Bill and dave
How hewlett and packard built the world’s greatest company
Description
From a contemporary perspective on business history, the initial encounter between Bill Hewlett and David Packard is often seen as a pivotal moment.
Their first meeting occurred in the fall of 1930 during tryouts for Stanford University's football team. David Packard, a freshman from Colorado, stood out not only for his athletic prowess but also as a promising talent in Stanford's nascent electronics department.
Despite his athletic achievements, Packard's academic pursuits in engineering would shape his future. In contrast, Bill Hewlett, who was shorter and had a more robust build, compensated for his lack of natural athletic ability with sheer enthusiasm and dedication.
Despite his struggles with dyslexia, which went undiagnosed until much later in his life, Hewlett's perseverance in academics allowed him to excel in other areas.
Table of contents
01Initial friendship subsequent partnership
In the autumn of 1930, a significant event in modern business history took place: the first meeting between Bill Hewlett and David Packard. This encounter occurred during the annual tryouts for the Stanford University football team. Packard, a six-foot-five freshman from Colorado, was a natural athlete and a rising star in Stanford's new electronics department. He would go on to play for Stanford's football, basketball, and track teams.
Hewlett, on the other hand, was short and stocky, compensating for his lack of natural athletic ability with enthusiasm and commitment. Despite his academic struggles, which were later attributed to severe dyslexia, Hewlett was admitted to Stanford due to his family connections. The two didn't immediately become friends, but their shared interests in the outdoors and electronics eventually brought them together.
02The early days of the venture
The inception of Hewlett-Packard is a tale of two friends, Bill Hewlett and David Packard, who embarked on a business venture without a clear idea of what they were going to do. Their friendship and mutual trust were the bedrock of their partnership, unencumbered by venture capitalists or the scrutiny of trade magazines.
Packard, offered a research assistant's job by Professor Terman, took a one-year leave from General Electric (GE) to explore this opportunity. Upon his return to San Francisco, he and Hewlett wasted no time in formalizing their partnership in January 1939. Hewlett advanced some money for his shares, while Packard contributed equipment he had purchased at GE. They set up their "corporate headquarters" in a small rented house in Palo Alto, with Packard and his wife occupying the lower floor and a small storage shed, and Hewlett residing in a shed that barely accommodated a bed and a chair. The garage served as the storage for their business equipment. Initially named "The Engineering Service Company", they soon decided to rename it after themselves, with the order of the names determined by a coin toss.
03The era of conflict
In the early days of Hewlett-Packard, founders Bill Hewlett and David Packard had to be versatile, handling everything from product invention and building to pricing, packaging, shipping, customer relations, bookkeeping, and even cleaning up at the end of the day. Their first year successes led them to expand their business, entering into a contract with ITT to develop a crystal-controlled, fixed frequency oscillator for an electronic aircraft landing system.
However, they soon realized they had taken on more than they could handle and began hiring technicians, machinists, mechanics, and test engineers. This rapid increase in staff strained their cash flow, but they managed to avoid financial ruin. They also expanded their product range, developing a harmonic wave analyzer and a square wave generator. By the end of 1940, Hewlett-Packard had total revenues of $34,396, a staff of five full-time employees, and four products in its catalogs.
04Economic downturn and subsequent remarkable expansion
Post World War II, the demand for electronic instruments was expected to decline slightly, but the market conditions turned out to be harsher than Hewlett or Packard had anticipated. The company's sales halved from $1.6 million in 1945 to $800,000 in 1946, leading to a workforce reduction from 200 to 120. This experience was so traumatic that for the next thirty years, Hewlett-Packard never had a mass layoff again, making it an exception in an industry characterized by cycles of overhiring and brutal cutbacks.
Despite the company barely managing to survive in the immediate post-war years, Bill and Dave decided to expand HP’s product catalog and enter new industries. This decision stretched the company’s employees, uncovering skills they never knew they had. Dave Packard personally designed a new voltmeter, which became a highly successful product for the company for the next five decades. After hitting rock bottom in 1946, HP’s revenues started climbing rapidly. In 1947, HP’s revenues were $851,287, up 50-percent from the year before, and the following year, revenue almost tripled to $2.2 million1.
05The era of the 1960s
Hewlett-Packard (HP) began the 1960s with $50 million in annual revenues, 3,000 employees, and a reputation for innovative products and personnel policies. It was taking its first steps as both a national and international corporation. By the end of the decade, HP had grown into a $330 million global giant with 16,000 employees, earning the title of the most admired company on earth. However, it was also embroiled in the political and generational conflicts taking place just beyond its walls.
In 1961, HP moved its stock listing from NASDAQ to the New York Stock Exchange and entered the Fortune 500 list at number 460 the following year. In 1963, HP ventured into the Japanese market through a joint venture, a significant move as it allowed HP to sell into a market that offered very limited access to non-domestic companies at the time1.
06The decade of the 1970s
In the late 1960s, David Packard, co-founder of Hewlett-Packard (HP), was invited by the U.S. Secretary of Defense to serve as the deputy secretary in the incoming Nixon administration. Accepting this role meant Packard had to donate all income from his HP stocks to charity during his tenure, leaving his partner, Bill Hewlett, to manage HP alone during a challenging period.
Between 1970 and 1981, a time marked by two recessions, inflation, and a gas crisis, nearly 30% of Fortune 500 companies fell off the list. However, HP thrived, growing from a 16,000-employee company with annual sales of $365 million to a $3.6 billion company with nearly 67,000 employees. HP transformed from a primarily American, test and measurement company to a global computer company, achieving this without layoffs and maintaining high employee morale.
07The founder's legacy
Upon retirement, Bill Hewlett and David Packard left John Young to find his footing as the new CEO of Hewlett-Packard. During this time, Bill took a break to cope with the loss of his wife, while David traveled to China for a private visit that would later pave the way for HP's future business dealings with the country. Both men also devoted their time to their respective philanthropic foundations.
The David and Lucile Packard Foundation, established in 1964, was on its way to becoming a $4.7 billion institution, making it the sixth wealthiest of its kind in the U.S. Similarly, the William and Flora Hewlett Foundation, founded in 1966, began addressing issues such as population control, environmental protection, preschool education, and universal health insurance for children. David Packard also funded a $55 million state-of-the-art aquarium in Monterey Bay and a marine research institute. Both men collectively donated over $400 million to Stanford, likely one of the largest educational grants ever made, and funded a new $9.1 million engineering center on campus, named after Professor Terman.
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