052 innovation & technology

By Spencer Ante

creative Beginnings in a Downturn
How bold entrepreneurs exploited tough times to pioneer new industries
hewlett-PackarD

It’s easy to get depressed during a recession. But history shows that many great companies have been hatched during tough times. Everything is cheaper during a downturn. There’s less competition, both from incumbents that are trying to put out their own fires and from startups that find it harder to raise money. And tough times force entrepreneurs to hustle. “Recessions can be really useful strategic opportunities, says Tom Nicholas, an ” entrepreneurial management professor at Harvard Business School.

Lesson Learned: Pick Up game-Changing Companies on the Cheap may 2002: HP acquires Compaq Computer amid the tech bust for $25 billion. The deal makes HP a powerhouse in the PC business and a stronger player in computer servers. August 2008: In another downturn, HP buys tech-service giant EDS for $13.9 billion. The deal helps HP bulk up in services and take on IBM.

january 1939: Engineers Bill Hewlett and Dave Packard hatch a company in a garage in Northern California at the tail end of the Depression. Soon after, Hewlett-Packard lands its big sale of eight oscillators to Walt Disney. The devices are used to fine-tune the soundtrack of Fantasia.

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1929: ThE STOCK mArKET CrASh ANd BANKINg COLLAPSE TrIggEr ThE grEAT dEPrESSION

Digital equiPment

Lesson Learned: Stay One Step Ahead of the market june 1998: After missing the boat on personal computers, a humbled Digital Equipment gets swallowed up by Compaq to form the world’s second-largest computer maker.

August 1957: Venture capital pioneer American Research & Development gives Ken Olsen and Harlan Anderson $70,000 to create Digital Equipment. After turning a profit in one year selling computer modules, the startup creates the market for business computers smaller than mainframes, embarking on a successful 30-year run.

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1957: TIghT mONETAry POLICy PrOmPTEd By POST- KOrEAN WAr INFLATION SPArKS ThE rECESSION OF 1957-1958

genentech

Lesson Learned: Find Strategic Partners to Stretch the Budget October 1980: During the second oil crisis and recession, Genentech raises $36 million in the hottest IPO in more than a decade. On its first day of trading, the stock pops from 35 to 86.

April 1976: Venture capital firm Kleiner Perkins finances the first biotechnology company, Genentech. Unable to foot the multimillion-dollar bill for labs of its own, Genentech subcontracts its research on cloning genetic material to three medical institutions.

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OctOber 1973: ThE OrgANIzATION OF ArAB PETrOLEUm ExPOrTINg COUNTrIES PrOCLAImS AN OIL EmBArgO. ThE dOW FALLS 45% FrOm jANUAry 1973 ThrOUgh OCTOBEr 1974 AS ENErgy PrICES SOAr.

google

Lesson Learned: Poach Top Talent on the Cheap August 2004: Google takes advantage of the tech bust, when wage rates had cooled, to hire 3,000 tech stars who help the company generate and manage explosive growth. Revenues and profits soar, and the company stages a successful IPO valuing Google at $27 billion. june 2009: During the Great Recession of 2009, Google expands into e-commerce by starting a new effort to sell electronic versions of books.

September 1998: Sergey Brin and Larry Page, two Stanford PhD students in computer science, create Google.

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March-NOveMber 2001: ThE COLLAPSE OF ThE dOT-COm BUBBLE, ThE SEPTEmBEr 11 ATTACKS, ANd ACCOUNTINg SCANdALS CAUSE AN ECONOmIC CONTrACTION

BUSINESSWEEK I J U LY 27, 2009

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