1968 Science Advertisement for the HP 9100A. Copyright by and used with permission of Hewlett-Packard

1. The Machine That Made Silicon Valley

When Hewlett-Packard got into the personal computer business, a “personal computer” was a $4900 calculator. Ads for HP’s 9100A aimed at scientists and engineers in 1968 called it by different names: an electronic genie, a computing marvel and yes, a personal computer.

The 9100A used mathematical notation rather than software code. It fit on a desk, and almost anyone could use it. It was a fairly capable general programming machine, but to reach a broader market, HP renamed it.

“If we had called it a computer,” Bill Hewlett said, “it would have been rejected by our customers’ computer gurus because it didn’t look like an IBM. We, therefore, decided to call it a calculator and all such nonsense disappeared.”

Hewlett then asked his engineers to make a version that could fit in his pocket. After introducing the HP-35 in 1972, the company sold 100,000 devices in a year, giving us an easy anecdote to mock market research forever.

HP and other companies had been working in conjunction with Stanford for years on military technology and semiconductors, but that’s how Silicon Valley really got started. It’s definitely how HP’s Personal Systems Group (PSG) began. It may be the most storied division in the history of consumer computing technology. And within a year and a half, HP’s current management hopes they’ll be rid of it.

2. The Future of HP’s Hardware Business

HP’s mobile devices running webOS will be done in first, drowned in the bathtub, from Palm smartphones to the new TouchPad slate. WebOS may survive, licensed by another manufacturer or deployed in more competitive, better-selling projects. But the hardware HP built to showcase it will be gone before the end of the year.

Everything else — a gigantic hardware catalog spanning calculators and keyboards, monitors and memory, cameras and mice and digital photo frames, and yes, the biggest manufacturing unit by volume in desktop and laptop PCs in the world — will be wound down over the next year in a half. The printing divison, which is a separate unit, will stay. Whether the PSG will be split into a separate company, sold off to a competitor, or first one and then the other, nobody knows.

That’s what’s ultimately most surprising about how this went down. HP’s leadership has made and announced big, irrevocable decisions about huge parts of its product line without telling most of its internal teams or actually nailing down their future first:

• webOS devices will be killed — and webOS will be licensed, probably. We’re working on it.
• We want to buy big data-crunchers Autonomy — and we’re pretty sure that we’ll get that deal done soon.
• We’ll separate our enterprise business from the Personal Device Group — which will be spun off, or sold, maybe. Do you guys know anyone who wants it?

I guess “Initiates Company Transformation” was a better co-hed than “Reports Disappointing Quarter, Forecasts Several More To Come.” HP needed a giant fig leaf. It had to come clean about its plans to transform itself, if the details of that transformation aren’t entirely firm.

We do have a few clues. In March, Taiwan’s Commercial Times reported that HP was considering selling its PC business to Samsung, with Lenovo and Foxconn also in the mix. According to Digitimes, rumors have been swirling about this sale since 2010, when a proposed HP-Samsung deal was supposedly called off for an unknown reason.

Then, HP brusquely denied it, arguing that its PC business was core to its global business strategy. Well, that strategy’s clearly changed; a deal like that may make sense again. if Samsung were still interested, they could probably snap it up cheaply, making them an even bigger name in hardware. Who knows? If nobody jumps at licensing webOS and it turns into a fire sale, Samsung could incorporate that, too.

3. Picking A Fight With Oracle and IBM

What about the newly PC-less HP? They’re exiting the consumer market (with the questionable exception of printers and scanners) for a higher-margin, more stable business that’s more suited to CEO Léo Apotheker’s experience and temperament.

“Apotheker is very much a software man,” Ars Technica’s Anders Bylund writes. “HP’s board of directors knew this when they hired him. If the steering committee wasn’t okay with a radical shift into software and services, they would have hired somebody else.”

Here some history is helpful, too. HP’s former CEO Mark Hurd resigned a year ago, months after the Palm acquisition, following a sexual harassment and expense report scandal.

Besides throwing HP into temporary turmoil, Hurd’s departure soured relations with Oracle, whose CEO Larry Ellison publicly trashed HP for their handling of the affair: “The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.” The HP-Oracle Alliance was falling apart.

Ellison hired Hurd to join Oracle as a co-president. HP then sued Oracle, claiming Hurd would necessarily have to use trade secrets and confidential information from his time at HP. Oracle responded by calling the suit vindictive and destructive: “The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace.”

Since then, that’s generally proven to be true. An agreement between the two companies in September 2010 became the basis for another HP lawsuit after Oracle decided to cease support for Intel’s Itanium architecture. Oracle’s June 15 press release on this suit is a doozy:

We believe that HP specifically asked Oracle to guarantee long-term support for Itanium in the September of 2010 agreement because HP already knew all about Intel’s plans to discontinue Itanium, and HP was concerned about what would happen when Oracle found out about that plan.

What we know for certain is that Ray Lane and HP’s current board members and Leo Apotheker and HP’s current management team now know full well that Intel has plans in place to end-of-life of the Itanium microprocessor. Knowing this, HP issued numerous public statements in an attempt to mislead and deceive their customers and shareholders into believing that these plans to end-of-life Itanium do not exist. But they do. Intel’s plans to end-of-life Itanium will be revealed in court now that HP has filed this utterly malicious and meritless lawsuit against Oracle.

In July, Oracle demanded HP drop a trade secrets lawsuit against another top executive who jumped ship from HP to Oracle. During Thursday’s conference call, Apotheker singled out Oracle, saying it would continue to take legal and any other actions to protect itself from Oracle’s attempts to hurt, limit or steal HP’s server and enterprise operations.

HP and Oracle can’t be partners, friends or even frenemies any more. As a result, HP had to do something radical in database and business software to compete with Oracle and IBM. Like buy Autonomy.

On its face, the move looks like a winner: acquire a company with next-generation software that you can incorporate into your entire product line, allowing you to separate from a long-time partner whose dominance of the industry doesn’t make them any easier to deal with. You vertically integrate your operations and try to take your competitors by surprise. What could go wrong?

HP should know perfectly well what could go wrong. This is exactly the strategy that the company tried when it acquired Palm and webOS. HP would have its own operating system for its own devices and no longer have to depend on Microsoft’s PC software to beat Apple and Google in mobile. But Microsoft’s Windows 8, Apple’s iPad and Google’s Android smartphones all won. All the features of webOS that might make it technically superior to Windows, iOS or Android couldn’t make a difference.

Enterprise software is a very different business from consumer hardware. HP couldn’t use webOS, but may be able to use Autonomy. This could be a fight HP is better-positioned to win.

But make no mistake: the fight’s just beginning. The future of the company that little calculator made famous depends on it.