Hewlett and Packard on pricing

Over the Christmas break, I'm reading a couple of books. One of them is Michael Malone's Bill & Dave: How Hewlett and Packard Built the World's Greatest Company.

I've always been a fan of company histories, and this is one shaping up to be a good one. It's done a particularly compelling job so far of capturing HP as the scrappy startup flying by the seat of its pants.

Here's a great example -- and an especially poignant one since we just went through the very long, tedious, and MBA'ish task of getting all the old Opsware products on the HP price list.

Here's how Bill and Dave named and priced their ever first product offering, an audio oscillator. First on naming (emphasis mine):

[Bill and Dave] designated the new instument as the "200A" because that number sounded like just the latest in a long line of products from a mature enterprise, not something from a pair of twenty-five-year-olds working out of a garage.

And now -- more surprisingly -- on pricing:

The price the two decided upon was even more arbitrary: the 200A audio osciallator was listed at $54.40, a number chosen entirely because it amusingly reminded Bill and Dave of the historic phrase "54'40" or Fight!" that was used in the 1844 campaign to set the U.S.-Canadian border in the Northwest.

The fact that makes this arbitrary price even more eye-raising:

Though the story of the pricing has become part of the HP myth, less remebered is how foolish this decision was: $54.40 was well below what it cost the pair to build the 200A, meaning that they would lose money on every sale. It was not a propitious start for two future titans of American business.

Thankfully, the company survived its lowball pricing scheme. Fast forward to this fiscal year, and HP becomes the first technology company ever to post more than $100 billion in revenue (I had thought IBM had done it before, but nope -- HP got there first.)