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Dave Packard and Bill Hewlett in 1964.

Hewlett-Packard is making a long-shot bid to change the fundamentals of how computers work.

Credit: Hewlett-Packard

There is a shrine inside Hewlett-Packard’s headquarters in Palo Alto, in the heart of Silicon Valley. At one edge of HP’s research building, two interconnected rooms with worn midcentury furniture, vacant for decades, are carefully preserved. From these offices, William Hewlett and David Packard led HP’s engineers to invent breakthrough products, like the 40-pound, typewriter-size programmable calculator launched in 1968.

In today’s era of smartphones and cloud computing, HP’s core products could also look antiquated before long. Revenue and profit have slid significantly in recent years, pitching the company into crisis. HP is sustained mostly by sales of servers, printers, and ink (its PCs and laptops contribute less than one-fifth of total profits). But businesses have less need for servers now that they can turn to cloud services run by companies like Amazon—which buy their hardware from cheaper suppliers than HP. Consumers and businesses rely much less on printers than they once did and don’t expect to pay much for them.

HP has shed over 40,000 jobs since 2012, and it will split into two smaller but similarly troubled companies later this year (an operation that will itself cost almost $2 billion). HP Inc. will sell printers and PCs; Hewlett Packard Enterprise will offer servers and information technology services to corporations. That latter company will depend largely on a division whose annual revenue dropped by more than 6 percent between 2012 and 2014. Earnings shrank even faster, by over 20 percent. IBM, HP’s closest rival, sold off its server business to China’s Lenovo last year under similar pressures.

And yet, in the midst of this potentially existential crisis, HP Enterprise is working on a risky research project in hopes of driving a remarkable comeback. Nearly three-quarters of the people in HP’s research division are now dedicated to a single project: a powerful new kind of computer known as "the Machine." It would fundamentally redesign the way computers function, making them simpler and more powerful. If it works, the project could dramatically upgrade everything from servers to smartphones—and save HP itself.


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