Inside Google

Silicon Valley is still Obama country – a Democratic bounty of lefty voters, liberal checkbooks and cutting edge cachet — but the captains of California’s high-tech industry are warning they won’t be taken for granted.

President Barack Obama, who tried to make peace earlier this month with the U.S. Chamber of Commerce, needs all the business friends he can muster as he heads into a 2012 campaign likely to hinge on his ability to create jobs. That explains, in part, why he summoned a dozen cyber-titans for a working dinner Thursday night at the mansion of a prominent Democratic donor and business partner of Al Gore in Woodside, 25 miles south of San Francisco.

Obama called on the group — which included Apple’s reclusive and ailing Steve Jobs, Facebook founder Mark Zuckerberg and Google CEO Eric Schmidt — to support an “innovation” agenda he outlined in the State of the Union speech, big education and broadband budget increases and corporate tax reform, administration officials say.

“This evening, the president joined 12 leaders from technology companies to discuss ways to work together to invest in American innovation and promote private sector job growth,” press secretary Jay Carney said afterward.

“In the president’s State of the Union Address, he called on us to win the future by out-innovating and out-educating the rest of the world and increasing American competitiveness. The President believes that American companies like these have been leading by investing in the creativity and ingenuity of the American people, creating cutting-edge new technologies and promoting new ways to communicate.”

Those assembled were expected to respond with a sharp summons of their own, calling on Obama to streamline regulation, trim tax rates and improve their position against foreign competitors.

“Silicon Valley is Obama’s core, the showcase of the national recovery and his fundraising base. But there has been a growing disappointment with the president,” says Rob Enderle, a veteran tech industry analyst based in San Jose.

“His cyber-czar took a long time to be appointed, he hasn’t moved much of the industry’s agenda and there’s a perception he’s been kind of wishy-washy across the board.”

What did they want to hear from Obama? The same message the chamber wanted when the president addressed it earlier this month: “Making it easier to do business in a global market and proving that the government stands behind them, not in their way,” Enderle added.

Obama is likely to face an even tougher audience Friday when he’s in Oregon visiting chip maker Intel and its CEO Paul Otellini ,who told CNN last October that Obama “doesn’t get” how to create jobs. Otellini said he’s looking for “some action” boosting small business investment and easing the industry’s tax burden.

Obama’s aides downplayed the notion that Thursday night’s dinner was a “summit,” saying that it was simply intended as an informal discussion of ways to help the industry. And Carney brushed aside any suggestion the trip was politically motivated – pointing out that Obama won’t be attending any fundraisers, a sine qua non of presidential visits to the Valley.

But Obama will be returning to the West for cash, and it’s clear he wants the region’s usually reliable Democratic donors to be in a good mood when he does.

The word among tech lobbyists in Washington in the hours before the dinner was that the hastily arranged meeting, while welcome, was a scheduling nightmare that annoyed some of those who were invited. (“The president’s in your neighborhood, you’re going to say no?” said one D.C.-based consultant.)

Among Democrat operatives, however, the question wasn’t why Obama chose now to hold his Revenge-of-the-Nerds summit – but why he didn’t convene one earlier.

In 2008, employees at the top 20 Silicon Valley tech firms gave Obama $1.4 million, compared to just $267,000 raised for Republican John McCain, according to a Center for Responsive Politics analysis. Voters in the area favored Obama by 70-30 margin.

“From a political perspective, it’s basically a grand slam for Obama,” says California-based Democratic consultant Chris Lehane, quickly ticking off four reasons it was a no-brainer for the White House. “First, this is a part of the country that’s still creating high-paid jobs. Next, Jobs being there buys you a national audience… Next, you get to talk about the role Facebook is playing [in the Mideast liberation movements]. And it’s touching base with a group of donors who are going to be very important in next year’s election.”

One potentially rough patch for Obama is Google. The company has pending business before the Department of Justice, which has yet to rule on the company’s attempt to acquire the online travel booking company ITA, and recently drew criticism for skipping a Senate Judiciary Committee hearing on rogue web sites.

Consumer Watchdog, a California nonprofit long critical of Google’s business practices, pronounced itself “deeply distressed to learn that President Obama is meeting with Google CEO Eric Schmidt today behind closed doors as the Justice Department is poised to render its [Justice Department] decision.”

Still, the meeting wasn’t likely to be a love-in. In addition to Obama supporters like Schmidt and venture capitalist John Doerr, Gore’s partner, the guest list also included Oracle CEO Larry Ellison and John Chambers, the chairman and CEO of Cisco Systems, who have pressured Obama on a range of sticky issues, including their call to lower the 35 percent tax rate on foreign earnings of U.S. multinationals.

Rounding out the guest list: Yahoo President Carol Bartz, Twitter CEO Dick Costolo, Reed Hastings of NetFlix, Stanford University President John Hennessy, former Genentech CEO Art Levinson and prominent venture capitalist Steve Westly.

In 2010 that Obama spoke of expanding and making permanent a research-and-development tax credit that greatly assists the tech industry, passing outstanding free trade agreements and boosting the ranks of high-skilled foreign workers in the United States.

The credit was temporarily extended in December during the lame-duck congressional session. But lawmakers failed to act on any pending free trade agreements or on expanding the vital H-1B visa program.

Obama has committed more fully to those issues in 2011, devoting a large portion of his State of the Union address to the importance of technology and innovation. That isn’t lost on tech companies, which reveled in the fact Obama included as part of his budget new expansions to R&D funding. But questions remain in the tech crowd about the president’s ability to translate those plans into law.

Still, business leaders seem grateful for the chance to vent and open to Obama’s overtures, however vague they turn out to be.

“He’ll answer their question, sure, but basically this is Obama country and they are going to give their money and votes to him,” says Garry South, a Democratic consultant and adviser to former California Gov. Gray Davis.

Tony Romm contributed to this report.