Hewlett Packard - Calculating a generational loss

Bill Hewlett and David Packard could not have imagined when this picture was taken in 1938 that the suburban garage in which they are sitting would become famous worldwide.

Still less could they have guessed that their fame would stem not from the electronics on the bench, but from an industry that would render obsolete the slide-rule that Packard is holding rather self-consciously.

The garage was the birthplace of Hewlett Packard (HP) and still stands in Palo Alto, in what has come to be known as Silicon Valley.

In January Hewlett died at the age of 87, having outlived his co-founder by nearly five years. Even his death helped promote the company: it gave an extra boost to a massive advertising campaign featuring the garage, which HP bought last year for $1.7m. This coincidence was, of course, entirely fortuitous. The company would not have timed the campaign with an eye on the old man's health, now would it?

HP launched on borrowed capital of just $538 and now enjoys revenues of some $60bn a year; but it was hardly a case of rags to riches for its two founders. Both came from prosperous homes and met as students in the intellectual hothouse of Stanford University where their mentor was Fred Ternan, who has been called the 'Father of Silicon Valley'.

Packard went to General Electric (GE) on graduating in 1934, while Hewlett took a master's degree at MIT and returned to Stanford in 1936. The two men had talked of founding a company and Ternan gave them the idea for their first product - an audio signal generator the output frequency of which could be controlled by a simple variable resistance.

Ternan pointed out that it could be made more cheaply than any similar product, but the prototype was unstable. Hewlett cured this by using a cheap light bulb as a stabiliser, ingeniously exploiting the peculiar way its resistance varied with temperature.

A meeting of minds

Packard took leave of absence from his $110-a-month GE job to join Hewlett on $55 a month. The legendary garage was in the driveway of the first-floor apartment Packard rented.

One of the first customers for the HP signal generator was Bud Hawkins, chief sound engineer at Walt Disney Studios, who bought eight at $71.50 each to help develop the soundtrack for the film Fantasia. The device can be seen as a precursor of today's sound cards, ironically one of the few computer products HP does not manufacture.

Hewlett recalled that they would take on virtually anything to make money - one of HP's early projects was a self-flushing urinal.

Hewlett spent the war in the signal corps but the company flourished under Packard's guidance, thanks to the increasing demand for their electronics.

The duo were in at the birth of Silicon Valley, which grew from the need to finance the growth of Stanford at a time when the area was beginning to pull out of a post-war slump.

The university had been bequeathed vast tracts of land and HP was among the first firms to set up in Stanford's 579-acre industrial park in 1953, in a historically successful marriage between academia and capitalism.

HP produced its first programmable pocket calculator in 1972. But it was not until 1984, with the launch of the first LaserJet printer, that the company became widely known.

It did not do everything right, however. Legend has it that Steve Jobs and Steve Wozniac founded Apple after leaving HP in the 1970's when the company refused to back Wozniac's personal computer.

On hearing of Hewlett's death, Jobs said of the HP founders: "Today marks the final passing of their era but their spirit lives on in every company in this valley."