История развития компьютеров (Silicon Valley, its history the best companies)

История развития компьютеров (Silicon Valley, its history the best companies)

Student’s report

On Economics

by Constantine Nikitin

Contents

Silicon Valley - what is that? 3

Stanford University 3

Hewlett Packard - the garage myth 5

HP: Foundation and first years 5

The rise of HP up to the present 6

The HP Way - an example of corporate culture for a whole industry 7

HP today. 7

The rise of Silicon Valley 10

Invention of the transistor 10

Shockley Semiconductor 11

Importance of military funding 12

Intel Corp. 13

Foundation in 1968 13

First products - Moore's Law 13

"Ted" Hoff's first microprocessor 14

Cooperation with IBM in the 1980s 15

Intel today 16

The emergence of the PC industry 17

Altair - the first PC 18

The first computer shops 19

Homebrew Computer Club 19

The Apple Story 19

"Woz" and Jobs - the two "Steves" 19

The first Apple 20

Building up the company 21

Apple II - starting the personal computer boom 22

Turbulences in the early 1980s 23

The Lisa project 23

The Macintosh revolution 24

John Sculley and Steve Jobs 25

Apple today. 27

Silicon Valley - what is that?

This question may have occurred to many people's minds when they came

across the term Silicon Valley. What hides behind it is mostly unknown to

them, although the revolutionary inventions and developments, which have

been made in this «Valley», affect everyone's daily life, and it is hard to

imagine our modern civilization without them. Silicon Valley is the

heartland of the microelectronics industry that is based on semiconductors.

Geographically, it is the northern part of the Santa Clara County, an area

stretching from the south end of the San Francisco Bay Area to San Jose,

limited by the Santa Cruz Mountains in the west and the northern part of

the Diablo Range in the east. It covers a thirty- by ten-mile strip

extending from Menlo Park and Palo Alto, through Los Altos, Mountain View,

Sunnyvale, Cupertino and Santa Clara, down to San Jose.)

The name Silicon Valley was coined in 1971 by Don C. Hoefler, editor of the

Microelectronics News, when he used this term in his magazine as the title

for a series of articles about the semiconductor industry in Santa Clara

County. "Silicon" was chosen because it is the material from which

semiconductor chips are made, which is "the fundamental product of the

local high-technology industries.")

Silicon Valley saw the "development of the integrated circuit, the

microprocessor, the personal computer and the video game") and has spawned

a lot of high-tech products such as pocket calculators, cordless

telephones, lasers or digital watches.

Looking at our high-tech society in which the PC has become indispensable -

both in business and at home, replacing the good old typewriter by word

processing - the crucial role of Silicon Valley as the birthplace of the

microelectronics and then the PC revolution becomes even more evident.

Silicon Valley is also seen as a place where many entrepreneurs backed by

venture capital have made the American Dream come true as "Overnight

Millionaires."

This makes Silicon Valley a philosophy saying that everything which seems

impossible is feasible and that improvements in our society can take place

daily, as Thomas McEnery, the mayor of San Jose, the capital of the Santa

Clara County, puts it.)

Thomas Mahon calls it the "economic and cultural frontier where successful

entrepreneurship and venture capitalism, innovative work rules and open

management styles provide the background" for the perhaps "most profound

[...] inquiry ever into the nature o f intelligence" which might, together

with "bioengineering and 'artificially intelligent' software, [...] affect

our very evolution.")

On the following pages I would like to convey the image of Silicon Valley

as the nucleus of modern computing, presenting the most important events,

which comprise the developments of the three major companies Hewlett-

Packard, Intel and Apple.

Stanford University

The story of the Silicon Valley starts with Stanford University in Palo

Alto, which has been of fundamental importance in the rise of the

electronics industry in Santa Clara County.

In the 19th century, Spanish settlers, who have been the first white

visitors to California, founded civilian communities and gave them Spanish

names such as San Francisco, Santa Clara or San Jose. They liked the

Mediterranean climate in the Santa Clara Valley, which was very hospitable.

This area came to be used by farmers and ranchers cultivating orchards, for

it provided "some of the world's finest farming soil.")

In 1887, Leland Stanford, a wealthy railroad magnate who owned a large part

of the Pacific Railroad, decided to dedicate a university to his son's

memory who had died due to a severe disease shortly before he intended to

go to a university.

Leland Stanford and his wife built Leland Stanford Jr. University on 8,800

acres of farmland in Palo Alto and also donated 20 million dollars to it.

The university opened in 1891 and "would in time become one of the world's

great academic institutions.")

In 1912, Lee De Forest, who had invented the first vacuum tube, the three-

electrode audion, discovered the amplifying effect of his audion while

working in a Federal Telegraph laboratory in Palo Alto. This was the

beginning of the Electronics Age, and "amateur radio became an obsession")

at Stanford University.

Frederick Terman, who was the progenitor of the initial Silicon Valley

boom, changed the state of this university fundamentally. Today he is also

known as the "godfather of Silicon Valley.") Terman was born in 1900, and

as the son of a Stanford professor (who developed the Stanford-Binet IQ

tests) he had grown up on the campus. After his graduation from Stanford

University he decided to go East to the Massachusetts Institute of

Technology (MIT), which was the leading university in technology then. He

studied under Vannevar Bush, who was one of America's leading scientists,

and was offered a teaching position at MIT after receiving his doctorate in

1924.

He returned to Palo Alto to visit his family before he intended to start at

MIT, but he was caught by a severe case of tuberculosis, which forced him

to spend one year in bed. This made him finally to decide to stay in Palo

Alto and teach at Stanford University because of the better climate in

California.)

Terman became head of the department of engineering by 1937 and established

a stronger cooperation between Stanford and the surrounding electronics

industry to stop the brain drain caused by many students who went to the

East after graduation, as they did not find a job in California then.)

The Varian brothers are an example of such cooperation between university

and industry. After graduation they founded a company upon a product they

had developed at the Stanford laboratories. Their company, Varian

Associates, was settled 25 miles from the university and specialized on

radar technology.

After World War II, the Stanford Research Institute (SRI) was founded. Its

aim was to provide the industry with more skilled students and to increase

the number of companies in Santa Clara County.

Terman wanted companies to settle next to the university. In 1951, he

founded the first high-technology industrial park, the Stanford Research

Park, "where business, academic and government interests could come

together in a synergistic vision of the future.") Portions of this land

would be leased to companies, because the "original Stanford family land

gift forbade the sale of any of its 8,800 acres.") These companies were

offered close contacts to the SRI and could lease land for 99 years at a

fixed price, which they had to pay in advance. The first firm to settle in

this park was Varian Associates leasing land for $4,000 an acre, which was

a good deal as there was no inflation clause in the agreement making this

site today worth several hundred thousand dollars.

More and more firms - among them Hewlett-Packard as one of the first

residents - settled their Research and Development (R&D) departments in

this park, and they were to become the "core of the early explosive growth

of Silicon Valley.") Today, there are m ore than 90 firms employing over

25,000 people.

During the Korean War the US government placed Stanford with a great deal

of their projects, which made more, and more electronics companies (among

them IBM and Lockheed) open R&D departments in Santa Clara County.

Due to his prepaid leasing program Terman received more than $18 million

and, moreover, many companies endowed the university with gifts, which

Terman used to hire qualified professors from all over the USA. Thus, he

had created a mechanism which increased the settlement of the electronics

industry.

The successful Stanford Research Park has served as a worldwide model for a

lot of other high-technology parks.)

Hewlett Packard - the garage myth

Hewlett-Packard was one of the first companies to be founded in the Silicon

Valley and has today become the largest one to be seated there. Its story

is typical for this Valley and has had a great impact on many firms founded

later on.

HP: Foundation and first years

Bill Hewlett and David Packard met at Stanford University in 1934. Bill

Hewlett was the "son of the dean of the Stanford Medical School, while Dave

Packard had come to Stanford from Pueblo, Colorado,") and was an

enthusiastic radio ham.

They both were very interested in electronic engineering and spent a lot of

their free time experimenting in Terman's lab who supported them. After

graduation in 1934, Packard went to Schenectady, New York, where he worked

for General Electric (GE), while Hewlett went on studying at the MIT. In

1938, Terman called them back to Stanford where they would earn electrical

engineering degrees after their fifth year of study.

During this year they decided to work on a project professor Terman had

suggested to them in his course at university: In the garage next to their

rented apartment in Palo Alto they developed a variable frequency

oscillator, which was much better than existing products but cost only a

"fraction of the existing price ($55 instead of $500).") Terman was very

convinced by this product, so he encouraged them to try to sell it. He

himself loaned them $538 for the production and arranged an additional loan

from a bank in Palo Alto.

The new firm Hewlett-Packard (HP) was founded in 1939, and its first big

sale were eight audio oscillators to Walt Disney Studios, which used them

for the soundtrack of "Fantasia.")

From now on, they concentrated on highly qualified products and innovative

electronic instruments for engineers and scientists. This main product line

has been kept till today.

By 1942, five years after its foundation, HP already had 60 employees and

reached annual sales of about $1 million. So it became necessary to

construct the first HP-owned building in Palo Alto. The two Stanford

graduates had successfully built up their own company which had been

founded upon an idea during their studies and was to rise from a "garage-

headquartered firm") to a leading company in the world. This phenomenon was

typical for Silicon Valley and would be imitated by many following

companies such as Apple.

The rise of HP up to the present

During World War II the demand for electronic products brought HP many

orders, and the company could grow constantly in the subsequent years. HP

continued to invent new devices such as the high-speed frequency counter in

1951, which greatly reduced the time required (from 10 minutes to one or

two seconds only) to accurately measure high frequencies. Radio stations

used it, for example.

The net revenue went up to $5.5 million in 1951 and the HP workforce was at

215 employees. So, in 1957, the stocks were offered to the public for the

first time. The additional capital due to the stock offering was invested

to acquire other companies and t o expand globally such as into the

European market. As a consequence, in 1959, the first manufacturing plant

outside Palo Alto was built in Bцblingen, West Germany.

HP entered the Fortune magazine's list of the top 500 U.S. companies in

1962, and established the HP Laboratories in 1966, which were the

"company's central research facility") and became one of the world's

leading electronic research centers.

In the 1970s, the company's product line was shifted from "electronic

instruments to include computers"), and the world's first scientific hand-

held calculator (HP-35) was developed in 1972, making the "engineer's slide

rule obsolete.")

In the 1980s, HP introduced its LaserJet printer (1985), which became the

company's successful single product ever, and moved into the top 50 on

Fortune 500 listing with net revenues of more than $10 billion (1988).)

Today, HP has total orders of $16.7 billion and employs more than 92,000

people in the whole world.) Annually, The company spends over 10 percent of

its net revenues in R&D. These investments are fundamental to keep up with

the "state-of-the-art" technology, which uses the most modern inventions.

New products have always played a key role in HP's growth, therefore more

than half of 1992's orders were for products introduced in the past two

years.) HP's more than 18,000 products include "computers and peripheral

products, test and measurement instruments and computerized test systems,

networking products, electronic components, hand-held calculators, medical

electronic equipment, and instruments and systems for chemical analysis.")

Bill Hewlett and Dave Packard today rank with America's richest men ($1.7

and $0.85 billion) and are widely respected, especially in Silicon Valley

where they are viewed as the two "most successful entrepreneurs in

America.") They have spent millions of t heir profits for social welfare

and have established the Hewlett-Foundation.)

Hewlett and Packard have set a pattern of an outstanding company against

which every new high-technology firm "must be measured.")

The HP Way - an example of corporate culture for a whole industry

From the beginning the two founders have developed a management style,

which had never occurred in a large company before. They coined a new type

of corporate culture, which was to be called "the HP way."

HP always renounced the "hire and fire" mentality, which meant to employ

many workers for a single big order and to dismiss them afterwards.

Instead, the company offered its employees "almost perfect job security.")

Even in 1974, when the U.S. economy was in a profound crisis and many

people were unemployed, HP avoided layoffs by a four-day workweek, which

was a unique measure in corporate America.

The two founders trusted in the "individual's own motivation to work") and

treated their employees as family members; hence the custom to call each

other by the first name - even the two chiefs were only known as Bill and

Dave.

The HP workers were participated in the company with stock options and were

even paid additional premiums when HP was successful - today known as

profit sharing. These measures served to identify the employees with their

work and to encourage them.

Moreover, the HP way included extensive employment benefits such as

scholarships for the employee's children.

At the end of the 1950s Bill and Dave decided to write down the company's

objectives, which were to serve as guidelines for "all decision-making by

HP people,") since the company had grown ever larger. With some changes,

those objectives are still valid today. They cover as follows: "Profit,

Customers, Fields of Interest, Growth, Our People, Management, and

Citizenship.") And these objectives are to be achieved through teamwork.

HP's strategies nowadays comprise mainly the "Management by Objectives",

"Management by Wandering around" meaning informal communication within the

company, and "Total Quality Control" which aims at producing highly

qualified products.)

The HP way is seen as model for corporate culture in many countries.

The roots of many subsequent companies are located in HP, e.g. Steve

Wozniak, who worked at HP and later co-founded Apple. This has led to the

establishment of a new corporate culture in Silicon Valley and many firms

have tried to imitate the HP way and ad opted measures such as stock

options, innovative work rules, teamwork, and profit sharing.

HP today.

Business Summary PALO ALTO, Calif., Nov. 13, 2000 -- Hewlett-Packard

Company (NYSE: HWP) today reported 17% revenue growth (20% excluding

currency effects) in its fourth fiscal quarter ended Oct. 31, 2000.

Excluding extraordinary other income and restructuring expenses, diluted

earnings per share (EPS) was up 14% from the year-ago quarter.

During the quarter, HP completed its previously announced 2-for-1 split of

its common stock in the form of a stock dividend. Share and per-share

amounts have been adjusted to reflect this split.

Net revenue was $13.3 billion, compared with $11.4 billion in last year's

fourth quarter. EPS for the quarter was 41 cents on a diluted basis,(1)

excluding investment and divestiture gains and losses, the effects of stock

appreciation rights and balance sheet translation, and restructuring

expenses. Including these items, diluted EPS on a reported basis was 45

cents per share on approximately 2.05 billion shares of common stock and

equivalents outstanding. This compares with diluted EPS of 36 cents in the

same period last year(2).

"We are pleased that revenue growth is accelerating, but very disappointed

that we missed our EPS growth target this quarter due to the confluence of

a number of issues that we now understand and are urgently addressing. I

accept full responsibility for the shortfall," said Carly Fiorina, HP

chairman, president and chief executive officer.

"Issues that reduced profitability included margin pressures, adverse

currency effects, higher-than-expected expenses, and business mix. The good

news is that our business is healthy, demand is strong, and we are making

good progress against our strategic objectives as we continue the hard work

of reinventing hp. We are determined to succeed and are not backing away

from our growth targets," Fiorina said.

HP also announced it has terminated discussions with PricewaterhouseCoopers

(PwC) regarding the potential acquisition of its consulting business.

Fiorina said, "We are disappointed that we have not been able to reach a

mutually acceptable agreement to acquire PwC's consulting business. This is

a high-quality operation, and we believe the strategic logic underlying

this acquisition is compelling. However, given the current market

environment, we are no longer confident that we can satisfy our value

creation and employee retention objectives -- and I am unwilling to subject

the HP organization to the continuing distraction of pursuing this

acquisition any further. We remain committed to aggressively growing our

consulting capabilities, organically and possibly by acquisition, and are

open to other business arrangements to achieve our goals."

Business Summary

Net revenue in the United States was $6.0 billion, an increase of 13% from

the year-ago quarter. Revenue from outside the U.S. rose 20% (26% in local

currency) to $7.3 billion. In Europe, revenue was $4.5 billion, an increase

of 15% (27% in local currency). In Asia Pacific, revenue was $1.9 billion,

an increase of 36% (34% in local currency). In Latin America, revenue

increased 11% to $0.6 billion.

Imaging and Printing Systems

The imaging and printing systems segment -- laser and inkjet printing, and

imaging devices and associated supplies -- grew 6% in revenue year over

year (9% in local currency) against a very strong quarter last year.

Internet printing and a migration to color are driving strategy and growth.

Strong sales of supplies, scanners, all-in-one (AiO) products, and consumer

imaging devices, as well as overall strength in Europe and Asia, partially

offset softness in the U.S. business printing market and continuing price

erosion in inkjet printers.

Nearly 12 million printing and scanning devices were shipped during the

quarter. HP's color LaserJet market share continues to grow and new

products began shipping in October. Imaging revenues grew 31% over the year-

ago period, driven by strong performances in all product lines: AiOs up

31%, scanners up 12% and digital cameras and printers up 137%. AiO units

were up 53% and PhotoSmart printer units were up 208%. Supplies revenues

grew 15% against a strong quarter last year.

Operating margin was 13.4%, up from 13.2% last year.

Computing Systems

The computing systems segment -- a broad range of Internet infrastructure

systems and solutions for businesses and consumers, including workstations,

desktops, notebooks, mobile devices, UNIX(R) and PC servers, storage and

software solutions -- grew 29% in revenue year over year (32% in local

currency) with strong performances across all product categories.

UNIX server revenues rose 23% year over year, with orders up 43%, driven by

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