SAN DIEGO BQ (Before Qualcomm) wasn’t taken entirely seriously as a region of big business. Sure, Gateway moved its corporate headquarters here, but that was mainly a lifestyle issue — it was tough luring top executives to South Dakota. And SDG&E/Enova/Sempra has long been a corporate rock. Same for SAIC. Yet San Diego was in the public eye mostly for the weather, the beach, closeness to Mexico and for the military, none of which really jibed with the big-shoulder reputation of big business cities such as Austin, Dallas, Chicago and even Minneapolis.

San Diego was small-boned, as measured by Wall Street. Nearly all its public companies were tiny and micro-cap entities, with market capitalizations under $100 million. Most analysts couldn’t be bothered with these babies. If they got interesting, some real company would buy them up.

In short, San Diego seemed like the world's biggest research boutique, with a faint air of frivolousness. Calling it paradise didn’t really help change the image, because people don’t expect to work in paradise. Those with long local memories lived with the tragedies and might-have-beens of past bids for business greatness: U.S. National Bank, Great American, Home Fed, Aerojet, General Dynamics, San Diego Trust & Savings, etc.

But something remarkable is stirring in San Diego AQ. While Qualcomm was rocketing to become the biggest Southern California firm by market capitalization (so sorry, Los Angeles), stock in dozens of other local companies also soared. Many of these businesses passed that magic $1 billion market cap level, and more are joining this elite club all the time. San Diego, say hello to your Billion Dollar Babies.

Mostly telecommunications and biotech companies, the BDBs largely worked years in obscurity before investors fell in love with them. Some became BDBs their first day on the market. Others took years to catch the fancy of investors. At least one, Titan Corp., is living a new and better life as it weans itself off defense dollars.

It’s impossible to tell within a single feature the tales of all the BDBs at length. At last count, 18 San Diego companies made the BDB list, not counting obvious megastars Qualcomm, Sempra and Gateway. A few other companies are just bubbling under the billion dollar threshold. Conversely, others who are flirting with the $1 billion level and pass it before press time could fall back. (Indeed, as we went to press two companies, Callaway and Ligand, dropped below the mark.) To make this feature manageable, it focuses on the story of one company, Wireless Facilities Inc. The company exemplifies the creation of an industry for this era and what the BDB phenomenon means for San Diego. (Individual profiles of the other BDB companies appear elsewhere within this special report.)

Out Of Thin Air

One moral of California's Gold Rush days is that the miners rarely got rich. The merchants who sold them food, clothes and tools prospered. They didn’t take the risks of digging in one mine; they depended upon the success of the whole gold mining industry. That's the strategy behind Wireless Facilities, which helps wireless telephone carriers make their systems work. Of course, wireless spectrum isn’t going to vanish like California's gold mines, so the company has a longer life expectancy. Founded by brothers Masood K. Tayebi, 37, and Massih Tayebi, 39, Wireless Facilities works with carriers of all sorts, in North and South America. The company occupies the middle ground between carriers, the users of technology and technology inventors such as Qualcomm.

"We’re technology agnostics," says Massih Tayebi, chief executive officer of the company. "We plan, design, deploy and maintain wireless networks. We continue to build on that model, although our business has grown tremendously. We are the largest independent provider of these services." Wireless Facilities is concerned with more than cellular and PCS. It’s going for the high-speed wireless data and video services of the future, such as a faster version of Qualcomm's Code Division Multiple Access standard for so-called "3G" or third generation networks. These networks will carry data at about 2 million bits per second. By comparison, the fastest dial-up modems transmit at just under 56,000 bits per second, and Sprint PCS transmits over its Wireless Web at 14,400 bits per second. Cable modems and DSL generally transmit data at several hundred thousand bits per second up to more than a million bits per second. A typical office Ethernet connection runs about 10 megabits per second.

The ultimate solution to the speed crunch, at least on the business end, may come in broadband wireless, which operates in extremely high frequencies such as 24, 28 or 38 gigahertz per second, compared to 1.9 gigahertz for PCS services. One brand of this service is called LMDS, for Local Multipoint Distribution Service. Tradeoffs are involved. The higher the frequency, the more information a signal is theoretically capable of sending — speeds of more than 100 megabits per second are contemplated — but physical obstacles and even rain can interfere with transmissions.

Broadband wireless' speed and ease of installation will make it very attractive to businesses, says Massih Tayebi. Consider the expense and delay in digging trenches and laying cable to every business that wanted a connection, he says. Instead of that logistical nightmare, just set up wireless transmitting and receiving dishes to cover that last mile. Fiber optics buried in the ground would still carry signals most of the distance, but wireless would handle that last mile.

This wireless Nirvana isn’t going to happen all at once, so Wireless Facilities is working with other wireless researchers to squeeze the most speed out of existing networks to reach what’s called the 2 1/2 standard, reaching several hundred thousand bits per second.

The company started to focus on how to deploy these various high-speed wireless data services about two years ago, Massih says, giving it a leg up on competitors. "Today, I’m absolutely convinced we’re leading the markets in design, deployment and strategic development of these technologies."

Right now, Wireless Facilities makes most of its money in deployment. The company’s technicians do the engineering, make sure the carrier's cell sites are properly positioned, and make sure voice quality is good. The company also offers its own training courses to help wireless carriers predict how much traffic their networks will have,and how to manage it. Its customers include Sprint PCS, AT&T, Qualcomm, Nextel, Ericsson, Lucent and Nortel.

Overseas, the company is active in Latin America, where wireless is being installed as "wireless local loop," a substitute for traditional wired phones. Its more than 700 employees come from 40 nations, and it has completed projects in 18 countries. About 150 employees are based in San Diego. The Iranian natives founded Wireless Facilities in New York in 1994, after emigrating from England to the United States. But after doing some research, they found San Diego was emerging as a wireless research center and decided to move here. Wireless Facilities quickly established local roots, bringing on its board wireless experts such as Anthony Acampora, director of UCSD's Center for Wireless Communications.

Wireless Facilities became a BDB on Nov. 5 with a market cap of about $2.4 billion (it’s now $3 billion, the same day it went public. The stock hit the market at $15 per share, and closed the day at $62 per share. It then slid to about $40 in late December before rebounding to $85.63 by Feb. 22.

For the quarter ended Dec. 31, Wireless Facilities revenue increased 120 percent to a record $35.8 million, compared to $16.3 million in the fourth quarter of 1998. Continued strong growth in the wireless telecom arena is driving the numbers.

Profit for the quarter ended Dec. 31 hit a record $4.1 million or 10 cents per diluted share, compared to $1.2 million, or 4 cents per diluted share, in the corresponding quarter a year ago.

For the full year 1999, profit rose 67 percent to a record $9.5 million, compared with $5.7 million a year earlier, while revenue increased 79 percent to a record $92.7 million, compared to $51.9 million for the full year in 1998.

The Meaning Of It All

The success of Qualcomm served as an example to local entrepreneurs that it’s possible to become a world-class company and remain in San Diego, says Michael Krenn, vice president of development for TheGolfer.com. In his former role as marketing director for the high-tech law firm of Cooley Godward, Krenn saw the genesis and growth of many local technology companies firsthand. "It opened everybody's eyes that San Diego could actually be a player in the technology industry," Krenn says.

Both Krenn and San Diego Mayor Susan Golding say an increase in local venture capital firms in recent years also fueled the trend. Venture capital is the lifeblood of new technology companies. Many firms prefer to invest close to their offices, so they can keep constant tabs on how their companies are doing. While the San Francisco Bay Area is still the undisputed king of venture capital, San Diego now has a very respectable venture presence. (See San Diego Metropolitan's January story on local venture capital).

Other service providers such as law firms, accountants, real estate, insurance and banking companies specializing in high-tech have opened their doors here, Krenn says, making it easier for start-ups to get on their feet. In a few cases, Krenn says he's heard anecdotal evidence that some people are deliberately choosing San Diego over the Bay Area because of San Diego’s superior quality of life. In fact, of the eight major biotech regions nationwide, San Diego ranked first in quality of life in a study released last month by the California Healthcare Institute.

The study focused on the Bay Area's biotech industry, but compared it with seven other regions in their quality of local research, accessibility to financing, labor pool quality, quality of life and infrastructure. The Bay Area ranked second in quality of life, and Los Angeles/Orange County finished seventh, ahead of last-place Princeton, N.J.

San Diego’s tech development also has been helped by the city's streamlined approach to business, Golding says. Speeding up the permit process with a one-stop center and other business-friendly moves make it easier for entrepreneurs to get going.

"When these entrepreneurs go to the city (for permits), it takes time and money away from their companies," Golding says.

Finally, Golding says, there's now a critical mass of skilled tech employees and companies here, making it easier for companies to recruit workers to San Diego. Especially in telecommunications and biotech, prospective transplants no longer have to worry about a lack of other job possibilities.

The billion-dollar babies are doing more than just bringing the analysts south of Orange County. Their stock value translates into more money in salaries and stock options for employees. The region is experiencing a strong inflow of cash and this wealth effect is translating into a better quality of life for all San Diegans, Golding says.

"People in the technology industry work hard, but after they get through with their day's work, they want to enjoy themselves," Golding said. "They support education, they support the arts, they add to San Diego’s culture. Business can be a catalyst to support the community, and it’s happening here."

The growth in large companies in San Diego is a sign the region is approaching maturity as a technology business center, says Paul Kreutz, a senior partner at Gray Care Ware and Friedenrich. Kreutz, who moved here about 5 1/2 years ago from Silicon Valley, says San Diego reminds him of that area 10 or 15 years ago. "The companies here are creating new technologies and opening new markets," he says. "In telecom, the big trend is the convergence of wireless and Internet voice and data, and that is just beginning to explode."

As the companies hit the big time and more employees get rich, Kreutz says a virtuous circle results, as new entrepreneurs strike out for themselves and found more companies, adding to the local pool of seasoned management talent.

Among those endowed entrepreneurs is Bob Bingham, a high-tech investor who got rich when the company was the chief investor in, SimpleNet, an Internet company that was founded in 1996, sold to Broadcast.com which was then bought by Yahoo!

"The carnage of the 1980s and the early 1990s laid the groundwork for what is happening now," says Bingham. "It was cheap rents, lots of (smart) people on the streets looking for work, the Internet kicking in and telecom in a state of deregulation."

Some may say these booming market cap figures are an aberration due to an out of whack stock market. If the market tumbles, these firms will shrink dramatically as the money flees to the old-line firms, sending San Diego back to a niche paradise.

Bingham, who personally has invested in 10 emerging local dot.coms., doesn’t expect that to happen.

"Is it a blip? No," Bingham says. "I think it is long term growth. Clearly there will be some weak sisters in there, but for the most part these companies are changing the world. And next year I bet that there will be five new ones and five that got merged with someone else."

Bradley J. Fikes, a regular contributor to San Diego Metropolitan, is a business journalist with the North County Times and its Temecula newspaper, The Californian.