Five Hundred and Thirty-Eight Dollars
The number is almost too perfect to believe: $538. That was the entire working capital when two Stanford electrical engineering graduates formalized their partnership on January 1, 1939, in a rented garage behind 367 Addison Avenue in Palo Alto, California. Adjusted for inflation, it amounts to roughly $12,000 — less than the cost of a decent used car, less than a month's rent in the city their company would eventually make unaffordable for anyone who didn't work in technology. From that sum, William Redington Hewlett and
David Packard would build the foundational institution of Silicon Valley, the template against which every subsequent garage-to-glory narrative would be measured, and — more durably — a management philosophy so distinctive it earned its own proper noun: the HP Way.
But the number that matters more than $538 is the one that arrived seventy-six years later. On November 1, 2015, Hewlett-Packard Company ceased to exist. In its place stood two publicly traded entities — HP Inc. (ticker: HPQ), inheriting the personal computer and printer businesses, and Hewlett Packard Enterprise (ticker: HPE), claiming the servers, networking, storage, and services portfolio. The combined enterprise had, by then, generated over $100 billion in annual revenue. The split was the final act in a decades-long drama of reinvention, mismanagement, cultural erosion, and renewal — a story in which the company that literally invented the operating system of Silicon Valley's corporate culture found itself, at various points, unable to run its own.
Hewlett-Packard's arc is not a conventional rise-and-fall narrative. It is something stranger and more instructive: a study in how the same organizational DNA that produces extraordinary resilience can, when the external environment shifts and the founding generation departs, become either an immune system or an autoimmune disorder. The HP Way — management by walking around, management by objective, respect for the individual, profit-sharing, open floor plans, first-name informality — was a radical innovation in the 1940s and 1950s. By the 2000s, it was either the company's greatest asset or its most constraining mythology, depending on who was telling the story and how recently they'd been fired.
By the Numbers
The Hewlett-Packard Legacy
$538Starting capital, 1939
$100B+First tech company to surpass $100B in annual revenue (FY2007)
86 yearsYears since founding
$55.3BHP Inc. FY2025 revenue
$31.2BHewlett Packard Enterprise FY2024 revenue
~150,000Combined employees across both successor companies
$8.8BAutonomy writedown (2012)
6CEOs in a single decade (2005–2015)
The Garage and the Coin Toss
The mythology begins, as all Silicon Valley mythologies must, with a professor. Frederick Terman taught radio engineering at Stanford in the 1930s. He was not merely an academic; he was, in the words of many who followed, the father of Silicon Valley — a man who understood before almost anyone else that a university could be an engine of industrial creation rather than a cloister from it. Among his students were two young men whose temperaments were perfectly, almost symmetrically, complementary.
David Packard — born September 7, 1912, in Pueblo, Colorado, the son of a lawyer and a schoolteacher — was tall, athletic, gregarious, an organizational natural who lettered in football and basketball at Stanford and was inducted into Phi Beta Kappa. He had the bearing and instincts of a chief executive before the term carried its modern connotations.
Bill Hewlett — born May 20, 1913, in Ann Arbor, Michigan, the son of a Stanford medical school professor who died when Bill was twelve — was quieter, dyslexic, brilliant with circuits, and possessed of a compulsive need to understand how things worked by taking them apart or, in his youth, making them explode. One man would run the business. The other would run the lab. Both would walk the floors.
They met as freshmen in 1930. They bonded over a two-week camping trip in 1934 — the kind of biographical detail that sounds invented until you realize it explains everything about a partnership that would last six decades without a serious rupture. After graduation, Packard went east to General Electric in Schenectady, New York, where he shared a house with three other young engineers, including John Fluke, who would later found HP's competitor Fluke Electronics. Hewlett stayed at Stanford, then went to MIT for a master's degree. By 1938, both were back in Palo Alto, pulled by Terman's gravity.
Their first formal business meeting was held on August 23, 1937. The minutes recorded that day — Noel "Ed" Porter, a third Stanford classmate, was also present — note that the proposed venture would involve "designing and manufacturing products in the electrical engineering field." The question of what to manufacture was, they agreed, "postponed." The proposed name: "The Engineering Service Company." Hardly the stuff of legend. But on January 1, 1939, when they formalized the partnership in Packard's garage, they settled on their own names. A coin toss determined the order: Hewlett won. Hewlett-Packard it was.
I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company's existence, we have to go deeper and find the real reasons for our being.
Oscillators, Fantasia, and the First Customer
HP's first commercial product was the Model 200A audio oscillator — a device that generated a controlled signal at a predetermined frequency, used to test amplifiers and broadcast transmitters. Hewlett's master's thesis work, conducted under Terman, had yielded a circuit design for a resistance-capacitance oscillator that was simpler and more stable than anything on the market. The key innovation was using a small incandescent lamp as a temperature-dependent resistor to stabilize the feedback loop — an elegant solution that sounds trivial in retrospect but was, in practice, the kind of insight that separates a thesis from a company.
The designation "200A" was a deliberate obfuscation, designed to make the two-person operation seem further along in its product line than it was. It worked. The oscillator sold for $54.40 — roughly a fifth the price of comparable instruments from established manufacturers.
And then came
Walt Disney. The Disney studio purchased eight HP oscillators for $71.50 each to test the sound systems being installed in movie theaters for the theatrical release of
Fantasia in 1940, the ambitious animated film that required a new stereophonic sound reproduction system called Fantasound. It was HP's first significant order. The symbolism was almost too rich: a company that would become synonymous with precision engineering, launched by an order from the most famous dream factory in America.
During World War II, HP expanded dramatically. Revenue grew from $37,000 in 1939 to over $1 million by 1943. The company developed counter-radar technology and advanced artillery shell fuses for the Naval Research Laboratory — products important enough that Packard received a draft exemption, while Hewlett served in the Army Signal Corps. Employment surged, including many women and retirees. In 1942, HP constructed its first company-owned building, at 395 Page Mill Road — nicknamed "the Redwood Building." The wartime experience taught two critical lessons: HP could scale manufacturing rapidly, and military contracts were both lucrative and volatile. The second lesson would shape six decades of strategy.
The Invention of a Way
After the war, the company endured a brief slump in defense contracts before returning to wartime revenue levels by 1947, the year HP formally incorporated. The division of labor that would define the partnership crystallized: Packard handled the business — finance, manufacturing, sales, administration — while Hewlett led research and development. But what distinguished HP from every other postwar electronics firm was not the quality of its instruments, which was excellent, or the complementarity of its founders, which was unusual. It was the conscious, deliberate construction of a management philosophy that treated corporate culture as a competitive advantage.
The pivotal event was the Sonoma meeting in June 1957, when HP codified its corporate objectives for the first time. The principles articulated there — and refined over subsequent decades — constituted what became known as the HP Way. They included: profit as a means rather than an end; contribution to customers, employees, and community as an organizational purpose; management by objective rather than management by control; an open-door policy; profit-sharing; and the expectation that employees would be treated as responsible adults who could be trusted to manage their own time.
This was genuinely radical in the 1950s. While other companies ran hierarchical command structures, HP endorsed first-name informality. While others built executive dining rooms and corner offices, HP used open floor plans. While others viewed layoffs as a routine cost-management tool, HP pioneered the "nine-day fortnight" during the 1970 recession — cutting hours and pay across the board rather than eliminating jobs, so that the burden of a downturn was shared equitably.
Packard and Hewlett practiced what they called "management by walking around" — visiting departments without appointments, talking with line workers as often as with managers, collecting the granular intelligence that no reporting structure could capture. The practice sounds banal now. Every tech CEO who walks a cafeteria line in a company hoodie is, consciously or not, imitating Bill and Dave. But in the context of the 1950s American corporation — a world of Organization Men, gray flannel suits, and rigid hierarchies — it was an act of managerial imagination.
When I came to HP, it was when HP was in a pretty difficult set of circumstances. I was the third CEO in as many years. What I did was I went right to the founder DNA. I asked, 'what does this company do really well? What is the core of this company?' And despite all the acquisitions and all the drama, it was completely obvious that the core of this company was innovation and engineering.
HP also became one of the first businesses in the United States to endorse the idea that employees, customers, and the community have as valid an interest in company performance as do shareholders. It consistently ranked among the best places to work for women and minorities. It donated as much as 4.4 percent of pretax profits to charitable organizations. In 1946, HP hired Art Fong, the first known Asian-American engineer in Silicon Valley history, at a time when much of America was still formally segregated.
David Packard would later distill the philosophy in
The HP Way: How Bill Hewlett and I Built Our Company, published in 1995, a year before his death. The book was distributed to every HP employee worldwide. It remains the primary source on the company's founding principles — and, read today, a quietly devastating indictment of what followed.
The Product Machine
The HP Way was not merely a set of HR policies. It was an innovation system. The culture of trust, autonomy, and decentralization produced a remarkable product cadence across four decades.
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Six Decades of Reinvention
Key product milestones in Hewlett-Packard's history
1939Model 200A audio oscillator — HP's first product. Sold to Walt Disney for Fantasia.
1951524A high-speed frequency counter — used by FM radio and TV stations to meet FCC regulations. Became a massive commercial hit.
1964Cesium beam HP 5060A — HP engineers flew it around the world to synchronize atomic clocks to within one-millionth of a second.
1966HP 2116A — HP's first computer, designed to manage its own test and measurement instruments.
1968HP 9100A desktop calculator — the first desktop scientific calculator. Bill Hewlett called it a "personal computer" in internal marketing materials, years before the term entered common usage.
1972HP-35 — the first pocket-sized scientific calculator. Sold at one-sixth the price of the 9100A. Rendered the slide rule obsolete.
Each of these products represented a strategic bet, and several of them involved HP entering markets where it had no existing presence. The 524A frequency counter, for instance, was not merely a good instrument — it created an entirely new category of demand by enabling FM broadcasters to comply with FCC frequency regulations. The HP-35 pocket calculator did not incrementally improve on existing products; it destroyed the slide rule, an instrument that had been standard-issue for engineers since the seventeenth century.
But the most consequential product decision HP ever made was arguably the one it didn't make. In 1976, an engineering intern at HP named Stephen Wozniak built a prototype for what would become the first personal computer and offered it to the company. HP declined. Wozniak received all rights to his idea and went on to co-found Apple Computer with Steven Jobs. The decision was not irrational — HP's instrument business was thriving, and personal computing was, at the time, a hobbyist curiosity — but it would become one of the most famous missed opportunities in technology history.
HP did eventually enter the personal computer market, but haltingly. Its first desktop computer, the HP-85 (1980), was incompatible with the IBM PC standard and failed. The HP-150 (1983), an IBM-compatible system with an innovative touch screen, also failed commercially. It was not until the LaserJet printer in 1984 that HP found its breakthrough consumer product — and the LaserJet's success was not in computing per se, but in the peripheral that made computing useful.
The Great Widening
By the early 1990s, HP was a sprawling enterprise — a global manufacturer of instruments, computers, printers, calculators, and medical equipment — that was beginning to feel its own weight. Its decentralized divisional structure, once a source of speed and autonomy, had produced a proliferation of product lines with inadequate coordination and, in some cases, internal competition. Revenue and profit targets were being missed. The stock price declined steeply.
David Packard, then seventy-eight, came out of retirement to take an active role. The most dramatic changes came in the PC group: new computers, color printers, and peripherals at aggressive prices that catapulted HP into the world's top three PC manufacturers. By 1993, with the turnaround complete, Packard retired again. By 1997, HP was added to the Dow Jones Industrial Average. In 1999, it spun off its measurement, electronic components, and medical businesses as Agilent Technologies — a move that clarified HP's identity as a computing and printing company but also severed its connection to the instrument-making heritage that had defined the company since the garage.
HP's revenue reached $42 billion in 1999. It was enormous. It was also, in the judgment of its board of directors, not enough. The company needed a new kind of leader — someone who could transform HP from a federation of engineering fiefdoms into a unified technology enterprise capable of competing with IBM, Dell, and the emerging forces of the internet economy. In July 1999, they hired Carly Fiorina.
The Queen's Gambit
Carleton "Carly" Fiorina was, by any conventional measure, a remarkable executive. She had started her career as a secretary in a real estate office, joined AT&T as a sales representative in 1980, risen to become the first female officer at AT&T, and by age forty was leading the company's North American operations. She oversaw the $3 billion spin-off of Lucent Technologies. She was charismatic, articulate, media-savvy, and unintimidated by scale. She was also the first woman to lead a Fortune 50 company and the first CEO of HP who came from outside the company.
The significance of that last fact cannot be overstated. For sixty years, HP had been led by insiders steeped in the engineering culture that Bill and Dave had built. Fiorina was a sales and marketing executive from the telecom industry. She arrived with a mandate to shake things up. She proceeded to do exactly that, and the shaking would last a decade after her departure.
Fiorina's signature move was the acquisition of Compaq Computer Corporation, announced in September 2001 and completed in May 2002. The deal valued Compaq at approximately $25 billion in HP stock. It was the largest technology merger in history at the time. Fiorina argued that HP needed scale to compete with IBM and Dell, and that the combination would create a full-spectrum technology company capable of serving enterprise and consumer customers alike.
The opposition was ferocious. Walter Hewlett — Bill Hewlett's son, an HP board member, and a significant shareholder through the William and Flora Hewlett Foundation — publicly opposed the deal. He argued that it would dilute HP's margins, distract from its higher-value businesses, and destroy the company's culture. Fiorina pilloried him. The proxy fight that followed was one of the most bitter in American corporate history. HP won the shareholder vote by a razor-thin margin.
The merger's supposed benefits never fully materialized. HP's stock price declined. The company missed earnings forecasts. The integration consumed enormous management bandwidth. In February 2005, after five and a half years as CEO, Fiorina was forced out. She never received an explanation. As NPR's Jim Zarroli later reported, "Fiorina was fired in 2005 after five and a half years on the job."
This merger would dilute HP's margins and distract from its higher-value businesses.
The irony was vicious. The Compaq merger did eventually contribute to HP's revenue growth — the combined company surpassed IBM in revenue in 2006 and became the first technology company to exceed $100 billion in sales in fiscal year 2007. But Fiorina did not get to preside over the rebound. That honor went to her successor.
The Operator
Mark Hurd was a numbers guy. He had been CEO of NCR Corporation, a maker of ATMs and point-of-sale terminals — not a glamorous company, but one he had run with surgical efficiency. Where Fiorina was a visionary who spoke in sweeping strategic arcs, Hurd was an operator who studied cost structures the way a watchmaker studies movements. He added the chairman title in 2006.
Under Hurd, HP executed. Costs were cut with discipline. Earnings grew an average of 55% annually between 2005 and 2009. Revenue reached $115 billion. The company became the largest player in the $1.7 trillion technology market. HP expanded into data centers, IT services, and networking, positioning itself against IBM and Cisco simultaneously.
"In a short time, Mark has identified opportunities worth trillions of dollars, convinced his people to go after them and led the pursuit with vigor and financial acumen," Stanford professor Robert Burgelman said. "He has an incredible ability to see value where others don't."
But Hurd also cut R&D spending as a percentage of revenue, a decision that would haunt the company. And in 2010, he was forced out — not over strategy or performance, but over a scandal involving questionable relations with a marketing contractor. The details were tawdry, the denials categorical, and the result devastating: HP had lost, for the second time in five years, a CEO whose departure had nothing to do with the fundamental business challenges the company faced.
Eleven Months of Apotheker
Léo Apotheker lasted eleven months. The former CEO of SAP, the German enterprise software giant, arrived in November 2010 with a mandate to pivot HP toward software and services. By August 2011, he had announced that HP would discontinue its smartphones and the TouchPad tablet (which had debuted only seven weeks earlier), was considering spinning off the PC business entirely, and had agreed to acquire the British business software company Autonomy Corporation for $11.1 billion.
Each of these decisions had an internal logic. The TouchPad was losing money. The PC business was low-margin. Autonomy's software was, in theory, a high-margin complement to HP's enterprise services. But the speed, sequencing, and communication of the decisions were catastrophic. HP's stock price cratered. Employees were demoralized. The market read the announcements not as strategic clarity but as strategic panic.
Apotheker was replaced in September 2011 by board member Meg Whitman. Fourteen months later, in November 2012, HP accused Autonomy's management of inflating the company's value through "accounting improprieties" and announced an $8.8 billion writedown. Five billion dollars of that writedown was attributed to fraud. It was the most expensive acquisition disaster in technology history.
As Harvard Business Review's Karen Berman and Joe Knight wrote in 2013: "Even at the time, news of the acquisition contributed to a 20% drop in HP's share price."
The Board That Couldn't Shoot Straight
The dysfunction at HP between 2005 and 2012 was not merely a problem of CEO selection, though that was bad enough — three CEOs in six years, two departed in scandal, one lasted less than a year. The deeper pathology resided in the board of directors, which had devolved into a collection of warring factions whose behavior would have been comical if the stakes had not been so high.
Directors refused to be in the same room with one another. They accused each other of lying, leaking, and betrayal. Some leaked secrets to the press. The chairman of the board hired private investigators to obtain the phone records of directors and reporters to uncover the leakers — a surveillance scandal that ended with the company's chairman and CEO dragged before Congress to testify under oath.
As Fortune's Peter Elkind and his colleagues documented in their devastating 2012 investigation, "Dr. Phil could fill a month's worth of shows just examining HP's board, whose dynamics have resembled those of rival junior high school cliques more than what is supposed to be a sage guiding force." The board repeatedly chose new CEOs whose most salient trait was that they were the opposite of the last one: the outside visionary replaced by the inside operator, the operator replaced by the software strategist, the software strategist replaced by the turnaround specialist.
The deeper lesson — one that resonates far beyond HP — is that governance failure compounds. Each bad CEO choice made the next one harder, because the institutional knowledge and cultural coherence required to evaluate candidates had been degraded by the previous disruption. By the time Whitman arrived, the company she inherited was, as she would later say, "an unhappy company" — one whose employees live-blogged her introductory meetings and openly wished the enterprise ill.
The Splitting of the Atom
Meg Whitman had been CEO of eBay for a decade — a very different kind of technology company, a marketplace platform rather than a hardware manufacturer, but one that had taught her how to manage at scale and, crucially, how to manage a transition. She described her strategy at HP as a five-year turnaround, and for the first three years, she resisted the idea of splitting the company. HP was one of the world's top buyers of semiconductors and other computer parts, she argued, giving it pricing power superior to its rivals.
By October 2014, she had changed her mind. On October 6, HP confirmed it would divide into two companies: Hewlett Packard Enterprise, focused on servers, storage, networking, software, and services; and HP Inc., retaining the personal computer and printer businesses and the company's iconic logo. The split was completed on November 1, 2015.
"It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics," Whitman said. The statement was corporate boilerplate. The reality was more complex.
Wharton management professor Emilie Feldman argued that the split was an example of how "spinoffs can be used very proactively to create value for shareholders and separate businesses that don't belong together anymore." The PC and printer business operated on consumer rhythms — quarterly product refreshes, retail distribution, volume economics. The enterprise business operated on multi-year sales cycles, deep customer integration, and service-level agreements. They had different growth trajectories, different capital requirements, and increasingly different competitive sets.
The split also allowed each successor company to shed the baggage of the other. HP Inc. no longer had to explain enterprise strategy to consumer analysts. HPE no longer had to defend razor-thin PC margins to enterprise investors. But it also severed — permanently — the organizational unity that Bill and Dave had built. The garage on Addison Avenue now belonged to a joint venture called the Hewlett-Packard Company Archives, maintained by two companies that shared a name and a history but no longer a balance sheet.
Two Companies, Two Fates
After the split, each successor company charted its own course.
HP Inc. under CEO Dion Weisler (2015–2019) and then Enrique Lores (2019–present) settled into a disciplined execution model. The company generated consistent cash flows from PCs and printers, returned capital to shareholders through buybacks and dividends, and invested selectively in adjacencies — 3D printing, managed print services, and the peripheral ecosystem around hybrid work. Lores, a 30-year HP veteran born in Spain, framed the company's strategy around three vectors: advance core business models, disrupt using core assets, and transform the company's cost structure and go-to-market. FY2025 revenue was $55.3 billion, up 3.2% year-over-year. GAAP diluted EPS was $2.65.
Free cash flow was $2.9 billion. The company returned $1.9 billion to shareholders. Not a hypergrowth story. A cash-generation machine.
Hewlett Packard Enterprise under CEO Antonio Neri — a 30-year HP/HPE veteran who became CEO in 2018 — pursued a more aggressive transformation. HPE pivoted toward hybrid cloud, edge computing, AI infrastructure, and as-a-service consumption models through its GreenLake platform. FY2024 was a breakout year: record quarterly revenue of $8.5 billion in Q4, with full-year revenue up 10% year-over-year to approximately $31.2 billion. In January 2024, HPE announced a $14 billion acquisition of Juniper Networks, a major networking equipment maker — its largest deal ever, funded in part by a $1.35 billion offering of 7.625% mandatory convertible preferred stock and a $2.9 billion note offering. The Juniper deal, if completed, would dramatically expand HPE's networking portfolio and position it against Cisco and Arista in the AI-era data center.
"Our differentiated portfolio across hybrid cloud, AI, and networking positions us well to capitalize on the market opportunity," Neri said in December 2024.
The two companies, born from the same garage, now operate in almost entirely different competitive landscapes. HP Inc. battles Dell, Lenovo, and Canon. HPE battles Dell Technologies (the enterprise side), Cisco, and increasingly the hyperscale cloud providers themselves. They share a heritage, a name, and a Palo Alto zip code. Not much else.
The Way and Its Discontents
The central tension in the Hewlett-Packard story is not between innovation and execution, or between consumer and enterprise, or even between insiders and outsiders. It is between a management philosophy designed for a world of long product cycles, deep engineering immersion, and patient capital — and a technology industry that accelerated past all three.
The HP Way worked brilliantly when the company was an instrument maker selling to engineers, when product cycles lasted years, when customer relationships were built through technical quality rather than marketing spend, and when the company's culture attracted the best electrical engineers in the country. It worked because Bill and Dave embodied it — walked around, knew the products, understood the people.
But the HP Way was never a self-executing program. It required founders — or leaders of founder-caliber integrity and technical depth — to maintain it. When those leaders departed (Packard died in 1996, Hewlett in 2001) and the board appointed outsiders who understood the words but not the music, the Way became a slogan rather than an operating system. Fiorina invoked it while pursuing the Compaq merger over the objections of the founders' heirs. Hurd cut R&D while boosting earnings. Apotheker abandoned product categories in weeks that had taken decades to build. Each was, in their own way, trying to make HP competitive in a world that moved faster than the Way had been designed for.
Meg Whitman understood this. Her first instinct was to go "right to the founder DNA" — to celebrate engineering, restore partnering, and recommit to community. It bought her credibility and time. But the ultimate answer was not to restore the HP Way in its original form. It was to acknowledge that the company had become too large, too diverse, and too internally incoherent to be governed by a single set of principles. The split was not a failure of the Way. It was an acknowledgment that the Way worked best at human scale, in organizations where leaders could still walk around.
Today, more than 10,000 archival assets sit in the Hewlett-Packard Company Archives, a joint venture between the two successor companies. Several thousand historical photographs. Physical prototypes. Correspondence from Bill and Dave. Stacked end to end, the collection would be more than ten times taller than the Golden Gate Bridge.
The garage on Addison Avenue is a California historic landmark. The plaque calls it "the birthplace of Silicon Valley." The shed where Bill Hewlett lived after his marriage, where Lucile Packard served as secretary and bookkeeper, still stands. The coin that determined the company's name has never been found.
