Santa Clara Valley Historical Association

For most of Silicon Valley, 1995 was a vintage year, perhaps the best ever. Booming sales of computers, chips, and semiconductor equipment sent technology stocks surging in the first half of the year. By the three-quarters mark, the science and technology mutual funds index was up 46.7%, and a number of the larger companies had registered market-value increases of near 100% -- some 200% or more. Barring anything like the October 1987 crash, 1995 promised to end with many record gains.

Amazingly fast growth occurred in much of Silicon Valley industry. Demand ran high for computers and peripherals, semiconductors, semiconductor manufacturing equipment, communications devices, and multimedia products. Biotechnology did not generally share in the boom. Venture capital firms were active. Companies bought land, erected buildings and hired again after a long no-growth period. Seeking to cash in on the Internet's popularity, online, database, computer, networking, telephone, and cable television companies were all scrambling for position.

Technology advanced rapidly, too, spurring intense competition in some arenas. In disk drives, for example, new product generations lasted only nine months, prices fell 12% each quarter, and companies had to increase the storage capacity on a disk 60% a year to keep pace with their rivals. Large hard disks commonly stored 1.6 gigabytes, more than 50 times as much data as a decade earlier.

This pace forced one major consolidation. Seagate Technology Inc. agreed to acquire Conner Peripherals. The purchase of the No. 3 disk-drive company by the No. 2 company would create one company with $7.5 billion in revenues.

The hottest initial public offering turned out to be Netscape Communications Corp., a Mountain View firm founded by James H. Clark, who earlier founded Silicon Graphics, Inc. The stock more than tripled before settling back a bit, but wild action on the initial public offering signaled keen interest in simple ways to access -- and do business on -- the Internet.

In computer networking, acquisitions and mergers were rife. Three growing companies, each already well past $1 billion in revenues, appeared locked in a battle for dominance. Out in front were Cisco Systems of San Jose and 3Com of Santa Clara, which made its 11th acquisition in four years (not counting putting its name on the San Francisco stadium formerly known as Candlestick Park). Also in the derby was Bay Networks, formed of a recent merger of SynOptics of Santa Clara and Wellfleet of Massachusetts.

In software, introduction of Microsoft's Windows 95 operating system took the spotlight in August. But before that, Microsoft -- under pressure from the Justice Department -- dropped its bid to make a $2 billion purchase of Intuit Inc., the maker of the popular Quicken and TurboTax personal finance programs. Intuit employees in Menlo Park reportedly cheered when the deal collapsed. Oracle Corporation, Silicon Valley's largest software company, had its eye on the Internet, and so did Adobe Systems.

In microprocessors, Intel pressed its hot-selling Pentium advantage while rivals such as AMD, Nexgen and Cyrix aimed for faster superchips in hopes of reducing Intel's lead. Apple, IBM, and Motorola teamed up to bring out PowerPC chips using RISC architecture, somewhat faster than the Pentium but possibly not enough to peel off market share.

In the workstations market, Sun Microsystems brought out the 64-bit Ultrasparc, the first major revamping of its Sparc architecture since 1987, claiming unique multimedia features. Hewlett-Packard, Digital Equipment Company, and Intel with its projected P6 were working on faster-rated workstation chips for future introduction. MIPS Technologies, a Silicon Graphics subsidiary, had fielded its R10000 processor, "the fastest yet." Pyramid Technology was grouping MIPS and other chips in what Pyramid called "the most robust massively parallel offering."

Imagine testing a nuclear weapon with a computer. The U.S. Department of Energy announced a contract for Intel to develop a supercomputer using 9,000 P6 processors that would be capable of simulating nuclear weapons tests -- without the fallout.

In the shrinking U.S. defense industry, Lockheed and Martin Marietta completed their $10 billion merger as Lockheed Martin Corp. When worker layoff plans were announced, Lockheed Missiles & Space Company in Sunnyvale -- already down from a peak of nearly 25,000 employees to 11,000 -- escaped major cuts, indicating its projects would continue little changed in the near term. At adjoining Moffett Federal Base, a struggle was on to repel proposals to reduce Ames Research Center's role within NASA.

Driven by the desire to avoid a rerun of the VHS-Beta war of decades past, global companies planning to manufacture digital video disks compromised on a single standard. A group of seven manufacturers led by Toshiba Corp. accepted a proposal from the other camp, led by Philips Electronics and Sony Corp. Alan Bell, a specialist in CD technology at IBM's Almaden Research Center in San Jose headed a computer industry workgroup, including representatives of Apple, HP, Sun, and other companies, that successfully urged a single CD technology that would meet their needs.

The new disk would store a 133-minute movie at the highest audio and video quality, or store audio and computer data and software. It would have more than seven times a CD-ROM's computer data capacity. The New York Times said the process behind the agreement reflected the convergence of the consumer electronics, computer, and entertainment industries as a single multimedia industry.

Another ballyhooed form of convergence, that of computers and telecommunications, was cast into doubt when AT&T abandoned its costly vision of operating as a single corporate empire and divided itself into three companies.

Read The Sky's the Limit for Silicon Valley

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