In 1962, Atalla joined Hewlett-Packard, where he co-founded Hewlett-Packard and Associates (HP Associates), which provided Hewlett-Packard with fundamental solid-state capabilities. He was the Director of Semiconductor Research at HP Associates, and the first manager of HP's Semiconductor Lab.
He continued research on Schottky diodes, while working with Robert J. Archer, at HP Associates. They developed high vacuum metal film deposition technology, and fabricated stable evaporated/sputtered contacts, publishing their results in January 1963. Their work was a breakthrough in metal–semiconductor junction and Schottky barrier research, as it overcame most of the fabrication problems inherent in point-contact diodes and made it possible to build practical Schottky diodes.
At the Semiconductor Lab during the 1960s, he launched a material science investigation program that provided a base technology for gallium arsenide (GaAs), gallium arsenide phosphide (GaAsP) and indium arsenide (InAs) devices. These devices became the core technology used by HP's Microwave Division to develop sweepers and network analyzers that pushed 2040 GHz frequency, giving HP more than 90% of the military communications market.
Atalla helped create HP Labs in 1966. He directed its solid-state division.