IN the rain-soaked car park on a leafy West Country science campus, Phil Stenton is collecting a treasure trove of old coins on a trip around the Caribbean.

Stenton, a scientist of 22 years’ standing, is guided only by a hand-held computer and the technology he has devised - a system that overlays a virtual landscape on to a game player’s own surroundings.

It is cutting-edge stuff and part of a drive by Hewlett-Packard, the Silicon Valley giant best known for its ink-jet printers, to achieve the next technology breakthrough at its research laboratory just outside Bristol.

“Our work is not about bubbling test tubes hidden away from everyone. We want to involve as many people as possible,” said Stenton.

His is just the sort of activity that Gordon Brown is desperate to keep in Britain’s so-called knowledge economy. Mark Hurd, chief executive of HP, is also a fan but has told his researchers to sharpen up their act.

The Bristol base, which houses 150 boffins - a quarter of the total workforce of the research arm, HP Labs - was set up in 1985 alongside a computer-peripherals facility that made disk drives. The manufacturing has gone but the ideas factory remains, one of seven centres HP funds globally.

Now Hurd is slimming down the work from 150 small projects to no more than 30 larger ones. He wants more bang from the bucks he is spending - more commercial hits from his annual £90m stipend.

If that budget sounds small for a business that had net earnings of £3.6 billion last year, that’s because it is. The other 95% of HP’s £1.8 billion research pot goes on souping up existing products, such as the next generation of printers and personal computers, of which it makes more than anyone else.

Inside the research centre, Alice is whispering secrets into Bob’s ear. But they are not canoo-dling workers. “Alice”, who is the size of a cigarette packet, and “Bob”, who is as big as a large tub of margarine, are black boxes at the forefront of an advanced cryptography programme, which is searching for better ways to outwit credit-card and mail-order fraudsters.

Their “dialogue” consists of 30m photons (light particles) being transmitted in 0.6 seconds from four sources on Alice, which could eventually be shrunk and fitted into a mobile phone. They carry 21,000 “secrets”, or pieces of computer code. That is enough to top up Bob, playing the part of a hole-in-the-wall machine, with a list of 1,000 Pin codes. Instead of relying on the same Pin every time, Alice and Bob store a matching list of codes that are used only once and then erased, making fraud much harder.

In the future, consumers should be able to draw out cash or open the door of their office by simply pressing a button on their mobile phone. Government departments are already using HP’s “shared secrets” to encrypt information.

Right now, Alice and Bob cost £100,000 for the pair. The researchers’ job is to drive down the price closer to £5 so the technology can be put into phones and cashpoints and marketed to banks in about a year.

Things are looking up at HP. It has shaken off the boardroom spying scandal that claimed the scalp of Patricia Dunn, the chairman, and sales have been rising. They were up 14% last year to £51.6 billion, exceeding the sales of archrival IBM two years running. Part of that has come from a shift from its hardware roots into software and internet services, aided by a string of dot-com acquisitions.

Now Hurd wants HP Labs to have more of a venture-capital approach, zeroing in on commercial potential sooner.

John Manley, director of HP Labs at Bristol, believes his operation already runs along such lines. “You don’t have successful start-ups unless there is a vision behind what you are doing,” he said. “From that perspective, it is not really that different.” Like any blue-chip boss, Hurd has a tightrope to tread. Some projects might go on for 10 to 15 years, and right now they might not look like moneyspinners. However, the technology giants are paranoid they will miss a trick, just like Xerox, whose early work on personal computers was commercialised to great effect by Apple.

Bristol plays home to five of HP’s 23 labs, second only to the 13 in Palo Alto, California.

For the past eight years, Manley’s baby has been developing in one of them. The latest buzz phrase, “cloud computing”, is the notion that eventually computer users will go online to access everything from storage capacity to applications, instead of saving their information locally on a hard drive.

Manley challenged 422 South, a local Bristol animator, to knit together online the different strands of a film project - the models, colour textures and lighting. HP’s “cloud” technology effectively tripled the computer horsepower that 422 had at its disposal. The resulting short film, The Painter, secured HP a role in the production of Dream-works’ Shrek 2 movie. The level of detail the technology can provide can be seen in Madagascar, another film from the same studio, in which Alex the lion had 50,000 moving hairs in his mane.

The same “flexible” computing services that require huge but temporary amounts of memory and capability are now being used in the City to predict what would happen if a tranche of shares in a company were placed on the market.

This is all very impressive, but when does HP know to stop tinkering with new ideas and start bringing in the customers?

“The most important thing is the business judgment of the people involved,” said Manley. “This world [cloud computing] was going to happen. We just couldn’t tell you which year, but it was always going to happen.”

Stenton, meanwhile, creates his virtual worlds using GPS tracking or sensors embedded in trees, lamp posts or Beefeaters. His Mscapes technology has been tested at the Tower of London. It was used to develop a game for children to help imaginary prisoners escape, teaching them something about history as well. Now Hampton Court is working on a similar project.

Stenton also used it to design another game in which people dodge snipers as they walk down a street in Bristol.

Alistair Darling, the chancellor, cut the ribbon last month on Bristol’s Pervasive Media Studio, through which HP hopes to go into partnership with television producers and designers interested in developing the technology further. The Mscapes software has already been down-loaded 10,000 times from HP’s website.

“Nintendo’s Wii got people off the couch. We are trying to get people out of the house,” said Stenton. And in the same way, HP wants its new technologies to begin stretching their legs.

TECH CITY

BRISTOL has been associated with the BBC’s natural-history programming for almost as long as Sir David Attenborough has been clambering through the undergrowth. It still hosts Wildscreen, an annual wildlife film festival.

However, the city is fertile ground for a host of other technology and media companies. Chief among these is Aardman Animations, home of the Oscar-winning plasticine characters Wallace and Gromit, which signed a three-picture deal with Sony last year.

The Internet Movie Database (IMDb), a giant online reference tool founded by local Colin Needham, is still run from the city, although it is now owned by Amazon.

So it is no surprise that Bristol was singled out last month by culture minister Andy Burnham as a hotspot for the creative industries. The city’s media centre, Watershed, plays a key role.

“It is Bristol’s ambition to remain at the forefront of creative development,” said Clare Reddington, director of the local investment agency iShed. She reckons that some 6,000 people are members of local creative bodies.

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