After Palantir and Tesla: That's why HP is fleeing Silicon Valley

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On New Year's morning in 1939, William Hewlett and David Packard were sitting in a wooden shed flipping a coin.

The two Americans let chance decide what their new company should be called: Hewlett-Packard or Packard-Hewlett?

The winner is Packard, but he decides to name his friend in the company name and not himself first.

It is the moment when the abbreviation HP, which is known all over the world today, was born.

The shed, four by six meters, is in the town of Palo Alto, at 367 Addison Avenue. It stands next to a high hedge and is easy to miss today.

There is probably no other garage in California as important as this one: it is said that this is where Silicon Valley was born.

HP is considered the company that started it all.

Hewlett and Packard attracted more founders and helped transform the valley into a global tech hub.

Now HP is moving away.

The company announced a few days ago that its headquarters will be relocated to Houston, Texas.

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"Houston," HP wrote to the US Securities and Exchange Commission, "is an attractive market with lots of talent." PR speech that is supposed to cover up the real reasons for the move: lower taxes, less regulation, cheaper rents.

Silicon Valley, once the place of longing for all inventors, is experiencing an exodus.

The more promising half is moving away

The company Palantir, which offers software for the American military, relocated its headquarters to Denver, Colorado in the summer.

Elon Musk threatens to move to the Texas city of Austin.

His company Tesla is already building a new car factory there.

So many tech companies have settled in Austin's hilly west that the area is nicknamed "Silicon Hills".

Experts estimate that more than 15,000 companies have left California in the past ten years.

But probably no loss should hurt the state as much as HP does.

Specifically, it's about Hewlett Packard Enterprise, or HPE for short - a company that was founded in 2015 when Hewlett-Packard broke in two.

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HPE focuses on the topics of tomorrow, for example developing clouds and supercomputers for business customers.

The sister company HP Inc., which remains in Palo Alto, continues the business with PCs and printers.

So, of all things, it pulls away that half of the pioneer that is considered to be more promising.

HP was an icon of Silicon Valley, a role model for generations of founders.

"Hewlett and Packard," says Bret Waters of Stanford University, "created a corporate culture that was radical for its time." In the 1940s and 1950s, industrial groups on the East Coast - at that time the heart of the American economy - were strict hierarchical structures.

Their bosses were considered as aloof as Andrew Carnegie, the steel king, and John Rockefeller, the oil tycoon.

The managers wore white shirts, the workers wore overalls.

Böblingen as the gateway to Western Europe

At HP everything was different.

"The mood in California was more relaxed," says Waters, whose college is just a few minutes' walk from the old HP garage on Addison Avenue.

"In addition, Hewlett and Packard came from an academic environment in which unconventional thinking and collegial relationships were valued." The founders, says Waters, met their employees on an equal footing.

In fact, at HP they were approached Bill and Dave, something that was rare in the Pennsylvania and Michigan factories.

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The first product Bill and Dave brought out was a tone generator.

They called it the HP200A - in the hope that the high number would give the impression that they had already built a number of such devices.

In 1966, the two men developed their first computer, the HP 2100. Six years later, the HP-35 followed, the first pocket calculator that could solve complicated tasks.

But there is probably nothing that people associate with the company as much as Drucker.

The first, the Model 2767A, came out in 1970.

Its price was $ 11,500, which is nearly $ 80,000 in 2020.

Today HP - more precisely: HP Inc. - is in a close race with Canon from Japan when it comes to printers.

The Americans are currently in the lead, their global market share is almost 27 percent.

HP grew rapidly after it was founded.

In 1950 the company had around 200 employees, in 1960 it had 3500. International business began at this time.

HP opened the first factory outside of California - in Germany.

Böblingen, located in Baden-Württemberg, became the gateway to Western Europe for Hewlett and Packard.

Initially, tone generators were built there, and later printers and PCs.

Solve a human problem

The conditions in the early years were probably adventurous.

Workers, one reads in the company archives, soldered circuit boards together in frying pans.

But first they had to learn the language of their parent company.

HP sent an army of English teachers to the factory.

That seemed easier to the company than translating the building instructions into German.

In 1970 the number of employees worldwide rose to almost 160,000, and in autumn 2015 to more than 300,000.

But HP got a problem.

The most important products were still printers and PCs - at a time when people were doing more and more tasks with their smartphones.

The company, the managers decided, had to be split up.

A part that carries on the old business, so to speak, keeps the legend of Hewlett and Packard alive.

And one who cares about the technologies of the future.

This is how HP Inc. and HPE came into being.

But things are not going that well at HPE.

The business with servers and clouds is tough.

Shortly after the split, sales were over $ 12 billion.

Since then it has sunk significantly.

In the fourth quarter of 2020, $ 7.2 billion was reached.

The company has to save - and moving to the state of Texas with its low taxes should help.

Supercomputers are a bright spot.

HPE is the global number one there, most recently the market share was 37 percent.

One of these devices has been in use at the University of Stuttgart since the beginning of the year.

The “Hawk”, in German “Falke”, cost 44 million euros and is one of the fastest computers in Germany.

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It can do 20 quadrillion calculations per second and store 1.4 petabytes of data - about 250,000 times as much as a normal PC.

This performance should enable extremely complex simulations.

Scientists and engineers use the “Hawk” to calculate what the perfect airplane wing looks like, for example.

Or how wind turbines have to be built in order to generate as much electricity and as little noise as possible.

But the most difficult task for the HPE supercomputer is a different one: It is supposed to calculate the spread of the coronavirus.

This is considered particularly challenging because human behavior is hardly predictable.

So, 81 years after William Hewlett and David Packard tossed the coin in their Addison Avenue garage, their legacy is helping solve one of humanity's greatest problems.