Xerox PARC Will Try To Stand On Its Own

More than a year after it expressed intentions to do so, Xerox is spinning off its fabled Palo Alto Research Center.
Xerox Corp. finally pulled the trigger on a long-planned move to spin off its fabled Palo Alto Research Center as an independent company, saying that PARC will become a Xerox subsidiary in January, even as Xerox seeks additional investors in the center. Xerox also promoted associate center director Mark Bernstein to PARC director, as former director Michael Paige stepped down, and said it's searching for an external CEO to lead the new company.

For Xerox PARC, the move is the latest in a storied and often turbulent history with its parent company. Xerox, based in Stamford, Conn., created the research center in Palo Alto, Calif., in 1970 to investigate the "architecture of information" and help Xerox build the office of the future. Research at PARC reached a creative zenith in the 1970s, spawning inventions such as the PC, bit-mapped displays, laser printing, Ethernet, object-oriented programming, and the WYSIWYG word processor. The center's labs once employed a who's who of computer science, including Chuck Thacker, Butler Lampson, Charles Simonyi, Gary Starkweather, Alan Kay, John Warnock, and Bob Metcalfe. "What we did at Xerox was essentially spend money to simulate the future," said Thacker, now a distinguished engineer at Microsoft, in a recent interview.

But the West Coast researchers often clashed with product-development execs at Xerox, and critics accused the company of being slow to commercialize many of PARC's innovations. Many times, competing IT and industrial companies capitalized on PARC technology, or researchers formed their own ventures to speed products to market. By the late 1990s, Xerox was searching for ways to create faster channels for marketing its inventions--or spinning them off profitably. As Xerox fell into financial trouble in recent years, the company implemented a cost-cutting turnaround plan aimed at shedding nonessential operations.

Those elements caused Xerox to reveal in October 2000 that it planned to turn PARC into an independent company. The company wants to share its stake in PARC with a few outside investors, and there have been talks have been with investment and intellectual-property management companies. "Xerox will still have complete access to all PARC-related innovations," says a Xerox spokesman. In addition, the new company will try to license technology that Xerox can't turn into products itself.

Sometime shortly after Jan. 1, what's now Xerox PARC will become a wholly owned subsidiary of Xerox, the spokesman says. The new company will use the PARC name, but not Xerox's, he adds. Bernstein, who joined PARC in 1979 with a background in research at Fairchild Semiconductor, will manage research and, until a CEO is hired, operations at PARC. Paige, who became PARC director in June 2000 following the 10-year tenure of Xerox veteran John Seeley Brown, is leaving the company.

Xerox PARC employs about 230 researchers and administrative staff after a cut of 40 employees Tuesday. Top research projects include work in high-speed printing, document management, and materials science. The center draws an annual budget of about $70 million from Xerox, and the spokesman says that figure will remain steady after PARC becomes independent. Outside investors--when landed--will contribute additional funds to PARC's budget. The company could also raise money from licensing and product spin-offs. It's undecided whether Xerox will hold a majority or minority stake in the new PARC.

In an interview last year, Xerox chief scientist Seeley Brown said the company's goal for spinning off PARC is to achieve "business shrewdness early in the game, without political wars." PARC has always attracted people "who want to change the world," he added. "We're very adamant about not Balkanizing the place."

If Xerox can manage complex intellectual property via a chain of headstrong scientists, bottom-line execs, and outside investors, perhaps PARC can rise again to prominence.

Editor's Choice
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Terry White, Associate Chief Analyst, Omdia
Richard Pallardy, Freelance Writer
Cynthia Harvey, Freelance Journalist, InformationWeek
Pam Baker, Contributing Writer