Harvard Business School

9-699-011
Rev. November 22 1999

Hewlett Packard's warned Decision

From Jim Davis' Fort Collins, Colorado office, the serenity of the nearby Rocky o!ntains "as in shar# relief to the decisions that Davis "as faced "ith makin$ in the s!mmer of 199%. Davis "as the $eneral mana$er of the &e"lett'(ackard )&(* +,'-. #ro$ram office for enter#rise systems $ro!# )/01* )see Exhibits 1 and 2*. +t "as his res#onsibility to recommend a co$ent and #ra$matic technolo$y strate$y for mission'critical enter#rise com#!ter systems, ind!din$ both #ro#rietary and (C'based "orkstations and servers. /01, "hich "as formed in 1992 in res#onse to increasin$ com#etitive #ress!res, "as res#onsible for #rod!cin$ scaleable, hi$h'#erformance com#!tin$ systems that made !# the backbone of cor#orate information net"orks, incl!din$ #o"erf!l net"ork servers and mainframe stora$e sol!tions /01 systems ran the com#le3, mission'critical a##lications that their c!stomers de#ended on to r!n their b!sinesses and to 4eb'enable their information technolo$y infrastr!ct!res for the f!t!re. 5he central iss!e for Davis "as to recommend "hether &( sho!ld contin!e to allocate a lar$e share of its reso!rces to e3tendin$ the ca#ability of its pr()prietary 6N+7'based (erformance ,rchitect!re )(,* based on a proprietary HP R+0C micro#rocessor )detailed later* or "hether &( sho!ld dramatically shift reso!rces to develo# "orkstations and servers based on both a ne" chi#, code named erced, and its corres#ondin$ ne" architect!re called +,'-. )+ntel ,rchitect!re -.'bit data transfer*. &( had co'develo#ed erced and +,'-. "ith +ntel, and it had already committed vast reso!rces to the develo#ment of the ne" chi#. 0enior mana$ement at &( had committed these reso!rces beca!se they believed that erced "o!ld be a $ro"th en$ine for its f!t!re $enerations of enter#rise com#!tin$ #rod!cts. Davis also believed in +,'-.. &e believed that +,'-. "o!ld event!ally tri!m#h. 5he #roblem, ho"ever, "as kno"in$ "hen and ho" &( sho!ld chan$e from its #ro#rietary (, to +,'-.. Com#o!ndin$ the com#le3ity of this recommendation "as the fact that +ntel had recently anno!nced that the release of the erced "as $oin$ to be delayed by at 8east si3 months. 5his 9as only one year before c:inley, the second'$eneration +,'-. micro#rocessor, had been sched!led for its release. e:inley, as a second'$eneration chi#, #romised to have si$nificant #erformance

Research Associate Matthew C. Verh'nden prepared this case under the supervision ofProjessor Clayton M. Christensen as the asis for class discussw!n rather than to illustrate either ective or inective handh.n" of an ad#inistrative situation.

Co#yri$ht ; 1999 by the (resident and Fello"s of &arvard Colle$e. 5o order co#ies or re<!est #ermission to re#rod!ce materials, call 1'%==>.>'2-%>, "rite &arvard ?!siness 0chool (!blishin$, ?oston, , =21-@, or $o to htt#A8 8""".hbs#.harvard.ed!. No #art of thi0 #!blication may be re#rod!ced, stored in a retrieval system, !sed in a s#readsheet, or transmitted in any form or by any means'electronic, mechanical, #hotoco#yin$, recordin$ or other"ise'"itho!t the #ermission of &arvard ?!siness 0chool.
17

699-011

Hewlett Packard's Merced Decision

advanta$es over erced. Did it make sense for &( to develo# a ne" enter#rise com#!ter #latform based on erced "hen c:inley "as aro!nd the cornerB1 Cne ind!stry analyst <!i##ed, +n fact, some +,'-. system makers are <!ietly sayin$ D4ait for c:inley,D referrin$ to a second +,''-. #rocessor d!e to shi# in 2==1. c:inley, the story $oes, "ill be t"ice as fast as erced in the same +C #rocess, sho"in$ off the tr!e #erformance charaderistics of the f,D-. instr!ction set,2 4hile erced had been delayed, &('s com#etitors "ere not standin$ still. 0!n icrosystems )0!n* had already la!nched a cam#ai$n to convert second'tier 6N+7'based "orkstation and server s!##liers to their #ro#rietary o#eratin$ system. 0!n, #artic!larly thro!$h its C/C 0cott cNealy, "as #!blicly <!estionin$ &('s commitment to E ased machme. ,nd there "ere early si$ns that 0!n's cam#ai$n "as "orkin$A it "as $ainin$ share steadily in the market for R+0C86ni3 com#!ters. ,s Davis $aFed at the mo!ntain vista, the com#le3ity of this increasin$ly chan$in$ market and technolo$ies str!ck him as ironic. From this com#le3ity, he "o!ld need to define a #lan that "as acce#table to &( senior mana$ement )"hich "as feelin$ increasin$ #ress!re from markets to deliver near'term im#rovement in earnin$s $ro"th*, and "o!ld stren$then &('s lon$'term #osition in the hi$h'end market'a b!siness that analysts estimated co!ld $enerate G12 billion in reven!es in 1999.

Company Background
&(, an international man!fact!rer of instr!mentation, healthcare, com#!ter and comm!nication #rod!cts, "as fo!nded in 19@9 by ?in &e"lett and David (ackard in a one'car $ara$e in a re$ion in Northern California no" called 0ilicon Halley. From its h!mble be$innin$s as a starfD!# "ith an initial investment of only G>@%, &( $re" to more than G.@% in sales and G@.1% in net #rofits in 1992 )see Exhibits 3 and .*. Reco$niFed as an ind!stry leader, &(, over its history, ac<!ired a re#!tation for its innovative #rod!cts and mana$ement c!lt!re, "ith a #artic!lar ability to reinvent itself as markets chan$ed and evolved. +n 19@%, one year before the #artnershi# "as formaliFed, &e"lett and (ackard had develo#ed an a!dio oscillator, based on &e"lett's research "ork at 0tanford 6niversity. 4alt Disney "as their first maIor c!stomer, #!rchasin$ ei$ht a!dio oscillators for its film, $antasia. &e"lett and (ackard then b!ilt !#on this technolo$y a #rod!ct line of oscillosco#es and related e<!i#ment that formed the fo!ndation of their com#any. From its ince#tion, &( had created a tradition of b!ildin$ testin$ and meas!rement instr!ments !sed by en$ineers and scientists. fn 19--, desi$ned as an e3tension of some of the com#any's test and meas!rement instr!ments, &(s first com#!ter'the &( 211-,'"as b!ilt. 5"o years later, &( #rod!ced the "orld's first deskto# scientific calc!lator'the &( 91==,. 5he 91C=, "as the forer!nner of &('s "orkstation b!siness, and "ith its la!nch, &( had established itself as a leader in com#!ter hard"are. +n 19-9, &( marketed its first time'share o#eratin$ system on a minicom#!ter.

1 +t "as !nclear "hether and to "hat e3tent +ntel's delay in develo#in$ the erced "o!ld im#act its c:inley introd!ction sched!le. 4ithin +ntel, the develo#ment of these t"o chi#s had been assi$ned to different #roIect

teams. 5o some e3tent, ho"ever, the c:inley team "as likely to attem#t to levera$e !#on the learnin$ from the #redecessor erced #roIect. 2 'r4hat's 4ron$ "ith ercedB,D o urces% ,!$!st @, 199%.

1%

Hewlett Packard's Merced Decision

69911

+n the 192=s, &( contin!ed its tradition of $ro"th and innovation "ith the introd!ction of the first hand'held calc!lator and an e3#ansion of its minicom#!ter b!siness. +n 1922, &( #ioneered the era of #ersonal com#!tin$ "ith the first scientific hand'held calc!lator the &( @>'"hich made the slide r!le obsolete. ,lso in 1922, &( e3#anded into b!siness com#!tin$ "ith the la!nch of the &( @=== minicom#!ter. Cne year later, &('s small $eneral com#!ter "as the ind!stry's first commercial distrib!ted data #rocessin$ system. 5he 19%=> marked a contin!ed e3#ansion for &( in the com#!ter ind!stry "ith a f!ll ran$e of #rod!cts from deskto# machines to #o"erf!l minicom#!ters. +n 19%=, &( introd!ced its first #ersonal com#!ter. +n late 19%2, the com#any introd!ced the &( %=== technical com#!ter "ith @2 bit Ds!#erchi#D technolo$y'the first Ddeskto# mainframeD'as #o"erf!l as room'siFed com#!ters of the 19-=>. +n 19%-, &( introd!ced a broad ne" family of com#!ter systems based on innovative R+0C@ architect!re. 5o f!rther stren$then its #rod!ct offerin$s in this market se$ment, &( ac<!ired ,#ollo Com#!ter, a "orkstation man!fact!rer in 19%9. +n the 199=>, &( contin!ed its e3#ansion in com#!tin$ and "orked to mer$e many of the technolo$ies it held in its #ortfoliomeas!rement, com#!tin$, and comm!nication'in order to reinvent itself and ca#italiFe on hi$h $ro"th markets s!ch as those connected "ith the +nternet +n 1991, the com#any la!nched the &( 9>J7 #almto# (C, "hich combined advanced calc!lation feat!res and data'comm!nication ca#abilities. +n 1992, &( ac<!ired HeriFone, the ind!stry leader in electronic'#ayment systems, stren$thenin$ &('s ca#abilities in information systems, #artic!larly electronic commerce. &( contin!ed to be a market leader in both #ro#rietary hard"are and soft"are. +n 1992, &( refoc!sed its efforts on enter#rise com#!tin$ by formin$ the /nter#rise 0ystems 1ro!#. /01's #rod!cts "ere b!ilt aro!nd #ro#rietary R+0C micro#rocessors and #ro#rietary 6Nf7 o#eratin$ systems, both of "hich are described belo". &( !sed these #ro#rietary system com#onents beca!se, by bein$ able to inte$rate the desi$n of the t"o in !ni<!e "ays, they "ere able to stretch the #erformance of their com#!ter systems far beyond "hat co!ld have been achieved by b!ildin$ com#!ters from standard, mod!lar com#onents that "ere desi$ned and sold by third'#arty vendors.. ?y 1992, /01 had an installed base of more than 1.@ million E systems )&('67* "orld"ide. +n all, the division had sales of nearly G1=% in 1992. +n that year, the total market "as estimated to be "orth more than G-=%.> fn the server se$ment, &( had been the n!mber one 6N+7 server vendor by reven!e since 199@ "ith its &('67 #rod!ct line.

Market and Technology Tra ectories

/nter#rise com#!tin$ had historically been the domain of mainframe and minicom#!ters, "hose lo$ic circ!itry "as b!ilt in com#le3, m!lti'layered #rinted circ!it or "irin$ boards. (o"erf!l com#!ters em#loyed s!ch circ!itry beca!se all of the re<!ired f!nctionality co!ld not be inte$rated into a sin$le silicon chi#, as "as the case "ith less #o"erf!l micro#rocessor'based com#!ters. ,

@ 5he differences bet"een Red!ced +nstr!ction 0et Com#!tin$ )R+0C* and Com#le3 +nstr!ction 0et Com#!tin$ )C+0C* are e3#lained in the a##endi3E . &e"lett (ackard historically had not only desi$ned its o"n R+0C micro#rocessors, b!t had man!fact!red many of them as "ell'!nder the belief'that in order to achieve ma3im!m #erformance of the chi#s,&( needed to control its man!fact!rin$ #rocesses as "ell. 0ome of its #rocessin$ re<!irements "ere non'standard, dictated by the !ni<!e desi$ns of its chi#s. other of &('s com#etitors, notably 0!n icrosystems, had never man!fact!red their o"n R+0C #rocessors. 5hey also develo#ed #ro#rietary desi$ns, b!t then had their chi#s man!fact!red by contract by inde#endent fabricators. > D+nside +ntel, 5he F!t!re is Ridin$ on a Chi#,D e N Kk &i#es% ,#ril >, 199%.
19

699-011

Hewlett Packard's Morned Decision

n!mber of chan$es, ca!sed by advances in semicond!ctor man!fact!rin$, micro#rocessor desi$n and o#eratin$ systems, had chan$ed the ind!stry dramatically, ho"ever )see /3hibit >*. D!rin$ the 19>=%, mainframe com#!ter man!fact!rers, s!ch as +? and E,C, created the enter#rise com#!tin$ market "ith their delivery of systems that "ere able to handle com#any'"ide b!siness a##lications, s!ch as acco!ntin$, reliably. +n #artic!lar, the mainframe com#!ter man!fact!rers ca#italiFed on ?ell Jaboratories' 19.2 invention of the first !sef!l solid'state semicond!ctor'the transistor. 5he transistor, in contrast to its co!nter#art, the vac!!m t!be, had a n!mber of attractive #erformance #arameters incl!din$ their small siFe, $reat d!rability, lo" #o"er cons!m#tion, lo" rate of heat o!t#!t, and "ere event!ally easy to man!fact!re. ,ltho!$h they co!ld not initially handle the #o"er re<!ired to be !sef!l in e3istin$ markets, transistors had a si$nificantly different set of #erformance attrib!tes from those of vac!!m t!bes. 5ransistors enabled the ra#id commercialiFation and #roliferation of enter#rise com#!tin$. D!rin$ the 19-=% and 192=%, mainframe man!fact!rers dommated enter#rise com#!tin$. ?y 192=, +? alone had sales "hich soared to G2? and a $ro"th rate of more than 1>L. ?y the end of the decade, +? 's dominance of mamframes "as so #ervasive that 2=L of the "orld's com#!ter installations "ere centered aro!nd its e<!i#ment- ?!t "hile mainframe man!fact!rers dominated enter#rise com#!tin$ in the 19>=%, 19-=%, and 192=%, a ne" #rod!ct architect!re a##eared on the horiFon'minicom#!ters. 5hese minicom#!ters "ere lo"'cost, hi$h'#erformance machines tar$eted at so#histicated !sers "ho did not "ant or need to #ay for e3tensive soft"are and s!##ort services that came b!ndled "ith mainframes. +n 19-., D/C introd!ced the (D('- "ith time sharin$'a sin$le main com#!ter that co!ld s!##ort m!lti#le sim!ltaneo!s !sers. D/C follo"ed !# "ith a steady stream of ne" #rod!cts, "hich cost abo!t a fifth of a mainframe. ?y the late 192=%, D/C introd!ced its #o"erf!l H,7 line of minicom#!ters, "hich made serio!s inroads at the lo" end of the mainframe market beca!se their technolo$y traIectory im#roved at s!ch a rate that it co!ld satisfy lo" end enter#rise com#!tin$ needs. +n the early 192=%, yet another com#!tin$ device a##eared on the horiFon'the micro#rocessor. icro#rocessors "ere essentially a com#!ter on a chi#. e mainframes and minicom#!ters had #rinted "irin$ board lo$ic circ!its, micro#rocessors !sed a combination of $eneral lo$ic circ!its, firm"are, and soft"are to inte$rate com#!tin$ ca#ability onto a sin$le silicon chi#. 4hile the systems b!ilt aro!nd micro#rocessors, s!ch as "orkstations and #ersonal com#!ters )(Cs*, co!ld not initially f!lfill the re<!irements of mainstream minicom#!ter !sers, the com#!tin$ #o"er of the micro#rocessor im#roved at a rate m!ch faster than the needs of minicom#!ter !sers, as dia$rammed in Exhibit 5. ,s a res!lt, by the early 199=% systems based on the micro#rocessor had #enetrated the lo"er tiers of enter#rise com#!tin$. R+0C micro#rocessors, "hich "ere develo#ed by +? scientists in the 192=% )see ,##endi3*, #layed a key role in this #rocess. /l0C chi#s "ere m!ch faster than C+0C #rocessors. 5hey re#resented a dramatic, discontin!o!s im#rovement in micro#rocessor s#eed. +? "restled for years "ith "hether and ho" it co!ld im#lement R+0C "ithin its e3istin$ c!stomer basob!t by the time it had ada#ted the technolo$y to be com#atible "ith its e3istin$ c!stomers' installed mainframe and minicom#!ter hard"are and soft"are base, +? had com#romised the R+0C chi#s' #erformance so si$nificantly that they offered fe" advanta$es.

- Charles &. Fer$!son and Charles R.

20

orris, ter 'ars )Ne" KorkA 5ime ?ooks, 199@*E

!" Hewlett Packard's Merced Decision

699 #11

+n contrast, a set of ne" com#anies inD theD 19%=s's!ch as 0!n icrosystems, +(0 and 0ilicon 1ra#hics'ado#ted R+0C as a technolo$y thatD mi$ht hel# them b!ild small, cost'effective com#!ters that tar$eted the a##lications that histon'cally had !sed minicom#!ters. 5hey and the #rod!cts they made )"orkstations and net"ork servers* "ere hi$hly s!ccessf!l, as they dis#laced minicom#!ters and the com#anies that made them, s!ch as Di$ital /<!i#ment, Data 1eneral, (rime Com#!ter, Ni3dorf and 4an$. ,ltho!$h most R+0C Echi#s "ere fabricated by semicond!ctor com#anies s!ch as F!Iits!, the desi$ns of the chi#s "ere often done by the com#!ter makers. 0!n icrosystems )"ith its 0(,RC chi#*, 0ilicon 1ra#hics, and &e"lett (ackard "ere kno"n for their stron$ ca#abilities in R+0C micro#rocessor desi$n. ,lmost all R+0C'based com#!ters em#loyed 6ni3 o#eratin$ systems. 6ni3 "as an o#eratin$ system architect!re develo#ed by ,5M5's ?ell Jaboratories. 4hereas DC0 and 4indo"s o#eratin$ systems sold by icrosoft Cor#oration "ere standard #rod!cts sold to man!fact!rers and o"ners of com#!ters that "ere b!ilt aro!nd +ntel Cor#oration's micro#rocessors, most makers of R+0C'based com#!ter makers created their o"n #ro#rietary versions of 6ni3, in order to e3tract as m!ch #erformance as #ossible from their #artic!lar com#!ter hard"are desi$ns. ?eca!se each man!fact!rer's version of 6ni3 "as some"hat different, inde#endent soft"are vendors )+0Hs* had to "rite different versions of their #ro$rams to r!n on each man!fact!rer's version of 6ni3. +n the market, R+0C micro#rocessors tended to be b!ndled "ith 6ni3 o#eratin$ systems, and C+0C micro#rocessors tended to be b!ndled "ith 4indo"s o#eratin$ systems. &ence, t"o different D"orldsD had emer$ed in the micro#rocessor'based com#!ter ind!stryA a R+0C'6ni3 "orld, and a C+0C'4indo"s .)+ntel' icrosoft* "orld. Com#anies in these different val!e net"orks created t"o se<!ential "aves of innovation that s"e#t thro!$h the enter#rise com#!tin$ market, as sho"n in /3hibit >. 4orkstations and servers in the R+0C'6ni3 val!e net"ork "ere the first to enter this market tier "ith #ro#rietary desi$ns. 5hese "ere follo"ed by systems based on standard, commerdally available micro#rocessors and o#eratin$

systems, #rinci#ally those of +ntel and +vlicrosoft. ?y the mid'199=s, the combination of +ntel (enti!m (ro micro#rocessors and 4indo"s N5 had combined into a #o"erf!l D4+N5/JD system, a ne" technolo$y in the lo"er tiers of the enter#rise com#!tin$ market s#ace. ,ltho!$h these systems did not #erform as "ell as the #ro#rietary R+0C'6ni3 systems above them, they "ere ca#t!rin$ market share ra#idly beca!se of their lo"er cost. Com#!ter systems based on standard 4intel b!ildin$ blocks clearly had be$!n to e3ert a lar$e infl!ence c!terise com#!$. ,lo!$h the 4tel comba&on accoted for oy 9.@L of e mket for servers 1992, sales of #rod!ds based on ese o tecolo$ies e" --L om 199- to 1992 )see /bit -*. 5 d " e3#ected to con!e as advces "ere de bo tel o#rocessors d e 4do"s o#a$ system. . 4hile the !se of standard mod!lar com#onents had enabled (C man!fact!rers s!ch as Dell, Com#a< and &e"lett (ackard's (ersonal Com#!ter 0ystems 1ro!# )(01*2 to access this !#'scale market <!ickly "ith relatively limited incremental technolo$y investment, mod!larity had also meant that c!stomers "o!ld no lon$er be ca#tive to a sin$le vendor. 5he ind!stry's ado#tion of mod!lar #rod!cts had lo"ered entry barriers, and a n!mber of (C man!fact!rers had s!ccessf!lly moved !#'market to s!##ly their cor#orate c!stomers "ith servers, "orkstations, and f!ll'scale cor#orate net"orks !sin$ merchant micro#rocessors from +ntel r!nnin$ the standard 4indo"s N5 o#eratin$ system from icrosoft. Conse<!ently, increasin$ com#etition drove mar$ins do"n. 4hile

2 &e"lett (ackard, as Exhibit 1 sho"s, com#rised a hi$hly decentraliFed str!ct!re. +ts /nter#rise 0ystems 1ro!# )/01* com#eted very effectively in the hi$hest'#erformance tiers of the market, "hile its (ersonal 0ystems 1ro!# )(01* o#erated a!tonomo!sly in lo"er'#erformance tiers, em#loyin$ standard +ntel )C+0C* micro#rocessors and crosoft 4indo"s o#eratin$ systems. (01 "as mi$ratin$ steadily to"ard hi$her #rice' #erformance tiers of the market''in essence, strivin$ to com#ete a$ainst the lo" end of /01's #rod!ct line. s "as not !n!s!al. &('s laser Iet #rinter b!siness in ?oise, +daho com#eted a$$ressively a$ainst its ink Iet #rinter b!siness, located in Hanco!ver,4ashin$ton.
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699-011

Hewlett Packard's narced Decision

$ross mar$ins on #ro#rietary R+0C'6ni3 servers and "orkstations had ty#ically been at >='-=L, mar$ins on ne" 4+N5/J systems "ere often .=L or less. (rod!ct mod!larity "as indeed a do!bleD ed$ed s"ord, and it had altered the basis of com#etition amon$st com#!ter makers in markets "here it had become #revalent.

The U !" Market

,4hile 4+N5/J systems "ere clearly an emer$in$ force to be reckoned "ith in enter#rise com#!tin$, 6N+7'based systems in 1992, s!ch as &('s (, and 0!n icrosystems' 0(,RC, contin!ed to dominate the market "ith a @2.@=8o share )see Exhibit -*. 5his dominance, es#ecially at the hi$h end of the market, "as e3#ected to contin!e for several years. e $ro"th rate for 6N+7 based machines from 199- to 1992 "as 9.1L, "ith this e3#ected to slo" to a C,1R of >L from 1992 to 2==1, as systems based on +ntel micro#rocessors and a 4indo"s o#eratin$ environment became increasin$ly more #o"erf!l and reliable. ,ltho!$h the $ro"th in market share for #ro#rietary E ased machines "as e3#ected to Nslo", E based environment still acco!nted for "orld"ide reven!es of nearly G2>% in 1992 )see Exhibit -*. ?y 2==2, 6N+7 "as e3#ected to be the mainstream o#eratin$ system for servers #riced at more than G+CC:, acco!ntin$ for more than >=L of s#endin$s 6Nf7 machines offered #roven

mission critical sol!tions "ith the scalability, resilience, and hi$h availability feat!res to meet hi$h' end enterin$ com#!tin$ needs that based systems "ere still !nable to offer. &(, alon$ "ith other server and "orkstation man!fact!rers s!ch as 0!n and +? , had historically desi$ned their systems aro!nd a pr etary R+0C micro#rocessor. R+0C chi#s, beca!se of their limited instr!ction set architect!re, offered com#!ter makers si$nificant #erformance advanta$es over Cl0C micro#rocessors s!ch as those made by +ntel. 5hese R+0C chi#s enabled man!fact!rers to offer hi$h'#erformance machines needed for enter#rise com#!tin$ at attractive #rices, #artic!larly "hen com#ared to mainframes.
% 9 +bid.
22

,nalysis

of

&e"lett'(ackard

dE

ts.

Hewlett Packard's Merced Decision

!#$%& and !ts !'(act

%99$011

4ith these factors in mind, &( decided to Iointly develo# a ne" micro#rocessor "ith +ntel. +n 199., "ith little fanfare, +ntel and &( anno!nced that they "ere enterin$ into the Ioint develo#ment of a ne" -.'bit, #arallel #rocessin$ micro#rocessor architect!re.1= 5he Ioint develo#ment #roIect married the semicond!ctor'man!fact!rin$ #ro"ess of +ntel "ith the hi$h end micro#rocessor desi$n e3#ertise of &(. erced, code'named for the river that flo"s thro!$h Kosemite Halley, "as conceived as the first $eneration of a ne" chi# architect!re'+,'-.that "o!ld #otentially s!#ersede both the +ntel %=3%- architect!re and the &('(, architect!re.11 ,s de#icted in /3hibit >, the +,'-. architect!re "as desi$ned to enable an +ntel'branded micro#rocessor to directly attack the very hi$h end of the com#!ter ind!stry, made !# of the mainframes that r!n the o#erations of lar$e cor#orations, the e3#lodin$ "orld of +nternet 4eb servers, and the s!#ercom#!ters and "orkstations !sed by scientists and en$ineers. +t constit!ted a dramatic, discontin!o!s technolo$ical lea# !#'market. ,s s!ch, it "as fra!$ht "ith technolo$ical !ncertainty b!t offered hi$h #otential com#ensatory re"ards. erced feat!red -.'bit data transfer, an initial #rocessor s#eed of nearly %== &F, and the ability to #erform an /3#licitly (arallel +nstr!ction Com#!tin$, or /(+C )described in the ,##endi3*. erced "as desi$ned to incor#orate a $an$ of -.'bit /.f0C #rocessors to s!##ort /(+C. +n addition, erced "as desi$ned "ith a sector devoted to the stri##ed'do"n core of the (enti!m to maintain back"ard com#atibility "ith a 4indo"s o#eratin$ environment, as "ell as a sector that "o!ld hold (,'R+0C circ!its to maintain com#atibility "ith &('67. &ence, erced "o!ld constit!te a brid$e bet"een the historically

se#arate "orlds of R+0C and C+0C ho#ef!lly )in the eyes of +ntel, at least* eliminatin$ the distinction bet"een the t"o in the eves of the c!stomer. /(+C itself "as a maIor advance in micro#rocessor desi$n. +t allo"ed the erced chi# the #otential to #arallel #rocess !# to 12 instr!ctions #er dock cycle, in contrast to the si3 #ossible "ith the most advanced s!#erscalar R+0C chi#s. 4hile &( si$naled to the market its commitment to the +,'-. architect!re, its com#etitors in the R+0C'6ni3 val!e net"ork did not stand still. +n #artic!lar, 0!n #resented itself to c!stomers and inde#endent soft"arevendors s!ch as Cracle and 0,(, as the vendor of choice for 6N+7'based systems. ?y the time /01 "as formed in ay 1992, c!stomers and the ind!stry cons!ltants "ho advised them had voiced their concerns abo!t &('s commitment to E +nde#endent soft"are vendors "ere #artic!larly concerned abo!t sho!lderin$ the develo#ment costs for any ne" versions of &('s #ro#rietary 6 )&('67* o#eratin$ system "hen f!t!re vol!mes of &('s #ro#rietary /J0C architect!re )&('(,* "ere in <!eshon, $iven the commitment &( had made to +,'-..12

+C 5he term D-. bitD refers to the len$th of a D"ordD that co!ld be #rocessed. Cne "ay to !nderstand the im#act of #ro$ressin$ from the @2'bit architect!re characteristic of +ntel's (enti!m #rocessor line to the -. bit architect!re is to vis!aliFe a #i#e carryin$ fl!id. 5he amo!nt of fl!id the #i#e can trans#ort over time de#ends !#on its diameter and the s#eed at "hich it moves thro!$h the #i#e. +ncreasin$ the "ord len$th to -. bits essentially do!bles the DdiameterD of the D#i#esD that carry di$ital information in the micro#rocessor. &istorically, each do!blin$ of "ord len$th'from . to %, 1-, @2 to -.'bit architect!res, had constit!ted a si$nificant, diffic!lt ste# ahead for the com#!ter ind!stry. 11 ,ltho!$h there "as a stron$ #ossibility that +ntel "o!ld !ltimately abandon its line of @2'bit micro#rocessors )branded (enti!m, (enti!m (ro, (enti!m ++, etc.* in favor of thel,'-. architect!re, +ntel had not yet anno!nced "hether and "hen it "o!ld do so. +n fact, most ind!stry observers believed that +ntel "o!ld contin!e to e3tend this #rod!ct line beyond the (enti!m +1, for a n!mber of years in the f!t!re. 12 5he ske#ticism of the inde#endent soft"are vendors s!$$ests that they "ere !ns!re "hether f!t!re #ro$rams "ritten for &e"lett (ackard's +'f('67 machines "o!ld, in fact, r!n "ell on the DhybridD erced chi#. 2)

699#11
$ewton Packard's Morcod Decision

0!n had $ained market moment!m and mindshare "ith the inde#endent soft"are vendor comm!nity by achievin$ #erformance leadershi# on several key benchmarks, a dominant #osition in the +nternet market s#ace, and by makin$ an advanta$e of their foc!s on 6N+7. +nd!stry e3#erts had

+t a##eared to many in the ind!stry that /01 had conceded the 6N+7 market to 0!n. +n an Cctober 1992 $ortune ma$aFine intervie", 0cott cNealy, chief e3ec!tive officer of 0!n, so!$ht to ca#italiFe on this by statin$ his #osition thatA D&( is #!llin$ o!t of the 6N+7 b!siness and becomin$ an C/ for +ntel and icrosoft.D ?y the second <!arter of 199%, 0!n shi##ed more 6N+7 servers than any other vendor, incl!din$ &( and +? . /3acerbatin$ this sit!ation "as that the 6N+7 b!siness had already entered into a #hase of ra#id consolidation "ith second'tier systems vendors, s!ch as 0ilicon 1ra#hics, 6nisys, and &itachi, losin$ market share to &(, 0!n, and +? . ,s a res!lt, the second'tier #layers co!ld no lon$er $et the attention of inde#endent soft"are vendors. 5he installed base b!siness of these "eaker vendors re#resented abo!t .=L of the market in 1992.1@ ost second'tier vendors had decided to ali$n "ith to#'tier vendors for access to f!t!re 6N+7 technolo$y. ,s early as 199>, 0!n had la!nched an initiative to convert its smaller com#etitors )"hich historically had maintained their o"n #ro#rietary 6N+7 o#eratin$ systems*, into !sin$ 0!n's #ro#rietary (o)aris 6N+7.o#eratin$ system. 5his "o!ld consolidate vol!me for scale for the inde#endent soft"are vendors. ,ltho!$h 0!n "as able to ca#t!re F!Iits!, NCR, and 0iemens'Ni3dorf, )addin$ G2% #er year of 6N+7 #artner reven!es committed to 0olaris*, &( and +? had not Ioined by mid'199%.

The %rchitecture o& Competiti'e %d'antage

For &(, the develo#ment of the erced chi# had marked a strate$ic t!rnin$ #oint in its enter#rise com#!tin$ o#erations. 5raditionally, &( had man!fact!red its #ro#rietary (,' architect!re R+0C chi#s to r!n its most #o"erf!l machines in a #ro#rietary 6N+7'based o#eratin$ system #latformA &('67. +n contrast, the erced, "hich had sectors dedicated to both &('s #ro#rietary R+0C circ!its and a (enti!m core, "as able to s!##ort both 6N+7 and 4indo"s N5. erced "as also a merchant chi#'it "o!ld be sold on the o#en market and available to all makers of

servers, "orkstations and (Cs. 5he ne" &( strate$y for s!ccessf!l commercialiFation of the +,'-. architect!re "as necessarily a de#art!re from the strate$y of commercialiFation for &('(,. 5he c!stomers "ho follo"ed this trend "o!ld seled the best enter#risedass o#eratin$ environments available on +,'-. to s!##ort ne" de#loyments. &( "as the only to#'tier enter#rise vendor committed to sellin$ only +,'-. #latforms. 4hile this "as #erceived to be a stron$ initial sellin$ #oint a$ainst other vendors, over the lon$er term it raised the <!eshon for &( and its

1@ ,nalysis of &( doc!ments. 2&

4ith erced, &( "as co!ntin$ on an in'de#th kno"led$e of and early access to the 1,'-. architect!re as a com#etitive advanta$e. &( had ho#ed that this kno"led$e and e3#erience "o!ld $ive it an advanta$e in desi$nin$ ancillary systems s!ch as the com#iler and the ,com#le3 electronic circ!itry s!rro!ndin$ erced.

0eekin$ to $ain com#etitive advanta$e "ith erced and the +,'-. architect!re, &( had #laced #artic!lar em#hasis on the com#iler, and its desi$n "as a strate$ic levera$e #oint for &(. Com#ilers #layed a key role in the s#eed "ith "hich an a##lication ran on any #iece of hard"are and in any o#eratin$ system. 4hen a soft"are develo#er "rote an a##lication, it had to be Dcom#iledD before the micro#rocessor co!ld e3ec!te the #ro$ram. Com#ilers "ere res#onsible for translatin$ soft"are code into Dmachine lan$!a$e,D a binary code that the micro#rocessor co!ld !nderstand and e3ec!te. 5he efficiency "ith "hich the com#iler converted the a##lication soft"are had a direct infl!ence on the s#eed "ith "hich the a##lication "o!ld e3ec!te, and e3ec!tion s#eed "as a #rimary meas!rement of #erformance for the hard"are and o#eratin$ system. For the +,'-. architect!re and s#ecifically beca!se of /(+C, the com#iler "as res#onsible for not only translatin$ the soft"are #ro$ram into machine lan$!a$e b!t also for #arcelin$ the #ro$rams into se<!ences of inde#endent instr!ction sets that co!ld be inde#endently #arallel #rocessed. 5hese inde#endent instr!ctions co!ld r!n in any order and be carried o!t by "hatever reso!rces "ere available at the time. &ence, the com#iler "as key to enable +0Hs to take advanta$e of erced "ith its /(+C ca#ability, and the hard"are #rovider "ith the best com#iler "o!ld have a distinct advanta$e in the market#lace.
The (ow )nd *ets +,-C./ %gain 0 1

O ,s Davis contem#lated O micro#rocessor technolo$y

his recommendations for /01, he "as also concerned by a ne" that "as actively bein$ o!t'licensed to chi# makers by a ?ritish firm,

O O

O oldin$s Jtd

,R

chi#s, e be$innm$ + a##ear in the e lo" ,,end of the market' &e

,dvanced R+0C achines ),R *, "hich ori$inally had man!fact!red sin$le'board controllers, 1. had evolved to develo# a sim#le, yet #o"erf!l R+0C chi# "hich had fo!nd its "ay into #rod!cts s!ch as mobile fa3'#hones, #ersonal di$ital assistants, hard disk drives, smart cards, and #rinters. e entry into these markets "as made #ossible beca!se of !ni<!e architect!re "hich combined a #o"erf!l lo"'ener$y'cons!min$ R+0C'based micro#rocessor, a very small foot#rint )2 millimeters s<!are*, and a #rice !nder G>=. +n 199%, some ind!stry e3#erts tho!$ht that ,R micro#rocessors "ere sta$ed to become a tidal "ave of chan$e in the com#!ter ind!stry.1> ,R chi#s "ere only a tenth of the #rice of conventional micro#rocessorP and, altho!$h they "ere c!rrently limited in their #rocessin$ #o"er visvis their traditional co!nter#arts, there "as a si$nificant and ra#idly $ro"in$ market that "as bein$ satisfied by their #erformance attrib!tes )see /3hibit >*. ,R chi#s "ere also ra#idly increasin$ in #rocessin$ #o"er "hile maintainin$ a very

1. ?e$an as ,corn Com#!ters Jtd. of Cambrid$e /n$land. 1> D,R 's 4ay,D *lecironic 'ee+ly% ,#ril 29, 199%.
2*

Hewlett Packard's Merced Decision

cost'com#etitive #rofile. Davis had seen technolo$y s!ch as this )e.$., +ntel's C+0C micro#rocessor* emer$e at the bottom of the market before, and he kne" that it "as I!st s!ch ty#es of technolo$y that had the ability to redefine the com#etitive landsca#e. , n!mber of &( divisions man!fact!red hand held com#!tin$ and scannin$ devices that !tiliFed ,R Dlike micro#rocessors. E,s one of &('s senior technolo$y strate$ists, Davis felt he also needed to recommend to &(s senior mana$ement "hat strate$ic #ost!re they sho!ld take relative to ,R 'like #rocessors. 0ho!ld they be$in desi$nin$ and 8 or man!fact!rin$ these chi#s in'ho!seB Cr sho!ld they contin!e to o!tso!rce the chi#s, foc!sin$ their reso!rces and com#etency develo#ment efforts in the desi$n and assembly of final, end'!se #rod!ctsB

The Merced Decision

,s. Davis considered his recommendations, he realiFed that the com#le3ity of creatin$ a so!nd strate$y for the f!t!re of the /01 #rod!cts "as com#o!nded by the mo!ntin$ #ress!re of today's decisions'"hat "ere seemin$ly tactical reso!rce allocation decisions "ere, in fact, not. 5oday's decisions defined tomorro"'s choices. +n the enter#rise com#!tin$ arena, ne" #rod!ct desi$n did not sim#ly consist of #iecin$ to$ether off the0helf mod!les or com#onents from inde#endent vendors. Rather, it re<!ired the #arallel develo#ment of m!lti#le s!bsystems, each of "hich entailed len$thy develo#ment times. 5hese s!bsystems ind!ded micro#rocessor desi$n, system desi$n )incl!din$ com#le3 electronic circ!itry, or C/C*, firm"are, com#ilers and #acka$in$. &ence, "hat "as decided today "o!ld have far reachin$ conse<!ences for tomorro". Reso!rces "ere limited, and &( needed some "inners'some bi$ "inners. Davis kne" this. &e also kne" that limited reso!rces "o!ld make it diffic!lt for /01 to hed$e its bets to any si$nificant de$ree, by #!rs!in$ R+0C'6ni3 and erced #latforms sim!ltaneo!sly. +ncreasin$ the #ress!re on Davis "as the fact that &( had disa##ointed 4all 0treet analystsO for seven consec!tive <!arters. 5here "as tremendo!s #ress!re on mana$ement to increase reven!esO and #rofits and to increase them <!ickly. E O Cne o#tion available "as to abandon R+0C and f.JN+7 in order to foc!s e3cl!sively on +,'-.. 4ith the limited reso!rces c!rrently available, didn't it make sense to concentrate on one #roIect and do that #roIect "ellB +f Davis chose this #ath, the ne3t decision "as "hether to develo# a #latform #rod!ct on erced or to !se erced as a develo#ment tool and foc!s ener$ies on c:inley as the basis of a ne" #rod!ct #latform. cRinley "as sched!led to be released only one year after erced and "o!ld have si$nificant #erformance advanta$es. ,ltho!$h Davis fo!nd it lo$ically com#ellin$ to concentrate on one technolo$y, #artic!larly one that seemed to hold the f!t!re of enter#rise com#!tin$, he co!ld not i$nore the im#act on c!rrent reven!es if &( made a committed decision to Ddis invest, 6N+7 and (,. 4as there a "ay to reach a middle $ro!ndB For e3am#le, "o!ld it make sense for &( to Ioin 0!n's 0olaris cam#, "hich "as emer$in$ as the de facto standard in 6ni3B 5his "o!ld hel# &( contin!e to have a handsome reven!e stream, b!t "ith m!ch lo"er !# kee# costs. Cr sho!ld &( head in the o##osite direction and commit f!lly to contin!in$ their #ro#rietary R+0C technolo$y and #ro#rietary t.JNf7B ,ll ind!stry forecasts and analysis #roIected that 6N+7'based machines "o!ld be the loci of attractive mar$ins and reven!es for years to come. 4hy not #!t +,'-. on. the back b!rner !ntil its sched!les and technolo$ies "ere more certainB

,nd then there "as ,R . 5he technolo$y "as not c!rrently a threat to &('s enter#rise com#!tin$, b!t "here "as the technolo$y heacJin$B ,s Davis looked to the serenity of the mo!ntain vista, he kne" that the decisions he faced "o!ld not be easily ans"ered.

1#

2%

Hewlett Packard's Merced Decision

%ppendi2

History o& the Microprocessor

699011

5he micro#rocessor "as invented in 1921 by a start'!# com#any called +ntel "hose main #rod!ct had been memory devices. 5ed &off, a yo!n$ +ntel en$ineer, had been "orkin$ on a contract to b!ild a hand'held calc!lator for ?!sicom, a Ja#anese com#any. &off's assi$nment "as to b!ild a series of inte$rated circ!its that #erformed each of the calc!lator' s f!nctions. &o"ever, &off

had the vision that he co!ld !se +ntel's memory technolo$y to store the calc!lator's o#erations as soft"are instr!ctions. 5hen, instead of constr!ctin$ hard'"ired circ!its for every o#eration, he #laced eno!$h $eneral'#!r#ose lo$ic circ!its on a silicon shi# to #erform "hatever o#erations the soft"are instr!cted them to do. &off s team had, altho!$h it "as #rimitive in nat!re, created a com#!ter'on'a chi#'the micro#rocessor.
C,-C

5he +ntel micro#rocessor evolved on a desi$n #hiloso#hy called Com#le3 +nstr!ction 0et Com#!tin$ )C+0C*. C+0C !sed commands that incor#orate many instr!ctions to carry o!t a sin$le o#eration. 5here "ere a n!mber of characteristics that defined this architect!reA 1. ?!ilt into every C+0C micro#rocessor "as a lar$e set of commands, "ith several s!bcommands of varyin$ len$th needed to com#lete a sin$le o#eration. 5his set of commands "as called a Dmicrocode.D +ndivid!al commands "ere called by either the o#eratin$ system or a soft"are a##lication "hen the #rocessor needed to #erform a task.

2. 5he

C+0C commands micro#rocessor needed #rocessin$ s#ace and e3ec!tion time.

"ere not to e3amine the correct

all the same siFe. 5his meant that the each command to determine the re<!ired treatment of each command. 5his increased

@.

5he #rocessor sent the re<!ested commands to a decode !nit, "hich translated the com#le3 command into microcode'a series of smaller instr!ctions directed to the nano#rocessor. 5he nano#rocessor "as a #rocessor "ithin the #rocessor, "ith corres#ondin$ com#le3 circ!itry beca!se each instr!ction it e3ec!ted mi$ht need to #ass thro!$h several transistors in order for it to be #rocessed. Conse<!ently, the instr!ctions moved relatively slo"ly thro!$h the C+0C circ!its. the #ossibility that all instr!ctions needed to all #endinD$ instr!ctions com#leted. one command mi$ht de#end on the res!lts of another, be #erformed in order, one at a time. 5his meant that "ere #!t on hold !ntil the c!rrent instr!ction "as

.. 4ith

+!S,

+n the 19-=s, "henJohn Cocke, a senior scientist in +? 's Korkto"n &ei$hts Research Center, "as foc!sin$ on b!ildin$ faster #rocessors, he noticed that the $ro"in$ com#le3ity of the microcodes "as over b!rdenin$ the #rocessor and red!cin$ the #rocessor's s#eed and hence com#!ter #erformance. Cocke, "ho had al"ays been interested in the relationshi# bet"een hard"are and soft"are, foc!sed on the instr!ction set as a #ossible mechanism for increasin$ #rocessor s#eed. QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ 11
27

ewton Packard's Morned Decision

Cocke discovered that if he red!ced the instr!ction set and constr!cted the instr!ctions themselves to be e3ec!ted in one dock cycle of the micro#rocessor, the com#!ter e3ec!ted almost any soft"are #ro$ram m!ch faster. +? had ke#t this "ork secret, attem#tin$ to im#lement R+0C in a n!mber of its #rod!ct lines.14hile +? str!$$led to find "ays to !se R+0C in its #rod!cts, by the late 192=% other researchers had be$!n to e3#eriment "ith red!ced instr!ction set, #rinci#ally David (atterson at ?erkeley and John &ennessy at 0tanford. +n 19%=, (atterson desi$ned a ne" micro#rocessor called R+0C +. (atterson's "ork led directly to 0!n icrosystem's hi$hly s!ccessf!l 0(,RC R+0C micro#rocessor. &ennessy left 0tanford to co'fo!nd +(0. ?oth com#anies dominated the R+0C 'market in the second half of the 19%=>, e3#loitin$ the boomin$ markets for en$ineerin$ "orkstations and net"ork servers. 5he R+0C chi# !sed fe"er o#erations. 5his relative sim#licity made R+0C chi#s easier to desi$n and man!fact!re. ,s a res!lt, R+0C chi#s "ere inherently chea#er and smaller. 5he emer$ence of R+0C com#!tin$ in the mid'19%=% re#resented a ne" a##roach to com#!tin$, "hich "itho!t any advances in man!fact!rin$ or #rocess technolo$ies, res!lted in machines that ran t"o to fo!r times faster than conventional C+0C desi$ns. R+0C im#roved #rocessin$ s#eed in the follo"in$ mannerA >. /ach command in a R+0C #rocessor consisted of several small, discrete instr!ctions that each #erformed only a sin$le o#eration. ,##lication soft"are, "hich "as com#iled s#ecifically for a R+0C #rocessor, told the #rocessor "hich combination of its smaller R+0C commands to e3ec!te to com#lete an o#eration..

-.

,llR+0C commands "ere already microcode of identical siFe, and there "as only one "ay to load and store them. ,s a res!lt, R+0C commands "ere ready to e3ec!te faster than C+0C commands had. 4hen soft"are for a R+0C #rocessor "as com#iled, the com#iler determined "hich commands "ere inde#endent of the res!lts of the other commands. 5his allo"ed for the #otential of the #rocessor bein$ able to e3ec!te more than a sin$le command sim!ltaneo!sly.

2.

R+0C #rocessor had sim#ler circ!itry than its C+0C co!nter#art beca!se the R+0C #rocessor dealt "ith sim#ler commands. For a com#arable o#eration, R+0C inter#reted and e3ec!ted instr!ctions at an avera$e of fo!r to ten times faster than it takes to load and decode a com#le3 C+0C command and then e3ec!te each of its com#onents. For com#arison, C+0C micro#rocessors "ere only able to e3ec!te a##ro3imately =.@ instr!ctions #er cycle "hen R+0C micro#rocessors "ere commercially introd!ced in the mid'19%=%. /arly R+0C chi#s boosted #erformance to one instr!ction #er clock cycle. &ence, for any $iven clock s#eed in a chi#'lCC me$ahertF, for e3am#le' R+0C chi#s co!ld #rocess three times as many instr!ctions. +n later $enerations of R+0C chi#s, the n!mber of instr!ctions e3ec!ted #er dock cycle "as increased f!rther, leadin$ to even more si$nificant #erformance advanta$es over C+0C circ!itry.
1- ,n acco!nt of +? 's discovery of msC and its attem#ts to ada#t it for !se in its e3istin$ #rod!ct lines can be

%. 5he

fo!nd in Fer$!son and orris, Co#puter QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ 12

'ars%

199@*.

28

Hewlett Packard's arced Decision

63.#11

-uperscalar +,-C

+n the late 19%=s, an additional level of #arallel instr!ction com#!tin$ "as added to Rl0C chi#s in order to increase their #erformance. 5hese ne" chi#s "ere deemed D0!#erscalar R+0C.D 0!#erscalar R+0C chi#s "ere able to e3ec!te inde#endent instr!ctions in #arallel, do!blin$ #rocessor s#eed.

+n addition to #ara!el instr!ction set com#!tin$, 0!#erscalar R+0C chi#s often em#loyed branch #rediction. ?ranch #rediction "as a "ay to #re'fetch data in advance of "hen the a##lication soft"are needed it to e3ec!te. ?ranch #rediction "as desi$ned to lessen the im#act of memory latency. emory latency occ!rred "hen the micro#rocessor "as left "aitin$ or stalled for information contained in memory. For e3am#le, a micro#rocessor mi$ht have had to "ait 9= nanoseconds for the information contained in memory to arrive. 4hile that "as a very short time on an absol!te scale, the micro#rocessor "as cyclin$ at 1= to 1> nanoseconds. Delays inc!rred if e3ec!tion of the instr!ction "as halted !ntil the re<!ired data arrived from memory. +n 199%, s!#erscalar R+0C technolo$y "as firmly established in the market#lace "ith chi#s s!ch as &e"lett (ackard's (,'RR0C, Di$ital /<!i#ment Cor#oration's ,l#ha, 0!n icrosystems' 6+tra0(,RC, and the (o"er(C, desi$ned Iointly by +? and ,##le Com#!ter.
13
29

699#11 .14.

/3hibitl &e"lett'(ackard Cor#orate Cr$aniFa&on

*.

./ecutive ,o''ittee Me'0er

ed Be'holt #nn 1iver'ore #ntonio Pere2 1ew Plan Bill +ussell ,arol3n Ticknor Dick 4atts Bo0 4a3'an Duane 5it2ner

,o'(an3 docu'ents6

Exhibit 2 Cr$aniFational Chart for /nter#rise 0ystem 1ro!#'s 0ystems and 5echnolo$y

#nnette 1ea2er :inance Denn3 7eor;

.S7 S3ste's and Technolo;3

8i' 7rosvenor9 .S7 Strate;ic Business Develo('ent

8i' Davis< !# %& Pro;ra' =>>ice

Sharon +oulier Hu'an +esources

?1S! Technolo;3 ,enter 8ohn 4heeler

H4 S3ste's and Technolo;3 ,enter Ton3 7addis

S3ste' Desi;n and Per>or'ance 8i' Ha3es

.nter(rise S3ste's Technolo;3 ,enter 1inda 1awson

Source@ ,o'(an3 docu'entsA

ST,$Hal>Do' Bill .ads

ST,$$Taho "uan Bul

%99$011

Hewlett Packard's Merced Decision

/3hibit @ &('s Net Reven!es for the (eriod 1992 to 1992a

B*0

B&0

B)0

B20
B10 A

B0

1992

1993 Year

1994

1995

1996

1997

Source@ HP #nnual +e(orts

a :iiscai 3ear end =cto0er )16

A2'3+libit . &('s Net income for tfie (eriod 1992 to 1992

B)9*00 B)9000 B29*00 B29000 B19*00

B19000
B*00 B0
C

e ar

Source@ HP #nnual +e(orts a.arnin;s 0e>ore e>>ect o> accountin;A

16
..'..

32

O
Exhibit 5
1$
i*vks*

arket ,##lication 5iers and 0ystem 0ol!tions

5ime

Hew5en Merced Decision

699-011

Packard's

/3hibit )G milfions*
1009000 909000 -09000 709000 %09000 *09000 &09000 )09000 209000 109000

er

arket ForecastA /nd'nser 0#endin$ of

er

arket by (1atforrn., 199>'2==1

199* 1996 1997 1998 1999 2000 2001

Source@ #nal3sis o> Bear9 Stearns D ,oA dataA

1-

@.