Hewlett-Packard Co.

Hewlett-Packard Co.

Fact File:

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Founders: Bill Hewlett and David Packard.

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Distinction: Leader in technology, and the business world that

produced it.

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Primary Products: Computers, printing and imaging products,

related services.

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Annual sales: $42.370 billion.

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Number of employees: 84,400.

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Major competitors: Compaq, IBM, Xerox.

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Chairman, President and CEO: Carleton S. "Carly" Fiorina.

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Headquarters: Palo Alto, Calif.

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Year founded: 1939.

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Web site: www.hp.com.

As the 21st century approached, the Hewlett-Packard Company faced

a significant dilemma. Justifiably acknowledged as Silicon Valley's original

startup, it literally began in a garage and unequivocally grew into one of

the world's top computer companies. Ever since its audio oscillator was

picked up by Walt Disney Studios in 1939 for use in the original Fantasia,

HP had consistently produced state-of-the-art electronic gear that was the

envy of its industry. From that first product through calculators, computer,

printers and imaging peripherals, Hewlett-Packard was always one to

watch.

In addition, the company was always a great place to work. Its

founders pioneered the concept of Management By Walking Around, which

encouraged leaders to stay in close touch with their employees. It

eschewed time clocks and offered flexible work schedules. It was one of

the first large American firms to decentralize its operation and empower its

workers. It provided a superior salary-and-benefits package. It even

institutionalized these and other components of its vaunted corporate

culture through adoption of The HP Way, an official document that stresses

trust and openness. About the only criticism ever leveled at HP, in fact,

concerned the historical lack of women in the ranks of its upper

management.

As the company prepared to usher in the new country, however, all

this was no longer adequate. Its once-experimental corporate structure

was providing an ill fit for the networked age. Quaint habits–like an odd

87-hour pay period that was implemented decades ago for a type of

worker HP no longer employs-were causing unnecessary headaches.

Innovations in software and other key areas often went unnoticed by the

public (as well as by many members of the all-important investment

community). Competitors were surging. Internet activity was lagging.

And so, in mid-1999, Hewlett-Packard broke the mold once more by

naming Carleton S. "Carly" Fiorina as its president and CEO. The first

women ever to lead one of the companies that comprise the Dow Jones

Industrial average–and the first outsider ever to lead HP–the 45-year-old

veteran of AT&T spinoff, Lucent, this company," she explained. Fiorina's

subsequent actions certainly stunned some tradition-bound observes.

Others–including many employees, customers, and investors–were more

positively impressed.

A half-century before garage-based technology startups on the West

Coast became a cliché, a pair of 26-year-old electrical engineers was

working on electronic products in their own one-car shed in northern

California. Bill Hewlett and David Packard has just $538 (along with a

string of disappointments) to their names when they came up with the

technically advanced HP 200A resistance capacity audio oscillator. The HP

200A was an instrument used to test sound equipment, and The Walt

Disney Company snagged them both a patent as well as a contract. The

studio's ensuing order for eight HP 200As, and their part in the

development of its groundbreaking film Fantasia, started the Hewlett-

Packard Company on a regular path of innovative electronics excellence.

Right from the beginning, though, Hewlett and Packard also

recognized the importance of their relationship with employees. They

focused their creative energies there as well. The two built facilities with

an open floor plan–including executive office without doors–and

established an official "Open Door Policy" to help establish mutual trust at

all levels. They additionally implemented their now-famous "Management

by Walking Around" philosophy to actively engage supervision and workers

in even more deliberate and meaningful ways.

During the 1950s, significance breakthroughs continued on both the

product and personnel fronts. Successful releases, such as the HP 524A

high-speed frequency counter, a device used by radio stations to comply

with certain federal regulation, rolled out of their increasingly busy plant.

Profits were reinvested in new research and development, freeing the

partners from venture capitalists and resultant debt. The practice also

allowed them to acquire a plotter company that would eventually form the

basis for their printer business. And it gave them the footing to go public.

At the same time, HP's progressive philosophies helped it attract top

young scientists and engineers. In 1957, the company formalized its

unique objectives and management style in "The HP Way." The following

year, it split into separate divisions with individual profit-and-loss

accountability, and moved them out of headquarters in Palo Alto. Each

became a self-sustaining unit responsible for developing, manufacturing,

and marketing its own products–and would be awarded future R&D

funding in direct proportion to performance. In 1959, HP took these ideas

global and opened a manufacturing facility in Germany and a European

headquarters in Switzerland. It also made stock-opinion plans a part of its

employee benefits package, and become the first company to institute a

cash profit-sharing program.

The 1960s was a decade of flex time and calculators. The former

first appeared in HP's German plant in 1967, and time clocks completely

disappeared throughout the company within half-dozen years. The latter

hit the market in 1968 in the form of the HP 9100, proudly proclaimed by

the company to this day as the world's first programmable scientific

desktop calculator. (Four years later, HP would introduce its first handheld

version the HP 35. Slide rules suddenly became superfluous, and the

technology revolution went portable.)

The company also entered the world of business computing in 1972

with the HP 3000 minicomputer. By this time, it had 16,000 employees

and sales of more than $365 million. Only top college's graduates were

recruited for the expanding workforce. They were retained by the

challenging professional atmosphere, and the progressive people programs

that now included a strict promote-from-within policy and an unofficial ban

of layoffs.

Desktop mainframe computers were unveiled with the now-familiar

Hewlett-Packard logo in the early 1980s, and the company entered the

printing business in 1984. Its reasonably priced inkjet and laser printers

took the market by storm and quickly became ubiquitous. Concurrently,

the company formed four "sector" organizations to manage its proliferating

groups while establishing the first high-tech joint venture in China. When it

celebrated its 50th anniversary in 1989, the garage where Hewlett and

Packard developed that first audio oscillator was designated a California

State Historical Landmark.

By the mid-1990s, HP's diversified units had introduced

breakthrough products–ranging from a palm-sized PC weighting 11 ounces

to a device that processed ultrasound waves for noninvasive real-time

cardiac analysis. It teamed up with Intel to develop common 64-bit

microprocessor architecture and moved vigorously into the growing homeoffice

market. It also formalized policies on telecommuting which

encouraged employees to work at home or remote offices around the

globe. Half of all sales were now coming from outside the United States–

10 percent of the world's high-tech retail space featured its products. And

by the end of the decade, the original garage startup had grown into a

major multinational with 104 divisions, 19,000 products, and more than

$47 billion in sales.

Yet growth, which once regularly hit 20 percent a year, was virtually

nonexistent, HP stock was flagging, despite a bull market that had been

particularly kind to tech companies. No new business lines were emerging,

but strong competitors certainly were. And the Internet appeared an

afterthought while key executive routinely fielded offers from outside. In

response, the company long known for its unorthodox ways responded

with some very radical changes.

The transformation actually began under former CEO Lew Platt, who

took the helm as HP's fourth leader in 1992. Platt, considered a capable

manager but not an innovator, realized things needed to change and

began the corporate makeover just a few years later. Much like IBM, he

decided to reinvent HP as an Internet solutions company providing

hardware, software, and support for corporate customers. He also decided

 

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that the company's decentralized nature was stifling its attempts to move

on "Internet time," and he realigned it into two cohesive operation: Agilent

Technologies, a new $8 billion company selling test-and-measurement

equipment and medical electronics, and a $40 billion company selling

computers, printers, software and services that bore the long-standing

Hewlett-Packard name. Platt further announced that he would be stepping

down early at the end of 1999, and that the new HP would be led by a new

CEO.

Carly Fiorina, who managed the original branding campaign that

helped Lucent gain respect in the industry and get noticed by Wall Street,

was one of 100 candidates for the slot. When chosen after an array of

tests (which reportedly included a three-hour interview and a 900-

questionpsychological survey), Florina immediately leapt into the fray with

her characteristic high-energy zeal. Within days, she was meeting with

supporters as well as detractors inside the company and out. She quickly

tallied $1 billion in savings by consolidating diverse operations, and

considered layoffs that observes estimated could ultimately pare the

payroll by 25 percent. She reoriented the company's disparate advertising

and marketing approaches, lent her own voice to commercial in a radical

departure from HP's long-time publicity shy ways, altered product designs,

and announced entirely new lines, such as digital cameras, a printer that

allows bookstores to rapidly produce entire books on demand, and

software that provides intriguing possibilities of electronic commerce. She

also dropped the venerable "Hewlett-Packard" logo ff many of them in

favor of an ore trendy "HP".

For a company so immersed in tradition that it keeps official

corporate artifacts tended by a full-time archivist, this whirlwind of

activity–all accomplished or announced within months of Fiorina's hiring–

was quite jarring, to say the least. But it's nothing less than the promise

voiced in one of her first national TV spots: "The original startup will act

like one again. Watch."