies, one shut down and another is liquidating. Others still have promise or are actually performing well. Biotech, energy and materials companies will be in its next generation.
Triton Network Systems, Orlando. A Milcom progeny, the high-speed wireless company raised $98 million by 2000 and shuttered the next year with an accumulated loss of $99.3 million.
ITFlorida. The state's tech-boosting task force went private on schedule in 2001. Former Chairwoman Julia Johnson now sits on the state Board of Education and has her own consulting company, Net Communications. She sees tech's future in mainstay telephone and electric utilities.
Reason for optimism
Florida does have areas of non-defense-related tech strength scattered about: In north Florida, nanotechnology -- manipulating atoms for biotech and other fields -- is emerging. Biotech, emanating from Florida's universities, has traction. Civil aerospace flourishes around Cape Canaveral and elsewhere in Florida. Photonics and lasers are important in central Florida. South Florida has pharmaceuticals and a medical device industry, as does Pinellas County. Fort Lauderdale has software developer Citrix.
The state also has what Jeff Kline, who coined InternetCoast as the "brand" name for south Florida, calls entrepreneurial spirit.
"I took as many bumps and bruises as anyone else has," says another entrepreneur, Scott Adams, who made his name founding a web-hosting company that he sold after three years for $352 million. His next move, accelerator Cenetec, hasn't come close. He closed a Gainesville office and now from Boca Raton does more traditional management of investments already made. "Only the serious are playing now," says Adams. "That's healthy."
Benjamin Finzi, a key builder of ill-fated Epik and a major player in getting Florida an important piece of internet infrastructure called a network access point ("What Happened To ... ?" below), has bounced back from Epik's demise. He's now CEO of Internet Satellite Platform, a 25-employee Orlando company that provides satellite-based broadband for rural markets. "I can't go fast enough to meet demand," Finzi says.
Florida, on the plus side, also has its proximity to Latin America, which brings the likes of Yahoo Latin America here. Telefonica, the Spanish telecom giant, in 2001 opened a data center in Miami and an international landing site in Boca Raton. Tech watchers also say it should be kept in mind that while venture investing in Florida companies is down, it's at a level that would have been heralded if judged by the standards of funding in Florida before the boom years.
"The problem is, now that we've climbed Everest, it's difficult to go merely to the Smoky Mountains, which is where we're from," says Daniel Aronson, an attorney with Greenberg Traurig in Miami and a former chairman of the Florida Venture Forum.
In addition, the tide went out everywhere, not just Florida. Consider the viewpoint of Sean Doherty, whose California company took Epik off the hands of Florida East Coast. (For a company in which FEC invested $350 million, Doherty's Odyssey Telecorp paid only $500,000 cash and was given another $17 million by FEC. Odyssey in return gave FEC stock warrants and may pay up to $30 million depending on Epik's performance.)
Doherty won't purchase in his home state of California because of its overbuilt telecom as well as environmental and power supply issues. In California, people "complain that market is overinvested and there's too much competition for deal flow." Meanwhile, he speaks of Florida's image as a recession-proof state, with good government.
BACKBONE
Aside from the tens of thousands employed in Florida by United Space Alliance, Lockheed Martin, Northrop Grumman, Boeing and other major defense contractors, backbone tech companies in Florida include:
Citrix. The Fort Lauderdale software company employs 1,700 globally, has a half-billion dollars in revenue and has parlayed its way of making it possible to use applications on any computer and any network into leadership of the application server and access portal markets.
L-3 Communications. With 2,000 employees, L-3 makes "black boxes" in Sarasota -- they're actually orange -- for airplanes and ships; in Largo, L-3 manufactures explosives-detection machines for airports.
Raytheon. In Florida, the company makes the Navy's anti-cruise missile defense system deployed on carrier battle groups. It also handles information security for the Navy/Marines intranet, the secure telecom switching systems for the president's Red Phone and other secure communications. It employs 2,200 in St. Petersburg and Largo.
A long way to go
Going forward, say tech survivors, Florida has far to go to build a sturdier tech structure. Groups such as Florida TaxWatch advocate more incentives -- a tough proposition given the state budget. One priority: Eliminating the sales tax companies pay on research and development equipment. "Florida taxes the business inputs others don't," says TaxWatch's Dominic Calabro. Significant? Maybe. Not a single company interviewed for this article volunteered a complaint about the tax.
Agreement is widespread, however, on the importance of boosting Florida's intellectual capital by increasing funding for universities and university research, a commitment the state should make "for decades," says Aronson. University discoveries lead to patents and the commercialization of breakthroughs, creating a cycle of growth.
Florida last year launched a $30-million "centers of excellence" program to fund the most promising research. Meanwhile, venture fund executives such as Steve Lux of Stonehenge Capital in Tampa look to the state to authorize another $150 million in tax credits for insurance companies that back venture funds that invest in Florida concerns.
Known as capcos, the existing three, launched with an initial $150 million in credits in 1999, created a net six new jobs as of December 2001, according to a report from the state Office of Tourism, Trade and Economic Development. The capco venture funds say that without them, job losses would have been the case. "Let's face it. This has been a miserable economy, and if you're in the wrong place, you've been slaughtered," says Greg Zink of Wilshire Partners in Miami. "Absent capco, there would be a much larger negative."
Stonehenge's Lux also cites research that says in terms of direct hires and jobs indirectly created by the capco investments, total job creation and retention as of the end of 2001 is 1,705 with an average wage of $55,000.
Compare that, though, with Northrop, which has 1,800 employees in Melbourne alone with an average salary of $65,000, and Harris, which pays its 5,000 employees in Brevard an average of $65,200.
Staying power
For the short-to-medium term, Florida's strength in defense should serve the state well. Harris, for example, has a $2-billion deal to supply avionics to the military's next generation stealth fighter and last year won its largest contract, a $3.5-billion, 15-year deal to modernize and manage the Federal Aviation Administration's telecommunications network. Since 2000, Harris has been awarded 350 patents -- more than the University of Florida, University of Miami and Florida State University combined.
Relying on government and military spending over the long term, however, carries its own dangers. Cautions Jason Rottenberg, vice president of business development and marketing at Milcom Technologies, a Maitland company that commercializes tech developed for the military: "Defense and aerospace is an unbelievably cyclical business ... and you can basically bank on it being cyclical."
Meanwhile, however, with the national defense budget now $355.5 billion, the sector is booming. Harris added 300 positions in 2002 while Northrop Grumman's expecting "a fairly substantial increase" in employment, Doshier says.
In addition to the $3-million investment in the war games project, which bears the typically opaque name of Cyber Warfare Integration Network, Northrop in the three years that Doshier has been in Melbourne has branched out into anti-mine warfare and the use of Northrop gear to allow dumb bombs to hit moving targets.
That's all in addition to the Melbourne mainstay, Joint STARS aircraft, the electronics for which are installed and tested in Melbourne. A joint Army-Air Force project, a Joint STARS plane can peer more than 150 miles in front of friendly lines to track and classify -- wheeled or tracked -- all ground targets in all weather.
At the height of the dot-com and telecom frenzy, Northrop Grumman's Doshier watched some of his best and brightest exit in search of companies to build and riches to reap. Now he's seeing them return to ask for jobs. No grudges held: "By golly, we're taking them back."
UP-AND-COMERS
Riptide Software. The Orlando-based simulation software company has had 6,432% revenue growth since 1997 to $4.7 million in 2001. Riptide's top clients are the military and NASA. Its specialties include live fire simulation. It has 39 employees.
The Orlando office of SAIC. Science Applications International Corp. specializes in simulation and IT for the military and is now after homeland security business. Recent product: Military technical manuals stored on palm-sized PDAs and field-rugged PDAs with detailed maps and topographical info. SAIC employs 325 in Florida.
Accrisoft. Run by Jeff Kline, who coined the InternetCoast name for south Florida, Accrisoft makes it possible for non-techies to run a meaty website. Kline says "blockbuster deals" are in the works for the 12-employee company.
Pilgrim Software. In Tampa, the company provides enterprise quality management and process improvement software. Pilgrim President and CEO Ami Utji was Ernst & Young's Florida entrepreneur of the year in 2001. She founded the company with Prashanth Rajendran in 1993.
AuthenTec. A Harris spinoff in Melbourne, AuthenTec makes a low-cost, low-power sensor that reads fingerprints. Making a mint depends on convincing makers of cell phones, laptops and desk computers that the best security -- and easiest password to remember -- is the owner's fingertip. Under Harris veteran F. Scott Moody, 46, the 50-employee company has raised $34 million and has shipped 200,000 sensor chips.
IntelliNet Technologies. The Melbourne company develops telecom infrastructure software for prepaid cards, global roaming, enhanced messaging and other revenue-generating features.
Electronic Data Resources. Founded in 1999 in West Palm Beach, EDR is a payment processing firm for merchants. President and CEO Bill Blakey says annual revenue runs $15 million; it's working with 7,000 merchant customers, and it's handling $500 million in transaction volume with 46 employees.
MeshNetworks. The company delivers mobile broadband over a network formed by everyone's PDAs and cell phones, eliminating the need for cell towers. Formed in Maitland from ITT technology developed for the military and with $38 million raised to date, the 72-employee company began shipping mobile broadband and wi-fi products in November, the same month one of its founders, Richard Licursi, took over as CEO.