Hewlett-Packard Co

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HEWLETT-PACKARD CO.

Hewlett-Packard Co. (HP) is second only to IBM Corp. among the world's largest computer firms. Along with manufacturing and marketing its top selling computers and printers, the firm also sells hardware, software, and services for World Wide Web-based operations. Under CEO Carly Fiorina, at the helm since July of 1999, HP has set it sights on becoming a premier e-business technology and services provider.

EARLY HISTORY

In 1938, Stanford University electrical engineering graduates William Hewlett and David Packard started their own company in the garage of a home Packard was renting in Palo Alto, California. With a mere $538 in capital, the partners began marketing a resistance capacity audio oscillator (HP 200A), which was essentially a sound-equipment testing device that Hewlett created as a graduate student. The company's first break came when Walt Disney ordered eight of the new oscillators for the production of Fantasia . In January of 1939, Hewlett and Packard named their new electronics manufacturing partnership Hewlett-Packard Co., after flipping of a coin to decide upon the order of their names in the company's moniker.

Throughout the late 1940s, Hewlett and Packard devised and implemented management policies that would later lead to their recognition as pioneers in corporate management and employee relations. For example, they created an Open Door Policy, believing that all employees should feel empowered to approach management about issues and concerns. To facilitate this policy, employees worked in open cubicles, and managers worked in offices with no doors.

HP released the HP 524A, a device that lessened the time needed to measure high-speed frequencies from about 10 minutes to one or two seconds, in 1951. Radio stations began using the HP 524A to ensure accurate broadcast frequencies, especially on the fledgling FM band. By that time, sales exceeded $5 million. HP completed its initial public offering in November of 1957. It was then that Packard created objectives for HP, believing that concrete goals would help to facilitate consistent choices by the firm's management team. The following year, HP completed its first acquisition when it purchased graphics recorder manufacturer F.L. Moseley. International expansion began in 1959 when a manufacturing plant was constructed in Germany, and an office was established in Geneva, Switzerland, to serve as a headquarters for European operations. That year, HP became one of the first firms to add profit sharing to the compensation package it offered employees.

By the end of the 1960s, sales at HP exceeded $165 million, HP Laboratories was created to serve as the main research hub for the firm, and the firm invented the first scientific desktop calculator in the world, the HP 9100. Hewlett, who had recently replaced Packard as CEO, decided to decentralize operations. Although divisions had been operating fairly independently since the late 1950s—with each department handling its own research and development, manufacturing, and marketing activities—this new structure granted the decision-making authority previously held by executive vice presidents to general managers, who oversaw divisions with similar product lines.

TRANSITION TO COMPUTER MANUFACTURING

After spending nearly three decades manufacturing various instruments for analysis and measurement, HP diversified into computers by developing the HP 2116A, a machine designed to control HP's test and measurement instruments; although the HP 2116A was not intended for the commercial computer market, it eventually helped to facilitate HP's move in that direction. Even more instrumental in HP's shift to computers was its 1972 launch of the HP 35, the first scientific handheld calculator. The product is viewed by many industry analysts as a major stepping stone in the growth of the personal computing industry because it rendered obsolete the engineer's slide rule. HP also moved into the business computer market—dominated by IBM Corp. and Digital Equipment Corp.—when it introduced the HP 3000 minicomputer. Innovations in employee relations continued throughout the mid-1970s as flexible work hours were offered to employees, and as time clocks were eliminated.

In 1977, John Young took over as president; the following year, he was also named CEO. HP unveiled its first personal computer, the HP-85, in 1980. Sales exceeded $3 billion that year. In 1982, the firm introduced its first desktop mainframe machine, the HP 9000. In 1984, HP launched the ThinkJet printer and its most successful product to date, the LaserJet printer. That year, sales topped $6.5 billion as earnings reached a record $500 million. To handle its growing number of operating groups—each time a group reached 1,500 employees, it was split into two separate groups—HP created four broad sectors to oversee these units.

HP developed a line of computer systems using Reduced-Instruction-Set Computing (RISC), in place of Complex Instruction-Set Computing (CISC), in 1986. The group of machines, dubbed HP Precision Architecture, was able to execute programs two to three times faster than normal by excluding many routine instructions. Though RISC chips were denounced for their inflexibility, other computer firms soon began developing their own versions of the technology. The DeskJet printer, an inkjet printer for the mass market, was launched in 1988. Although HP had succeeded in positioning itself as a leading computer maker by the late 1980s, each of its major computer lines, created for a specific purpose, was incompatible with the others. Recognizing that this strategy had resulted in redundant research and development efforts and limited expansion capabilities for consumers, HP began working to enhance the compatibility levels of its machines. As a result, all computer operations were placed in the same operating sector. Based on revenues of $9.8 billion, HP ranked 49th among Fortune 500 firms in 1988.

HP bought Apollo Computers, an engineering workstations vendor, for $500 million in 1989. The next year, after profits tumbled roughly 11 percent, Packard became more actively involved in managing HP, which laid off 3,000 employees. In 1991, sales reached $14.4 billion, and earnings rebounded to $755 million. HP developed the 95LX, a personal computer weighing just eleven ounces, and laid off another 2,000 employees. Young was replaced by Lewis E. Platt in 1992. Two years later, HP and Intel Corp. agreed to work together to create a computer chip able to run more than one operating system by the end of the decade. HP also moved into the home PC market with the launch of the HP Pavilion.

The mid-1990s were marked by price cuts for Hewlett-Packard as competition in the PC market intensified. In 1995, Hewlett-Packard reduced prices on its commercial PCs by up to 16 percent. The firm also launched its CopyJet color copier and printer, pricing it at roughly one-tenth the price of conventional color copiers. In an effort to enhance its share of the PC market in Europe, HP reduced prices there roughly ten percent in 1996. Two years later, HP introduced the Pavilion home PC line, pricing the base model, the Pavilion 3260, at an unprecedented $800. By then, HP was the second largest computer manufacturer in the world, with annual sales of more than $42 billion. Although Fortune named HP one of the most admired companies in the U.S., profits dipped by six percent, due mainly to increased competition and price slashing in the personal computer market. After deciding to hone its focus to personal computers, printers, workstations, and servers, HP spun off its non-computer related operations as Agilent Technologies in 1999.

MOVE TO THE INTERNET

One of the first major firms to engage in telecommuting, in 1994 HP developed a set of guidelines for employees who wished to work from home or at other offices. The firm's intranet, considered one of the largest in the world, allowed employees from all over the world to communicate with one another. Despite the firm's timeliness in this regard, however, it actually began a whole-hearted embrace of the Internet much later that its competitors. The reason for this, ironically, was that the decentralized structure that had worked so well for HP since its inception had "become a recipe for inward focus and bureaucratic paralysis," according to The Economist. By the 1990s, "the company had become a collection of 130 independent product groups that tried harder to meet their own financial targets than to find any common thread. It was no surprise, then, that HP was late to the Internet party—even though it had the technology in its labs. While Sun Microsystems and IBM were busy marketing themselves as dot.com revolutionaries, HP was still focusing on hardware." CEO Platt, in an effort to jumpstart HP's slowing growth, over-saw the release of an Internet Solutions line in 1997 and put in place an Internet Applications Systems Division to oversee the new products. However, it wasn't until Carly Fiorina took over in mid-1999 that the firm truly turned its focus to the Internet.

Fiorina launched a full-scale restructuring of HP, overhauling not only its internal organization by re-shuffling operations into four major groupings—computer products, imaging products, consumer sales, and corporate sales—but also the firm's marketing strategies and corporate vision. She narrowed HP's focus to providing information tools, infrastructure for these tools, and e-services. By the end of the year, HP had unveiled two new products: the Commerce for the Millennium system and the 9000 N Class server, which was designed to offer Internet Service Providers (ISPs) a comprehensive suite of online commerce tools. Her efforts were rewarded just a short while later, in mid-2000, when Internet retailing titan Amazon.com selected HP to provide roughly 90 percent of its Internet infrastructure, including Internet servers, storage devices, and PCs linked to the Internet. By then, HP had integrated its technology into various e-services solutions packages.

To bolster its position in the server market, in September 2000 HP introduced the HP 9000 Super-dome server, which allows different operating systems to run at the same time. The new machine, a key component in HP's quest to become the leading computer system supplier for Internet-based enterprises, was marketed to major dot.com businesses. In January 2001, HP bought Bluestone Software Inc., a maker of e-business tools. Rapid integration of the acquisition allowed HP to release 25 software products the following month, including the Netaction e-services development and implementation suite, and the OpenView e-services systems management suite. In April, HP balanced out its new software releases with several new hardware products, namely 19 Internet server appliances.

Foirina's efforts to retool HP received mixed reviews in 2001. While some analysts saw the many changes at HP as overdue, others expressed concern that HP was attempting to make too many changes at once, particularly as the slowing North American economy started to undercut the performance of most players in the information technology industry.