HP: Foundation and first years
Bill Hewlett and David Packard met at Stanford University in 1934. Bill Hewlett was the "son of the dean of the Stanford Medical School, while Dave Packard had come to Stanford from Pueblo, Colorado,") and was an enthusiastic radio ham.
They both were very interested in electronic engineering and spent a lot of their free time experimenting in Terman's lab who supported them. After graduation in 1934, Packard went to Schenectady, New York, where he worked for General Electric (GE), while Hewlett went on studying at the MIT. In 1938, Terman called them back to Stanford where they would earn electrical engineering degrees after their fifth year of study.
During this year they decided to work on a project professor Terman had suggested to them in his course at university: In the garage next to their rented apartment in Palo Alto they developed a variable frequency oscillator, which was much better than existing products but cost only a "fraction of the existing price ($55 instead of $500).") Terman was very convinced by this product, so he encouraged them to try to sell it. He himself loaned them $538 for the production and arranged an additional loan from a bank in Palo Alto.
The new firm Hewlett-Packard (HP) was founded in 1939, and its first big sale were eight audio oscillators to Walt Disney Studios, which used them for the soundtrack of "Fantasia.")
From now on, they concentrated on highly qualified products and innovative electronic instruments for engineers and scientists. This main product line has been kept till today.
By 1942, five years after its foundation, HP already had 60 employees and reached annual sales of about $1 million. So it became necessary to construct the first HP-owned building in Palo Alto. The two Stanford graduates had successfully built up their own company which had been founded upon an idea during their studies and was to rise from a "garage-headquartered firm") to a leading company in the world. This phenomenon was typical for Silicon Valley and would be imitated by many following companies such as Apple.
The rise of HP up to the present
During World War II the demand for electronic products brought HP many orders, and the company could grow constantly in the subsequent years. HP continued to invent new devices such as the high-speed frequency counter in 1951, which greatly reduced the time required (from 10 minutes to one or two seconds only) to accurately measure high frequencies. Radio stations used it, for example.
The net revenue went up to $5.5 million in 1951 and the HP workforce was at 215 employees. So, in 1957, the stocks were offered to the public for the first time. The additional capital due to the stock offering was invested to acquire other companies and t o expand globally such as into the European market. As a consequence, in 1959, the first manufacturing plant outside Palo Alto was built in Bblingen, West Germany.
HP entered the Fortune magazine's list of the top 500 U.S. companies in 1962, and established the HP Laboratories in 1966, which were the "company's central research facility") and became one of the world's leading electronic research centers.
In the 1970s, the company's product line was shifted from "electronic instruments to include computers"), and the world's first scientific hand-held calculator (HP-35) was developed in 1972, making the "engineer's slide rule obsolete.")
In the 1980s, HP introduced its LaserJet printer (1985), which became the company's successful single product ever, and moved into the top 50 on Fortune 500 listing with net revenues of more than $10 billion (1988).)
Today, HP has total orders of $16.7 billion and employs more than 92,000 people in the whole world.) Annually, The company spends over 10 percent of its net revenues in R&D. These investments are fundamental to keep up with the "state-of-the-art" technology, which uses the most modern inventions. New products have always played a key role in HP's growth, therefore more than half of 1992's orders were for products introduced in the past two years.) HP's more than 18,000 products include "computers and peripheral products, test and measurement instruments and computerized test systems, networking products, electronic components, hand-held calculators, medical electronic equipment, and instruments and systems for chemical analysis.")
Bill Hewlett and Dave Packard today rank with America's richest men ($1.7 and $0.85 billion) and are widely respected, especially in Silicon Valley where they are viewed as the two "most successful entrepreneurs in America.") They have spent millions of t heir profits for social welfare and have established the Hewlett-Foundation.)
Hewlett and Packard have set a pattern of an outstanding company against which every new high-technology firm "must be measured.")
The HP Way - an example of corporate culture for a whole industry
From the beginning the two founders have developed a management style, which had never occurred in a large company before. They coined a new type of corporate culture, which was to be called "the HP way."
HP always renounced the "hire and fire" mentality, which meant to employ many workers for a single big order and to dismiss them afterwards. Instead, the company offered its employees "almost perfect job security.") Even in 1974, when the U.S. economy was in a profound crisis and many people were unemployed, HP avoided layoffs by a four-day workweek, which was a unique measure in corporate America.
The two founders trusted in the "individual's own motivation to work") and treated their employees as family members; hence the custom to call each other by the first name - even the two chiefs were only known as Bill and Dave.
The HP workers were participated in the company with stock options and were even paid additional premiums when HP was successful - today known as profit sharing. These measures served to identify the employees with their work and to encourage them.
Moreover, the HP way included extensive employment benefits such as scholarships for the employee's children.
At the end of the 1950s Bill and Dave decided to write down the company's objectives, which were to serve as guidelines for "all decision-making by HP people,") since the company had grown ever larger. With some changes, those objectives are still valid today. They cover as follows: "Profit, Customers, Fields of Interest, Growth, Our People, Management, and Citizenship.") And these objectives are to be achieved through teamwork.
HP's strategies nowadays comprise mainly the "Management by Objectives", "Management by Wandering around" meaning informal communication within the company, and "Total Quality Control" which aims at producing highly qualified products.)
The HP way is seen as model for corporate culture in many countries.
The roots of many subsequent companies are located in HP, e.g. Steve Wozniak, who worked at HP and later co-founded Apple. This has led to the establishment of a new corporate culture in Silicon Valley and many firms have tried to imitate the HP way and ad opted measures such as stock options, innovative work rules, teamwork, and profit sharing.
Business Summary PALO ALTO, Calif., Nov. 13, 2000 -- Hewlett-Packard Company (NYSE: HWP) today reported 17% revenue growth (20% excluding currency effects) in its fourth fiscal quarter ended Oct. 31, 2000. Excluding extraordinary other income and restructuring expenses, diluted earnings per share (EPS) was up 14% from the year-ago quarter.
During the quarter, HP completed its previously announced 2-for-1 split of its common stock in the form of a stock dividend. Share and per-share amounts have been adjusted to reflect this split.
Net revenue was $13.3 billion, compared with $11.4 billion in last year's fourth quarter. EPS for the quarter was 41 cents on a diluted basis,(1) excluding investment and divestiture gains and losses, the effects of stock appreciation rights and balance sheet translation, and restructuring expenses. Including these items, diluted EPS on a reported basis was 45 cents per share on approximately 2.05 billion shares of common stock and equivalents outstanding. This compares with diluted EPS of 36 cents in the same period last year(2).
"We are pleased that revenue growth is accelerating, but very disappointed that we missed our EPS growth target this quarter due to the confluence of a number of issues that we now understand and are urgently addressing. I accept full responsibility for the shortfall," said Carly Fiorina, HP chairman, president and chief executive officer.
"Issues that reduced profitability included margin pressures, adverse currency effects, higher-than-expected expenses, and business mix. The good news is that our business is healthy, demand is strong, and we are making good progress against our strategic objectives as we continue the hard work of reinventing hp. We are determined to succeed and are not backing away from our growth targets," Fiorina said.
HP also announced it has terminated discussions with PricewaterhouseCoopers (PwC) regarding the potential acquisition of its consulting business.