Hewlett Packard Instrumentation Logo
Although Hewlett Packard is now a household name and many have HP printers and computers, chances are you don't have the logo pictured above, from a piece of microwave test equipment. Analysis - HP: Dial "M" for mahem tells that the company has decided to exit the PC and table business. Aside from accountants, the question on everyone's lips is, "Why would the world's largest manufacturer of PCs suddenly decided to quit making them?"
Hewlett Packard started in a Palo Alto garage in 1939. The founders were Bill Hewlett and Dave Packard, electrical engineering graduates from nearby Stanford University. The first successful product was an audio oscillator, a piece of test equipment that produces electrical signals. Walt Disney Productions purchased several, and it proved to be the tipping point of growth for the company.
The company became involved in computers because none of the computer manufacturers were interested in controlling instrumentation and measurement equipment. The engineering DNA cultivated by Bill and Dave was perhaps only equaled at Bell Laboratories and before long, HP was researching new technologies, materials, and processes for their instrumentation-oriented computers. They were hugely successful, even venturing into a line of business computers, although the company's primary focus was the instrumentation and test equipment.
In the early 70s, HP discovered a market for programmable desktop calculators, although more akin to a computer than the 4-bangers used by accountants. But they always had an interface to control the company's test equipment. In 1972, HP released the HP-35, a handheld calculator that sold for $400 which could perform the scientific and engineering calculations always approximated by slide rules. This electronic slide rule propelled HP's growth. In fact, in the late 70s, it became close to a calculator company.
These were the halcyon days for HP. Their engineering DNA rapidly produced new products - digital surveying, large expansion of medical products, gas chromatography, and many more. They were niche markets - the products solved a need. Although the product obviously required a business case, the primary decision was whether the product was needed and whether it had synergy with HP's DNA.
HP was the most admired company by engineers around the world. It produced computers and calculators that enabled their own personal success. In the engineering and manufacturing laboratories everywhere, their test equipment was the most desired and purchased. They attracted the brightest and most innovative from the universities, fueling even greater success. But they were not a household name.
In the 1980s, HP sold their first laser printer, eventually taking them away from their roots of instrumentation. Their commercial line of computers also began during this decade, defocusing the company.
In 1999, HP's transformation into a commercial product company was complete. They spun off their instrumentation and engineering products into a company named Agilent. HP itself would focus on commercial products. About this time Carly Fiorina became CEO. By the time she resigned in 2005, the company had lost market value and was losing its talented staff - both voluntary and involuntary departures. Also during her tenure, HP purchased Compaq Computers. One pundit penned this purchase was 'like two drunks trying to hold each other up'. Dell Computer was eating everyone's lunch.
Somehow through the remnants of engineering DNA, the company managed to claw back into respectability within the the consumer market, becoming the world's largest PC manufacturer. Of course the profit margins are almost zero, and manufacturing is all performed off-shore. And they want to exit the PC business and focus on speciality software.
Mmm. Engineers foresaw the future when Hewlett Packard made the turn to commercial PCs and ditched their engineering talent into Agilent. But no one could argue there were more dollars in commercial PCs. But that is the problem with western businesses. Today if you are not the biggest, you don't have the attention and lowest price of the supply chain. Investment in new technology is discouraged. Last spring I spent considerable time with an entrepreneur in optical communication. Despite his efforts, the U.S. is losing ground in optical communication to China. The reason - financial analysts in the western world are quarterly-based. The only important numbers are this quarter's numbers, which means that companies must eliminate the engineering and development investment pursued by HP during its halcyon days. China, meanwhile has patient money, permitting its companies (or is it country?) to prepare for the future.
Today's western companies have neither soul nor control of their destiny. It is too bad - it was fun to watch companies like HP, Digital Equipment, AT&T, Sony, Honda, among others.
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