The success of SpaceX and its historic Space Station servicing mission put the space business in California back on the map. But the sale of on a space pioneer in the Golden State reminds us that the economy has changed. In the 1950s, high-tech meant aerospace and rocketry. In the second decade of the 20th century, those industries still command respect and inspire a romantic view of the future. But if you want to sell your company for billions, smartphones and photo-sharing apps are the way to go.
This encapsulates the rise of Silicon Valley and the decline of Southern California. Although SoCal can still turn in some good results. As I reported back in March, United Technologies decided to sell Rocketdyne — the company makes exactly what it sounds like it makes, rocket boosters — to fund a record-breaking $16.5-billion acquisition of Goodrich Corp. UT has now completed that sale, to GenCorp for $550 million, according to the L.A. Times.
That's a little more than half what Facebook paid for Instagram, $1 billion, prior to the social network's IPO. One "Instgram" has gone on to become Silicon Valley and tech-biz shorthand for a cool billion.
So why is a 60-year-old rocketmaker worth only half a photo-sharing app that was started less than two years ago? The simple answer is future growth. If you want to launch satellites or spacecraft, you need the know-how that Rocketdyne offers. But you're not going to see crazy growth in the space business, even if more commerical enterprises, like SpaceX, enter the fray.
Facebook, meanwhile, sees half a million mobile users it hasn't reached yet, in terms of showing them ads. And then it looks at a company like Instagram, which exists only in the mobile realm and built up a base of 50 million users from zero in record time. Getting a piece of that future growth in Facebook's mobile presence and revenue was worth $1 billion to Mark Zuckerberg, who probably remembers Yahoo's critical decision to not buy Google in 2001. Back then, Googler said it was worth $3 billion and the then-CEO of Yahoo, Terry Semel, balked.
Google is now worth $200 billion. Yahoo is worth about $19 billion.
So although the growth may now be all in the consumer web and with mobile, aerospace is experiencing a mild renaissance in California. And in that sense, the Roketdyne price...isn't all that bad.
Even if it's far from being and "Instagram."