IN PART ONE OF THIS SERIES PETER HAYES LOOKED AT THE BIRTH OF THE SILICON CHIP AND ROLE SANTA CLARA (OR SILICON)VALLEY PLAYED IN IT. IN THE SECOND PART OF THIS SERIES WE LOOK AT THE COMPANIES THAT CASHED IN THIS BREAKTHROUGH.

The name Silicon Valley was first used in a magazine article written by the Californian electronics journalist Don Hoeffler. However the theme of the article was just as important to today's article as his nickname: It was charting the "gold rush" of start-up enterprises who were heading down to California in the hope of exploiting the last great invention of the industrial age -the silicon chip.

When Intel produced the world's first commercial integrated circuit it changed not only the whole face of electronics, but the whole world. However, until it was exploited commercially the general public remained largely in the dark.

Like the literal gold rushes that these companies mirrored, some indeed did get rich and famous; while some returned home even poorer than they had started out; and some got rich only to lose it all again trying to become even richer still!

What many of the start-ups failed to realise is that silicon, while a powerful electronic tool, changed all the research and development rules. Research and development costs rocketed as products needed both physical hardware and intangible software - and this was before programming had become part of the educational mainstream.

What these start-ups created, however, was new media forms unheard of up to that point in time. Terms such Desk Top Publishing, computer-controlled musical instruments (MIDI) and electronic mail.

With small and rare exceptions most of the long term success stories were (and are) companies that have found there niche market, developed it and then defended it the absolute maximum.

A perfect example of this would be Abobe, that produced the first scaleable fonts that would be the heart of desk top publishing. Oracle virtually invented the large scale company database and Hewlett-Packard set standards in the field of printers, which is still the bedrock of their business.

Another SV problem is that companies can have a single success and grow too big too soon. A classic example is Apple that spun out of control when the founders, who had creative skills aplenty, started believing their own press headlines.

SV analyst and writer, Paul Saffo, describes the local boom-and-bust cycle like this: "You think about how small companies get successful; they grow larger; they die. But if you're real lucky just before they die they throw of employees like a dying oak throws off acorns. And around the corpse rise the new little companies."

The first major application of silicon was handheld calculators that first appeared in 1972. What today you can buy for as little as a couple of pounds started life so expensive that many were actually rented. Hewlett-Packards first models cost $399 - and we have seen 800% (plus) inflation since then!

Before the mainstream computer industry was born, computers were put together as DIY kits and sold mail order. At shows all over America people displayed what they had assembled in their own garages. Often also running software of their own design.

It was an irony of the age that few of those around the Valley saw computing as a mass market phenomena. The seventies saw little major development in the modest desktop computer market, producing only three computers of note: The HP 3000 (1972), the Apple 11 (1977) and the Tandy TRS-80 (1977).

With skill Apple could, and should, have become the today's number one computer company. Despite having the market to themselves for almost four years, their products were over-priced and sold only through official dealers. All key technologies were kept under lock and key in-house. In the market before the IBM PC (and its clones) in 1981 this strategy worked, but afterwards its markets hare tumbled - without its killer applications (mostly in DTP) the firm might even have closed.

However Apple did, eventually, show that the mouse was an important part of computing and that graphical interfaces are the best way of controlling computers. Although the idea was borrowed from Rank Xerox - who in the early eighties had no immediate use for it.

Hewlett-Packard have probably been the best run electronics/computer firm of all time. Their management and marketing skills and Apples mouse driven technology would have made an unbeatable combination. Nevertheless HP have produced more cutting-edge products that any other company.

Apart from inventing the pocket calculator, they produced an important minicomputer (the HP3000) in 1972 and created de-facto standards in the computer printing world. Their 1997 company report indicated that they had a turnover of $42.9 billion US dollars and employed over 121,900 people worldwide.

Many of the giants of the Valley can trace their fortunes to a big break: Oracle co-founder Lawrence J. Ellison had his when asked to produce database software for the CIA and his eyes fell upon an IBM technical document that spoke of data been retrieved in an "relational" way. In short, ordering data to be collated freely rather than in pre-set chunks.

This language was called Structured Query Language (SQR). In 1979 Oracle (under the name Software Development Laboratories)created the world's first SQR program under the name Oracle - the success of which resulted in the change of company name.

Today Oracle is a $3 billion dollar a year company.

The biggest name outside of Intel is Microsoft. The story of how Bill Gates sold IBM its first operating system has been told so many times that I won't repeat it here. However the company has married software innovation with solid marketing and promotion - a lesson that many can still learn from.

The last word about Silicon Valley has to go to Intel, another firm that it is often fashionable to knock. If wealth, riches and power should fall on anyone in the computer world it should be Intel. While other writers can write there own SV history, if Intel had failed to perfect the silicon chip it could have been lost for a generation.

Intel had the gift of genius, money and time; and even then only just managed to achieve their goals. This wasn't an invention where if Intel failed, someone else was going to invent anyway. The basic knowledge that a circuit (or switch) could be etched into silicon had been around, unused, since 1947.

Once upon a time alchemists tried to turn common metals into gold, Intel just happened to turn one of the world's most common substances (silicon) into something that is worth even more than its weight in gold!

In the third, and last part of this series we will be looking at the future of Silicon Valley and threats it faces from new competitors from around the world.


Peter Hayes (Trinity) (C)