(FORTUNE Magazine) – IN THE LOCAL audio store, customers listening to the 1812 Overture are scratching their heads. How can two little speakers the size of quart milk cartons fill the room with the thunder of cannons and the pealing of bells? The answer is hidden under a chair in a black box about the size of a briefcase. It reproduces some difficult-to-capture bass tones and can be concealed anywhere. This is the new three-piece Bose AM-5 Acoustimass stereo system that is wowing audiophiles and critics. Across the street, a new-car buyer testing the Delco/Bose stereo system in a Cadillac with a Frank Sinatra tape suddenly looks into the back seat: The sound is so realistic that Ol' Blue Eyes might be there. Around the corner at an electronics shop, Bose speakers in a Zenith color TV are rocking out the stereo sound track of Peggy Sue Got Married. Such prominence is new for Bose Corp. For much of its 23-year history the Framingham, Massachusetts, company has been known mainly to stereo buffs, and well-heeled ones at that. Its burst of marketing creativity has observers and rivals wondering, like first-time listeners to the AM-5 system, just where Bose is coming from. How did a small speaker maker get into lucrative deals with some of the world's biggest auto and television makers? And why won't the company go public? The answers lie in the symphonic philosophy and stereophonic personality of Amar Bose, 58, the company's founder, chairman, and technical director. On some days, Bose can be found scrawling mathematical formulas on the gray chalkboard that covers one wall of his corner office in Framingham. On other days, he is 22 miles away in the lecture halls of MIT, where he is a professor of electrical engineering. In both places, he preaches a gospel of human potential. Says he: ''Man is a 100-cylinder engine running on only one cylinder.'' So far, Bose has not misfired. Sales for the year ended last June 30 were up 30% over the previous year, to $173 million. About half those sales were overseas. Bose sells more speakers in Japan than any other maker of stereo components. Deals with other manufacturers, notably General Motors and Zenith, accounted for 20% of the total. Bose, who has a majority stake, will not reveal profits. He grew up on a mixture of science and entrepreneurship. Raised in Philadelphia, he is the son of an Indian father who emigrated from Calcutta and an American mother who taught school. Although he studied violin, young Amar was more interested in radio. While still in high school during World War II, he started a radio repair shop that became the family's sole support when his father's import business was curtailed by the war. In 1947 Bose entered MIT as a freshman, and he never left; after earning a doctorate in 1956, he joined the faculty. His quest for the perfect speaker began shortly after he started teaching. Flush with his new job, Bose decided to reward himself with a hi-fi, and he pored over engineering specifications of all available components to put together the best possible system. The onetime violinist was disappointed with the result. The strings sounded shrill. ''I wondered why speakers that tested so well sounded so bad,'' he says. ''I wondered how I could get concert hall realism into my living room.'' He persuaded colleagues to let him make the search for better sound an official MIT project. Through the emerging science of psychoacoustics (the human perception of sound), Bose discovered that more than 80% of the music reaching a listener at a live performance was bounced off walls, ceiling, and floor. Armed with that fact, he launched the company in 1964 with one paid employee, his former student Sherwin Greenblatt, who is now president and chief operating officer. The first product appeared in 1968, the Bose 901 direct/reflecting loudspeaker. Instead of aiming sound forward like flashlight beams, as do conventional speakers, the 901 consists of a pentagonal enclosure housing nine small speakers, only one aimed at the listener. The result is a roomful of reflected music that some listeners liken to being bathed in a symphony. Not everyone loves the sound. In 1970, Consumer Reports concluded that ''individual instruments heard through the 901 . . . tended to wander about the room.'' Bose was incensed enough to sue, claiming ''product disparagement.'' After a 13-year battle that went all the way to the Supreme Court, he lost the case, though hardly gracefully. Grumps Bose: ''I learned that they are more interested in entertaining readers than informing them.'' Despite the unfavorable review, the 901 still sells briskly after 20 years to those picky folk who put together stereo systems by buying components -- speakers from Bose and, for example, a cassette player from Japan's Nakamichi. At $1,485 for a pair of speakers, the 901 shows remarkable longevity in an industry where the average product life is about five years. In 1975 Bose introduced a cheaper version, the 301, now $422 per pair. The company says it has sold 2.1 million units. Bose's latest sonic feat and the company's newest product is the AM-5 Acoustimass. The tiny speakers and the black box can be had for $699. Bose has revolutionary concepts about management as well: ''I don't sit around and say, 'My God, how do we grow the next 30%?' I ask what technology do we have that is new and better, and what are the applications?'' One of his ideas involved a complex mathematical formula aimed at amplifying bass notes by resonating air through a pipe, the way a pipe organ does, rather than by using the large vibrating cones of conventional speakers. Bose spent 15 years and $14 million to develop the formula. The result, introduced in late 1984, is the Acoustic Wave Music System, an elegant, $749 rival of a boom box. It consists of an 80-inch-long tube bent into a maze occupying less than one cubic foot of space and hooked to a radio tuner and cassette tape player. One reviewer says the sound is as good as much larger component systems costing nearly twice as much. The Acoustic Wave has a minimum of controls because Bose thinks most high- priced stereos are too complicated for the average consumer. Says he: ''Most people get along with a clock radio and a TV set because they are intimidated by all the dials, meters, and lights. Fine stereo should be like a refrigerator: The technical sophistication should be packed inside. All the customer should have to do is plug it in, and it goes.'' Confident by the mid-1970s that he had the living room under control, Bose began thinking about car stereos. Most audio engineers at the time had written off the interior of a car as an audio disaster area of glass, plastic, and plush. But Bose figured that psychoacoustics and a speaker system precisely tuned to the shape and composition of a particular car model might do the job. During a conversation with MIT President Jerome Wiesner, Bose described his ideas in full-volume detail. Caught up in his enthusiasm, Wiesner put Bose in touch with some friends at GM. One of them led Bose to Edward Czapor, now GM's vice president for quality control. At the time, Czapor had just taken over GM's sagging Delco Electronics division. Like its counterparts at Ford and Chrysler, Delco's sales were declining because serious audiophiles had begun ordering cars without factory-installed stereos so they could put in more sophisticated Japanese or European sound systems later. In 1979, following a four-hour session with Bose in Delco's Kokomo, Indiana, headquarters, Czapor said, ''Let's do it.'' Without so much as an order for a single unit, Bose committed $13 million and four years to the project. The deal caused consternation in Framingham. Remembers Bose: ''That was the only year Bose had losses. It scared heck out of the bankers. If we had been a public company, I would have lost my job.'' With those years fresh in his mind, Bose still refuses to take his company public despite almost monthly offers. He is sure shareholders would bridle at his research commitments. ''If you only focus on how to build a big business,'' he says, ''you tend to skip those things that will help you in the long run. Going public limits your creativity.'' This year the Delco/Bose stereo systems are available on 16 models, from the Chevrolet Camaro to the Cadillac Allante. Says Czapor: ''We have sold cars because of the Delco/Bose system.'' That fact has not been lost on the competition. Ford and Chrysler have teamed up with Harman International Industries of Washington, D.C. Ford uses Harman's JBL brand, and Chrysler carries its Infinity system. With GM's grudging acquiescence, Bose has made a deal with Japan's Honda Motor and is talking with several other automakers in Japan and Europe. By 1985 the growing use of stereo sound in TV sets gave Bose another idea. He approached major manufacturers to find one willing to let his engineers in on the ground floor. Zenith, the only major U.S.-owned company still making TVs in America, agreed. Bose used his Acoustic Wave technology. By folding the 80-inch tube inside the cabinet, he created a rich stereo sound while adding only an inch or so to the size of the set itself. The 27-inch Zenith/Bose starts at $1,399 but is selling so well that one dealer has complained that the price must be too low. BOSE HAS ALSO LEARNED the value of high-visibility marketing. When he heard news reports that Voyager pilots Dick Rutan and Jeana Yeager might wind up with impaired hearing after their nonstop round-the-world flight in an uninsulated light plane, he offered two sets of noise-canceling headphones. Bose had been testing them with the military for several years. Rutan and Yeager returned with no discernible hearing loss, and the publicity helped Bose begin negotiations with a European airline. The headphones electronically cancel background noise while letting through radio transmissions and, say, movie sound tracks. ''It's amazing,'' says Bose, who tested a set on a recent commercial flight. ''You put them on, and all that whoosh and rumble of cabin noise is gone. You hear nothing at all.'' Bose Corp., whose reputation is founded on quality sound, just may corner the market on quality silence.