The Second Watershed

The HP 35 Handheld Calculator rescued HP from the 1970/71 recession in dramatic fashion. Backed by CEO Hewlett when fabled market research group SRI voted no, the product fueled enormous growth for HP from 1972 through 1974. Then Texas Instruments, using a variety of tough competitive tactics, gutted the Handheld market. Elsewhere for HP, from 1974 through 1976, Instrument Group growth slowed to 14% CAGR, and Computers, without Peripherals, were even less, plummeting to 13% per year CAGR. Peripherals saved the day – new printers, disc drives, and data terminals added orders of $80 Million and revenue of $50 Million. Net profits were an even sorrier saga – the Instrument Groups grew a cumulative 21% over three years, but Computers, even with Peripherals, were up only 7% overall in the same three years. Clearly, more was wrong than just the TI competition – at the height of the digital computing revolution, this was terrible earnings performance.

Hewlett, the more risk-taking of the two partners, had three new answers being readied – the classic tech touchdown approach. One, an impressive calculator-watch, was codenamed Cricket and awarded the vaunted HP-01 model number. Second was an incredibly sophisticated surveying tool. Most important, Ely’s Cupertino team was finishing Amigo, the most ambitious computer program in HP history, dwarfing the abortive Omega five years earlier. Featuring Silicon-on-Sapphire (SOS) technology that no other company had yet mastered, it augured to be the flagship personal computer that the industry eagerly awaited. Alas, all three – highly visible – failed. Hewlett had fingerprints all over the first two, and he had confidently supported Ely with Amigo as the bold replacement for the scuttled Omega. The loser in all of this was Hewlett. His own confidence wavered, and tragically the love of his life – Flora – succumbed to cancer early in 1977 as well.

A year later, he retired, handing the company to the first non-founding CEO, John Young. The question on everyone's lips then was "now what"?
The questions thirty years later are "what really happened, and why" and "what were the options, compared to competitors?" What do you know about this era at HP?