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A Legendary Garage-Founded Upstart Goes Public

By Alex Planes - Nov 6, 2012 at 11:30AM

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Learning from the market's past to understand its present.

On this day in economic and financial history...

The past few years have seen enormous interest around the initial public offerings of "garage-founded" Silicon Valley tech start-ups. The granddaddy of them all, Hewlett-Packard (HPQ -1.37%), had its public debut today in 1957. HP offered 300,000 shares out of its founders' holdings at $16 each, valuing the company at $49 million on Nov. 6, 1957, based on 3 million total shares outstanding.

When it first went public, HP was described as a maker of "microwave equipment, electronic counters and frequency measuring devices, oscillators, and vacuum tube voltmeters." It would be another 11 years before HP got into the "personal computer" market, but this early foray was hardly a personal machine the way consumers now imagine it. That didn't stop HP from forging ahead in the booming field of business-essential computing, and it quickly challenged IBM (IBM 1.97%) for dominance in lower-end hardware. Within five years of HP's IPO, its market cap had grown to about $158 million.

HP led the world in pre-PC desktop computer sales in 1979, by which point its market cap had grown to $1.83 billion -- more than 37 times its post-IPO market cap. HP's advantage evaporated once manufacturers realized that the basic combination of Intel (INTC -0.88%) processors and Microsoft (MSFT -0.67%) operating systems could be reverse-engineered into systems identical to IBM's without running afoul of patent infringement claims.

It took nearly two decades for HP climb back to the top of the PC heap. In 1992, the company held only a 1% share of the PC market, and only 6% of its multibillion-dollar annual revenue came from PC sales. Under the leadership of CEO Lewis E. Platt, who had joined the company in 1992, HP became the fastest-growing PC maker in the world. The company grabbed third place in the PC market share war by 1997 -- the same year it joined the Dow Jones Industrial Average (^DJI -0.15%) -- behind only Compaq and IBM. HP was the first company to join the Dow on the strength of its personal-computer operations (IBM had been a member since 1979, but PCs were just gleams in its eye at the time), beating Intel and Microsoft to index membership by just more than two years.

Five years later, HP completed its acquisition of Compaq, solidifying its place as the world's largest PC maker. At this point, HP had a market cap of $53.5 billion. Its market cap had grown nearly 1,100 times larger than it had been at the end of its Nov. 6, 1957 IPO. That's an annualized growth rate of 16.8% over 45 years. Unfortunately for HP, the PC industry entered a long, slow decline shortly afterward, and the venerable technology company hasn't been able to find the next great growth industry of the post-PC world.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,831.80 (-0.15%) $-48.44
International Business Machines Corporation Stock Quote
International Business Machines Corporation
IBM
$133.75 (1.97%) $2.58
HP Inc. Stock Quote
HP Inc.
HPQ
$34.58 (-1.37%) $0.48
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$258.90 (-0.67%) $-1.75
Intel Corporation Stock Quote
Intel Corporation
INTC
$41.63 (-0.88%) $0.37

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