The Soapbox

This page written circa 10 April, 1999.

The Elysian Fields Subdivided

The hottest topic in Silicon Valley and the halls of the Fortune 500 is the announcement that HP is to divide (some say like a cell dividing) into two parts. You will no doubt know that this is your humble author's employer, a company regarded by Electrical Engineers as the closest place to Paradise in working earth.

This soapbox fundamentally reproduces a piece of a superb article on this subject, and which appeared in the San Jose Mercury News early in March, entitled "Silicon Valley shift", and written by Michael Malone, editor of Forbes and author of a recent tome on the fate of Apple.

Hewlett- Packard's split and Cisco Systems' plan for a $1 billion South Valley campus mark the start of a new era.

The COINCIDENTAL juxtaposition of announcements by two of Silicon Valley's biggest companies offers an occasion to take stock of where the valley is today---and of the dreams and lifespans of high-tech corporations. Announcements from Hewlett-Packard and Cisco Systems: Separately, they are stunning. Together, they are revealing, for they suggest we are now entering the next chapter of the Silicon Valley epic.

Let's begin with the Hewlett-Packard news, the more shocking of the two. Put simply, HP is being cut in two... well, not exactly in two. What will come out of the split is an immense company (the $40 billion computer and imaging group) and a very big company (the $7 billion test and measurement group). More accurately, the company is being split between its past and its present---between the company Hewlett-Packard set out to be, and the company it became.

The news is disquieting for several reasons. First and foremost, Hewlett-Packard wasn't supposed to ever change. HP isn't only the founding firm of Silicon Valley; it is also the ballast. It is in the valley, but not of it; it is the enduring sanctuary of long careers and stable families in a land of wildcat entrepreneurs, broken marriages and evanescent start-ups. For six decades, HP has been our role model, our conscience and our goal. In that Palo Alto garage, two extraordinary men built perhaps the greatest commercial institution of the 20th century.

And through their innovations---flex time, profit sharing, stock options, management by objective, enlightened globalism, social responsibility, which added up to the so-called "HP Way"---all of our lives are better and richer.

Many Silicon Valleyites asked themselves: What would Bill and Dave think? Implicit in the question is the presumption that Hewlett and Packard would heartily disapprove of the dismemberment of the company that bears their names. That, for sentimental reasons, they would cling to test and measurement instruments, the company's original business. But that romantic image would be at odds with the real men behind the myth. When it came to business, Hewlett and Packard were the most pragmatic of men, perfectly willing to jettison the past if it dragged on the present.

Remember, both men found it absurd to preserve and celebrate the founding garage---that was for the myth-makers. And, almost a decade ago, their celebrated and heroic return to the company was not to glorify HP, but to save it. They took no victory laps, but set about raising holy hell, forcing out deadwood managers and turning the company upside down. That's why, instead of impeding the split of their company, Bill and Dave might well have done it sooner. They knew better than anyone that HP became a schizophrenic company almost from the day it introduced the 2116A minicomputer in 1966.

HP had gone into computers less as a new market thrust than as a way to add value for its core market: scientists and engineers. But the new business quickly took on a life of its own.

By the mid-1970s, with the introduction of the HP 3000 business computer, HP had essentially become two not-very-friendly camps. The trajectory of the company was clear: The instrument group in Palo Alto was filled with happy, anonymous engineers cranking out the next tiny variation of multimeter and mass spectrometer for a stable mature market. Meanwhile, at the computer/calculator group down in Cupertino, the future entrepreneurial giants of the valley---Ed McCracken, Paul Ely, Bill Krause, even Steve Wozniak for a time---were racing about inventing whole new product categories and markets.

By the early 1980s, with HP's entry into the personal computer and printer markets, the battle for pre-eminence was over. The instrument group slowly receded from view, and HP became synonymous with computers and peripherals.

This week's announcement was inevitable, if belated. But the instrument group has played a crucial, often unappreciated, role inside HP: repository of the culture. With a history stretching all the way back to the first 200A audio oscillator in Packard's garage, it is the institutional memory of Hewlett-Packard, and thus of Silicon Valley. It is where the HP Way, the supreme business philosophy of the electronic age, was invented and nurtured.

It is still there, and no doubt it will burn brightly in the new HP instrument company. That's a good thing, because much of what has been good and sane in Silicon Valley over the last four decades has arisen from the penumbra of the HP Way as it manifested itself at Rolm, Tandem, 3Com and even Intel, Apple and Cisco.

Unfortunately, that flame has not always burned so bright at HP's computer operations. There, the cutthroat industry practices, rapid rate of change and the need to sell directly to consumers have led to endless compromises of the HP Way -- to the point that some quarters of the new HP computer company look a lot more like Compaq or Dell than Bill and Dave's creation.

So what? After all, if jettisoning the instrument group makes HP computers more competitive and profitable, who cares what the new company looks like? We all should care.

I've long been convinced that, like the adventurous child who takes risks precisely because Mom is nearby, Silicon Valley has been the greatest of all entrepreneurial dynamos precisely because its Mother HP was just up the road. Hewlett-Packard gave Silicon Valley the baseline of proprietary and responsibility against which we all could rebel. But when HP is starting fights and smoking in the boys room with the rest of Silicon Valley, to whom do we turn?

It is not an idle question. For six decades, Hewlett-Packard has cut the path that Silicon Valley and the rest of the electronics industry has followed. It has taught us how to build a great company, how to remain eternally innovative and how to revitalize a company in old age. That's why the HP split has such far-reaching implications: It will be the template that National Semiconductor, AMD and Intel (and after that, everybody else) will be looking to in a few years. If HP blows this split, Silicon Valley has a lot to be worried about.

In the meantime, there is the matter of names. Lew Platt and HP's top management, computer folks all, want to retain the name Hewlett-Packard Co. for the computer and imaging group. I think that's wrong. The instrument group is the real HP, so let it keep the name.

And the computer group? How about a name from the company's past: Dymec, originally devised by turning over the lower-case ``hp'' logo. It seems appropriate, since the computer and imaging group is HP turned upside down.

Now, Cisco. If Hewlett-Packard is a mature giant dealing with the challenges of old age, Cisco is a hot young success story feeling invincible and ready to make a major move. And if HP is nervously feeling its way forward into unexplored territory, Cisco is boldly (and blindly) charging down a well-worn trail.

That path leads to a giant corporate campus: 400 acres in Coyote Valley, a $1 billion compound designed to hold 20,000 Cisco employees, most of them new to the company. The plan is bold, ambitious... and probably stupid.

The idea of pulling together all the diverse divisions that got scattered across the landscape as a company blasted through nosebleed growth is one that has infected generations of valley companies. Call it the East Coast syndrome: Every time a local firm gets big, it starts thinking less like San Jose and more like Boston, less like a start-up and more like DEC. Apple had similar plans for a campus in South Valley---right before that company went off a cliff. Borland tried a campus too. As did Seagate, and Silicon Graphics... notice a common thread here?

Now it's Cisco's turn to play out the folly. A corporate campus has a natural appeal to top executives: It pulls all the employees together in one place so you can keep an eye on them, it allows for economies of scale by assuring that nobody has a better office or nicer lunch than anybody else, and, best of all, it creates a defendable fortress to help keep out headhunters, vendors and new ideas.

The Cisco announcement is not without benefits. For example, there has been a certain delicious entertainment in watching the new mayor of San Jose show some of the flexibility he is famous for: After all, if a Sunnyvale resident can turn himself into San Jose's mayor, why can't the son of a labor activist become the leading booster for the digital version of the old Anaconda Copper company town? And why shouldn't those contented, pastoral Coyote Valley types get the same high real estate values and traffic gridlock the rest of us enjoy? Finally, why shouldn't Cisco---a company co-founded by a woman who likes to pose nude on horseback---become the new pinup of valley corporate conformity?

But then again, John Chambers is one of our best businessmen. Against almost impossible odds, he has barely made a single strategic misstep in this decade. So if he believes a corporate campus is good for Cisco, who can argue?

His move, along with HP's split, signals the beginning of a new era in Silicon Valley. Whether it will be as magnificent as the one we are completing will only be revealed to us in time. But for now, as you watch the first shovel full of Coyote dirt being turned, remember Malone's Law, first formulated in 1982: Whenever a Silicon Valley company builds a new corporate headquarters, short its stock.

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