Quinn: For most of the SV150’s 30 years, HP dominated

Over the nearly three decade history of the SV150, this newspaper’s annual report card on the Silicon Valley tech industry, no single company has better reflected the trends buffeting the other companies on the list than Hewlett-Packard.

When the paper first published the ranking in 1986, HP was in the midst of shifting its focus to the computers that would play a central role for many of the companies on the list.

HP rode the PC revolution of the 1990s, as did the rest of the SV150. It got caught up in the dot-com boom and bust — and so did the SV150. And in recent years it has been paying closer attention to Wall Street — and, you guessed it, so have a lot of other companies on the list.

And now, HP is in the process of reinventing itself again, splitting in half in an effort to become much smaller but also more nimble and focused — like a lot of companies on the SV150.

HP’s split will mark the end of an era for the SV150 as well. The company has either ranked No. 1 or No. 2 on the list for every year of its existence. Not next year. The two new HP entities will appear below Apple, Google and Intel to battle with Cisco System for fourth and fifth places.

In many ways, the company’s very malleability is a metaphor for Silicon Valley over the past 30 years.

“We talk about Silicon Valley as it was when Hewlett-Packard was founded, but what it has meant has shifted in every decade,” said Leslie Berlin, a historian with the Silicon Valley Archives at Stanford University. “The ability to change itself is essential.”

HP’s founding story is the centerpiece of the Silicon Valley myth — two friends setting up shop in a Palo Alto garage with support from their Stanford professor.

Its vaunted HP Labs were imitated by other firms, most prominently Google. And it created the unique tech industry workplace, with stock options, flextime, profit-sharing and Friday afternoon bashes. Most other firms on the SV150 have copied something from HP’s informal, decentralized management style known as the HP Way.

“The spirit I see at Google right now, the energy, the camaraderie, is the same as it was at HP for so long,” said John Toppel, a professor of management at Santa Clara University who worked at HP for 31 years until 2004. “Other companies have taken the core of the HP Way and have improved it.”

With the launch of our annual ranking on April 21, 1986, HP had already begun one of its greatest metamorphoses, shifting from a focus on selling test and measurement instruments to offering computers and peripheral devices. By the end of the 1980s, two-thirds of its revenue came from that sector.

By the 1996 SV 150, HP’s $31.5 billion in sales was an astonishing 22 percent of the total generated by all the firms in the SV150.

By the late 1990s, HP, like many companies in the Valley, worried it was missing out on the dot-com boom. It was a period much like today, with younger, more focused firms challenging larger, older and slower-moving companies. HP’s answer was to focus on its computer and printer businesses, so in 1999, it spun off Agilent Technologies, its test and measurement division.

HP also hatched a strategy, which some say reflected the growing influence of Wall Street in Silicon Valley, of growing by acquiring companies, cutting costs and then dominating specific markets, another fad that coursed through the SV150.

In some ways, that plan worked, although the changes have been painful to HP, where there have been huge rounds of layoffs. By 2006, HP beat IBM to become the world’s largest tech firm in terms of revenue. It also supplanted Dell as the world’s largest PC maker.

By the 2008 SV150, the computers and peripherals sector ranked first in terms of sales, net income, market value and sales per employee, mostly thanks to HP.

And in the 2010 SV150, HP made 2.5 times Apple’s revenue.

But HP’s dominance has since dwindled with the rise of mobile phones and the cloud. In the 2012 SV150, HP lost its No. 1 spot as king of sales to Apple — a company modeled by Steve Jobs on HP itself.

That moment illustrated another tech industry truth: No company stays dominant for long.

The reversal was stark. Apple that year made $1 out of every $3 of profit amassed by the entire SV150; just three years earlier, HP had done the same thing.

For this year’s SV150, HP still holds the No. 2 position in sales, after Apple. But it tops some notorious lists. HP is No. 1 for the biggest dollar drop in sales at $1.95 billion. And like other tech firms, it has shed jobs, reporting the largest decline of employees at 15,500.

Some say HP needs to move back to its roots by focusing on innovation, something its current chief executive, Meg Whitman, has touted. The company is working on a project known as “The Machine,” which could replace data centers.

“HP should be rethinking what people do with their professional lives,” said Michael Malone, author of “Bill & Dave: How Hewlett and Packard Built the World’s Greatest Company.” “HP could win again.”

Now the firm is pursuing another Silicon Valley theme — starting over. As of later this year, HP will split in two, HP Enterprise and HP Inc., each with sales of roughly $50 billion. It’s a strategy that other firms, such as eBay and Symantec, are pursuing as well.

It’s a big risk. But in doing so, HP reflects Silicon Valley again. It has to keep moving or face being overtaken by nimble, smaller competitors who can upend business models overnight.

Contact Michelle Quinn at 510-394-4196 and mquinn@mercurynews.com. Follow her at Twitter.com/michellequinn.