WhereIsAtlas · Technology

What Happened to HP?

The garage-founded company that helped invent Silicon Valley was undone by a string of bad bets — then split itself in two to survive.

HP helped invent Silicon Valley, then a contested Compaq merger and the disastrous Autonomy deal eroded it. Splitting into HP Inc. and Hewlett Packard Enterprise in 2015 was the price of survival — and the end of the single, beloved HP.

The company in the garage

Hewlett-Packard's founding story is almost too perfect to be true: two engineers, a Palo Alto garage, and the birth of an industry. In 1939 Bill Hewlett and David Packard started making electronic instruments there, and that garage is now officially remembered as the 'birthplace of Silicon Valley.'

For decades HP was a model company — profitable, respected, and run on a famously humane management philosophy called 'the HP Way.' The story of how it fell is a story about what happens when a beloved institution loses the plot.

Instruments, printers and the HP Way

HP grew from audio oscillators to test-and-measurement instruments to calculators to minicomputers, earning a reputation for precision and reliability. Its 1968 'HP Way' — a culture of openness, trust and respect for the individual — became a management blueprint imitated across the tech industry.

In the 1980s and 90s HP expanded into two massively profitable businesses: printers (its inkjet and laser lines were cash machines) and desktop computers. It became one of the largest PC makers in the world.

Carly Fiorina and the Compaq deal

A turning point came in 1999, when HP spun off its instruments business as Agilent Technologies, and Carly Fiorina became CEO. She pushed a grand strategy of design and scale — and its centrepiece was the $25 billion acquisition of Compaq in 2002.

The merger was bitterly contested, and it never worked the way its backers hoped. HP became bigger, but not better, and the deal burdened it with exactly the kind of commodity hardware business that was already losing money.

Autonomy and the slow unraveling

The 2010s brought a string of disasters. The $11 billion acquisition of British software firm Autonomy in 2011 turned into a scandal — HP wrote down about $8.8 billion of it, alleging accounting fraud, and sued the company's leadership. It was one of the largest corporate write-downs of its kind.

Meanwhile leadership churned and restructuring followed restructuring. By the mid-2010s HP, once the pride of Silicon Valley, looked like a shadow of the company that had helped invent the place.

Splitting in two to survive

In 2015 HP took the dramatic step of dividing itself into two companies: HP Inc., which kept the PCs and printers, and Hewlett Packard Enterprise, which took the servers, storage and networking. It was a belated admission that one company couldn't be everything.

Both businesses survive today. They're not the beloved HP of the garage era, but they're still here. The lesson is that even an institution as storied as HP could be badly managed — and that breaking up was the only way left to protect what remained.

Sources