FORTUNE CHECKS OUT 25 COOL COMPANIES FOR PRODUCTS, IDEAS, AND INVESTMENTS
(FORTUNE Magazine) – Try to be cool and you're Conan O'Brien. Stop trying, and CBS pays you $42 million to host the Late Show. Try to be cool, and you're 3DO. Stop trying, and you're Logitech, the company that decided computer mice weren't its thing but now ships more of them each year than mighty Microsoft. Build a better product -- or tell a better joke -- and the buzz can be about you. In an info-tech age that's fast losing its innocence (will the Justice Department drag Bill Gates into court?), each company in our roundup has qualities that can get you, well, inspired. That doesn't mean they're all big successes. Only some will conquer the universe and make you sorry you didn't invest -- or couldn't, since many are privately held. Info-tech companies don't have to be young to create amazing products, nor do their founders. The youngest executive at Infosafe Systems is 51. Elwood Norris, Geppetto-like head of Norris Communications, is 55 and has nine children. One factor distinguishes this group from a similar list we assembled last fall: the Internet. Mosaic Communications writes software for it, McAfee Associates sells products through it, and Enterprise Integration Technologies helps others transact business on it. The founders of Women's Wire met via the Net, a mode of introduction they refer to as "the Nineties blind date." Like every cool company since IBM in its glory days, these show an enviable aptitude for ignoring old rules. The CEO at one outfit saw no need for a headquarters, so didn't build one. Another company doesn't grant a set number of vacation days, telling employees to take time off when they get tired. A third asks customers to pay for software on the honor system and isn't particularly bothered if they don't. Cool companies, like cool people, don't waste time looking over their shoulder to see what the other guy is doing. by Stephanie Losee
MOSAIC COMMUNICATIONS (founded 1994) Software for commerce on the Internet Mountain View, California Sales: none Employees: 18 -- The Guru With the Cash: You're Jim Clark, 50, Silicon Valley Legend. You've just left Silicon Graphics, the company that brought 3-D computer graphics to workstations and to Hollywood. You're walking away with about $37 million in stock, not to mention any other money you've made in the dozen years since you founded the company. What to do? You've got a great yacht -- why not head off to Fiji again? Your old company is now making video servers and designing set-top boxes for corporate tests of interactive TV. But you think the real action lies on the Internet, which links 20 million people around the world and is growing, by some estimates, at a rate of 20% a month. You say, "Before the first 100,000 users have broadband-switched television services, there's going to be a multibillion-dollar commerce on the Internet." And you know how to start companies. Just hire a team of smart kids from a hot computing university like Stanford or the University of Illinois. After all, that's how you founded Silicon Graphics. The Hayseed With the Know-How: You're Marc Andreessen, 9 years old, a smart kid in New Lisbon, Wisconsin (pop. 1,450). You're bored. So you go to the library, check out computer books, and teach yourself how to write Basic, the programming language. This is before you've touched a computer. When you do get your hands on one, you write a math program that very day. When high school's finally done, you get out of New Lisbon and make for the University of Illinois, home of the National Center for Supercomputing Applications (NCSA). You put together a team and create Mosaic, a software program to help people navigate the Internet via hypertext links connecting information-rich computers around the world. In March 1993, you offer Mosaic on the Internet free. A year later, more than a million people are using it. Now you're 22. Enterprise Integration Technologies, a Palo Alto company interested in developing commercial applications of Mosaic, pays you big bucks, so you head west. A couple of weeks after you arrive, Jim Clark, the Jim Clark, sends you E-mail. He offers you a trip on his yacht. He offers you a job. You struggle with the decision for over a month. Your employer lays a guilt trip on you. You agonize, you play Hamlet. But, as that employer now acknowledges, "When you're 22, and Jim Clark calls and wants you to found a company with him, you do it." So you move to Jim's new office in Mountain View. You recruit your university pals. Now you're ready to make real cash. The Investor with Questions: Reading this story, you wonder, "How can I get a piece of this?" Because you know that Silicon Graphics has returned 33.6% annually since going public in 1986; that Mosaic is the hottest software on the Internet; that employees at companies like General Electric and J.P. Morgan are already using it; that commerce on the Internet may indeed grow as quickly as Jim Clark thinks it will. The problem is that this time, Jim's not the only one with the bright idea of creating and supporting Mosaic-based products for business use. At least eight companies have licensed Mosaic from NCSA for commercial development (see the following story for one). And some may offer products before Mosaic Communications does. So the field's wide open. But are you going to bet against Jim Clark? --Rick Tetzeli
ENTERPRISE INTEGRATION TECHNOLOGIES (1990) Software and consulting for electronic commerce Palo Alto Sales: $5 million (est.) Employees: 27 -- If you haven't figured out how to transact business on the Internet yet, don't feel bad. Until April, even technosophisticates like Intel and Hewlett- Packard didn't have a clue as to how to buy, sell, or collect payments on what is becoming the world's de facto electronic highway. They're getting their acts together only because Marty Tenenbaum is pushing them. "We needed to make the marketplace," says Tenenbaum, CEO of Enterprise Integration Technologies. EIT runs CommerceNet, a nonprofit consortium of more * than 50 companies that want to use the Internet as a medium for initiating, negotiating, and closing deals. While businesses have long conducted prearranged transactions over private networks -- banks settling with the Federal Reserve on the Fed's own network, for example -- they've been slow to take advantage of the wide-open Internet. This global web of networks hasn't been easy to navigate, and it hasn't been secure. CommerceNet may help change that. By adding privacy features to software like Mosaic, which the Internet navigation tool users can get free, CommerceNet aims to make it safe to exchange sensitive data. Chipmakers, for example, will be able to create on-line catalogues and adjust prices daily -- or hourly -- to reflect the ebb and flow of demand. A customer will hunt for the best deal from several suppliers and order by sending the equivalent of a credit card number "encrypted," or scrambled, over the Net. The seller will unencrypt the number, check the buyer's credit with an on-line clearing house, and ship the chips. Tenenbaum didn't set out to run a marketplace. After 20 years as a researcher at Schlumberger and other companies, he conceived of EIT as a software and consulting firm that would help businesses use the Internet to make transactions. By 1992, EIT's business was growing, but not very fast. EIT decided to stimulate commerce on the Net by getting everyone to agree to start doing business at once -- at least major Silicon Valley players such as Apple, Intel, and Hewlett-Packard. Then it signed up big regional banks to develop on-line mechanisms for billing, check-writing, and issuing letters of credit. Finally, EIT approached Uncle Sam for startup funds. "It was only natural to ask the government to take the last little bit," says Allan Schiffman, EIT's chief technology officer. "Cover the stuff that's not in any individual company's interest." EIT's pitch to the Technology Reinvestment Project, a multi-agency group that uses defense research dollars to try to make the U.S. more competitive, won it $6 million. Dealings on CommerceNet in its first few months have been limited mostly to information sharing. Coding systems to keep financial transactions secure won't be fully implemented until fall. That's when the Internet's first real marketplace should turn on its lights. --Jennifer Reese
WOMEN'S WIRE (1992) On-line service for women South San Francisco, California Revenues: N.A. Employees: 8 -- When Ellen Pack decided to leave her job as chief operating officer of a small Palo Alto software company to start an on-line service for women, there was no competition. No wonder -- although it seemed to her such a service was long overdue, 90% of Internet users are men. "All I heard was that women don't use on-line services," she says. "It was like a joke. Two shoe salesmen go to a tropical island. One calls his office and says, 'I'm coming back tomorrow -- no one here wears shoes.' The other one calls his office and says, 'Don't expect me back for a month -- no one here wears shoes!' " An on-line acquaintance suggested that Pack, 29, hook up with Nancy Rhine, 43, who was running a consulting business for telecommunications startups. Rhine had plenty of experience building communities, both electronic and real. She had spent the 1970s living at the Farm, a 1,500-member commune in Tennessee; after moving to the San Francisco Bay Area, Rhine eventually became a manager at the Well, the Internet's best-known on-line community. Computer industry regulars doubted whether the service that the pair envisioned would ever be more than a hobby. But focus-group research revealed many women to be eager for an on-line service -- as long as it was easy to use. Launched in January, Women's Wire features clear, simple graphics and makes the network seem so inviting that women call to ask what kind of PC they should buy to join. The service has 1,300 subscribers, each of whom pays $2.50 or more per hour to participate in any of 240 on-line conferences. These chat groups range from Sappho & Friends, which addresses concerns of lesbians, to Culinary Corner, which includes recipe tips. For women working at home, Women's Wire serves as a kind of virtual water cooler, a forum for networking and research. Business people looking for feedback from women can simply log on and ask for it, as did a Jockey underwear executive who in response was mobbed with complaints about scratchy tags. Nonprofit organizations can post solicitations at no extra charge; businesses that want to advertise will have to pay an as-yet- undetermined fee to participate in a Marketplace section of the service starting this fall. Women's Wire is a decidedly low-rent operation. Headquarters consists of a great room filled with desks and PCs, plus two offices for the founders. Pack and Rhine are counting on revenues from advertisers, coupled with increasing numbers of subscribers and 55% margins, to make the service a force in the on- line world. Pack expects to have 10,000 subscribers within a year -- what she considers the company's breakeven point. All forums but Sexuality are open to men, who comprise 10% of subscribers. (The Sexuality forum's moderator checks participants' genders by phoning them when they join.) Are the founders worried that men will become too intrusive? Says Rhine: "If men want to come on-line and read about menopause or child-raising or bras, they can, but I think there's not a lot of super- interesting stuff for them." -- S.L.
RSA DATA SECURITY (1982) Data encryption Redwood Shores, California Sales: $5 million$10 million (est.) Employees: 30 -- The battle over how to ensure the privacy and security of communication in cyberspace pits the spy masters at the National Security Agency, with thousands of people and a budget said to be in excess of $10 billion a year, against a small, privately held California company. Nearly everyone in Silicon Valley seems to be rooting for the little guy. RSA is a darling of libertarian hackers because it sells a way to keep digital exchanges indecipherable by unwanted eyes -- including those of Big Brother. The NSA wants makers of computer and communications gear to deploy its so- called Clipper chip. If the technology works -- a big if, according to the latest research -- Clipper would make it possible for the feds to read the e- mail of citizens and businesses. The rationale: The government wants a way to keep crooks and terrorists from using cyberspace with impunity. Jim Bidzos, RSA's president, thinks that's a ridiculous argument: "It's a little like the FBI in the 1940s saying, 'An interstate highway system? Are you kidding? Do you know what kind of interstate crime that would facilitate?' " Bidzos claims that the NSA has threatened many companies with the loss of government contracts if they use RSA's technology. Nonetheless, RSA's roster of clients is a who's who of the computer industry, including Microsoft, Apple, Motorola, Novell, IBM, DEC, and Hewlett-Packard. RSA was founded by MIT mathematicians Ron Rivest, Adi Shamir, and Len Adleman. They're brilliant scholars but inexperienced businessmen. The company quickly overdosed on debt and was near collapse by 1986, when it got its big break: a deal with Lotus to put encryption into the product that became known as Notes. RSA generates its codes by multiplying large prime numbers; in theory, breaking them is a matter of mere arithmetic. But the task requires such a mind-boggling amount of computing that it's not worthwhile for thieves. As a kind of market research, RSA publishes sample codes and challenges hackers to break them. It has paid out some $100,000 in rewards to those who have succeeded over the years. But to collect, the code breakers must tell RSA how much computer power they applied over how long. This way, RSA can advise clients on how much encryption they need to stay ahead of potential crackers. A team led by Bellcore researchers recently broke a 129-digit RSA code by dividing the work among 600 people running 2,000 workstations over the course of eight months. Not to worry: Most financial institutions protect their data transmissions using codes of over 150 digits, which are at least 20 times harder to break than the one tackled by Bellcore. "Encryption is like condoms," says Bidzos. "I can't guarantee it's working, you don't know it's working, but you're a lot safer with it." -- Alan Deutschman
LOGITECH INTERNATIONAL (1981) Add-ons for PCs Fremont, California Revenues: $300 million Employees: 2,400 -- "We didn't want to be in mice," says Pierluigi Zappacosta, the president of Logitech, referring to computer mice, naturally. "They seemed to be beneath our intelligence. We wanted to be a software company -- like Microsoft." Yet Logitech, the company Zappacosta founded with chairman Daniel Borel, now produces almost 20 million mice a year, or one every 1.6 seconds. That makes Logitech the world's foremost mousemaker. The runner-up? Microsoft. How did two guys who didn't want to touch a mouse end up breeding them like rabbits? "We learned that small things are not always simple, or unimportant," Zappacosta says. Indeed, the lowly mouse turned out to be a critical step in the evolution of PCs, and progenitor to a host of ever more sophisticated peripheral devices that Logitech manufactures and calls "senseware." In effect, Borel and Zappacosta have expanded to make the eyes, ears, and voices of computers in as many forms as they can imagine. They even believe they might someday make a nose -- a chemical sensor that would let a PC sniff its master's mood. Logitech has mice for people who are left-handed or right- handed. There is a mouse for children -- in the shape of a real mouse. There is a cordless mouse that uses radio waves instead of the usual infrared, so objects on a messy desk can't block communication with the computer. And there is a 3-D mouse that lets the user appear to move behind objects shown on screen. This rodent costs $1,000 and is employed with computer-aided design systems. Logitech also makes videocameras and still cameras, 3-D joysticks, trackballs, scanners, and soundboards. Zappacosta believes the proliferation of specialized sensory devices has just begun: "We are like the packaged-goods industry before there was packaged coffee, ketchup, margarine." He says the Holy Grail for his company -- although he may not live to see it attained -- is a direct brain-to-computer link. Borel, who is Swiss, and Zappacosta, who is Italian, met while studying computer engineering at Stanford in the 1970s. Smitten by the entrepreneurial enthusiasm of Silicon Valley, they dreamed of "transplanting that flower to Europe." But there was no venture capital to speak of in Europe then, Zappacosta recalls, and bankers wouldn't lend millions of dollars to 27-year- olds. In 1981 the pair managed to get the rights to sell a Swiss-designed mouse in the U.S., and Logitech was born. Last year the company earned $6.3 million. Though it is headquartered in California and Borel and Zappacosta have appeared recently at U.S. investment conferences, Logitech's shares trade only on the Swiss stock exchange. -- Peter Nulty
RADISH COMMUNICATIONS SYSTEMS (1990) Software that marries telephones and PCs Boulder, Colorado Sales: N.A. Employees: 50 -- Radish co-founder and Chairman Richard Davis wants to change the way you use your telephone now. No need to wait for digital phone lines or the two-way cable TV systems of tomorrow. In a few months you should be able to hook both your phone and PC to a Radish-equipped modem and be ready to talk and share files onscreen all in the same call. Modems equipped with the company's VoiceView technology transmit data in bursts, interrupting the conversation for two or three seconds to send a page's worth of text or simple graphics. Some of the biggest names in modems and voice-processing equipment think it's a winning approach. U.S. Robotics, Hayes Microcomputer Products, Intel, and eight others plan to incorporate VoiceView in upcoming products. Davis, 49, says he had the idea for VoiceView while trying to make airline . reservations: "The travel agent was reading the information off her screen, and I was trying to copy it down as fast as I could. When I hung up, I thought, 'There must be a better way.' " After 21 years working on phone systems at AT&T Bell Laboratories, he already knew of one better way -- ISDN, the digital network some carriers are beginning to install, but he felt it was coming too slowly. Why not try to give consumers the best features of ISDN over existing lines?
Funding for Davis's vision came first from the sale of his beloved 1978 Porsche 911, then from family and friends at his wedding to Theresa Szczurek, a former AT&T marketing manager and Radish's co-founder. (The guests bought Radish bonds that they later exchanged for stock options.) But by late 1991, funds were low. Venture capitalists, worried about the couple's lack of management experience, suggested they hire a professional. Enter CEO David Klein, 51, a startup veteran who helped Xerox launch its first fax machine. One of Radish's earliest products was a modem-plus-display-screen aimed at stockbrokers and travel agents. Customers were reluctant to invest $600 per user in proprietary equipment from a company no one had ever heard of. So Klein and Davis set out to make VoiceView an open standard, licensing manufacturers to use the VoiceView protocol (techspeak for instructions that tell the modems how to communicate).
Getting the attention of industry heavies like Hayes was a challenge, until a Microsoft executive saw VoiceView at a trade show. In February, Microsoft promised to advise 300,000 Windows software developers on how to add VoiceView to their products. VoiceView-equipped modems are due to appear this fall. Even AT&T is giving its ex-employees the nod. It will make its Voice-Span system, which lets users talk and exchange data simultaneously, compatible with Radish's. --Alison L. Sprout
MAXIS (1987) Simulation software Orinda, California Sales: $23 million Employees: 95 -- Here's a sure way to make money: Sell software that lets people play God. Environment-simulation software from Maxis, the maker of SimCity 2000, makes you a city planner, mayor, and deity by letting you create and control a city right on your screen. You can sculpt the terrain, adding hills, trees, and lakes. Using a wickedly deflated currency -- a hydroelectric plant costs just $400 -- you build highways and hospitals for your inhabitants. But once you've set the simulation in motion, you have to live with the consequences of your choices. Build parks, and the resident Sims will cheer. Construct enough police stations that crime is reduced to a memory, and the Sims may rebel -- paying all those cops pushes up taxes. Co-founder and CEO Jeff Braun, 38, fell in love with simulations by playing with a program called Little Computer People on an Amiga computer in the mid- Eighties. The game involved an animated character whom the user could observe onscreen, moving about his little house and performing tasks like decorating a tree at Christmas or setting off fireworks on the Fourth of July. It was the user's job to feed the little guy by tapping the space bar; the fellow would pound on the screen if he didn't get his meal. Braun became perversely determined to "starve" the character to death -- no quick task, since the game operated in real time. Even after Braun put a message on his screen saying not to feed the little man, his co-workers would take pity and try to foil his plan. Braun recalls: "I finally got it to the point where he's passed out on the floor, dead, and it was just so cool." A new genre was born. Meanwhile, co-founder Will Wright, 34, invented SimCity as a freelance programmer for Broderbund. The company rejected the game because there was no way to win. Clearly, Br--derbund didn't appreciate the allure of creating a universe; Maxis has sold millions of copies of SimCity and sequels like SimEarth, SimFarm, and SimAnt (it turns your PC into a simulated ant colony). The programs typically cost $50. With sales growing 70% a year, Maxis has ambitious plans. It wants to hook customers on SimWorld, a greatly enhanced fantasy that will allow them to follow their interests no matter how unlikely. If you always wanted to run an Army base, you'd buy a military module and worry about how federal budget cuts will affect your funding. Or buy the local newspaper next, and try to torpedo the budget proposal by publishing hawkish editorials. By the time you've lived out all your dreams you'll be several hundred dollars lighter in pocket, and that's why Maxis is gearing its R&D toward SimWorld. The first modules won't come out for about two years. In the meantime, Maxis will market add-ons for SimCity, such as a program that lets you draw landmarks to add to your burg. Eventually players will be able to situate their SimCities in SimWorld -- but not the other way around. -- S.L.
McAFEE ASSOCIATES (1989) Network security management Santa Clara, California Sales: $28 million Employees: 105 -- Software maker McAfee Associates may have mastered the Zen of business. Says CEO Bill Larson: "Our perspective is that if you surrender your desire for making money, the money will come back to you." This isn't just talk -- McAfee offers its VirusScan products on on-line services for free evaluation, asking customers who continue to use them to pay on their honor. McAfee cheerfully offers technical support and free monthly upgrades to thieves and paying customers alike. If this business model sounds like a prescription for disaster, consider a few numbers. McAfee (pronounced MAC-a-fee) has a pretax profit margin of 65%. Revenues per employee hit $400,000 in 1993. The company commands a 67% market share in anti-virus software -- programs that block dangerous code from finding its way into your computer through your modem, your office network, or a contaminated floppy disk, and destroy any virus that does get in. Some viruses, like the Stone bug, put harmless messages on your screen ("your PC is now stoned"); others trash every file on your hard drive. McAfee has maintained its dominance in the face of Symantec, a rival nearly ten times its size. Not bad for a company that claims to have forsaken material goods. Founder John McAfee, 48, was living in tract housing when he invented one of the first programs to fight computer viruses in 1987. Now he lives in a multimillion- dollar beach house in Santa Cruz and serves as chairman and enforcer of the company's Taoist principles. McAfee recently fought with Larson over the latter's decision to shrink-wrap the software and sell it in stores. "John told me that software is electronic moments and shouldn't be harnessed on disk," Larson says. He convinced the chairman by adding -- at no extra charge, naturally -- a program that automatically dials on-line services where users can find more McAfee software for free evaluation. Until this year McAfee focused exclusively on combating viruses. It collected the latest specimens sent by customers around the world, cooked up cures, and offered monthly updates for its products, which kill 98% to 99% of the viruses they encounter: VirusScan software for stand-alone PCs and workstations, and NetShield for networks. But Larson, a marketing veteran of Apple Computer and Sun Microsystems, wasn't satisfied. Says he: "We can get to $50 million in annual sales on just anti-virus software, but not $100 million." To vault McAfee into that range, Larson decided it should offer more products to its primary customers, administrators who run corporate computer networks. This year McAfee bought a pair of network-management software companies; it now offers a dozen software tools to help automate network management. Some of the programs cost thousands of dollars, but McAfee still offers them all on a free-trial basis. What will McAfee do if some hacker invents an incurable virus that renders its flagship products useless and cripples its growth? One thing is sure, Larson says: The company will never hire former virus writers to crack the codes. Says he: "The question is, are you on the side of good or are you on the side of evil?" -- S.L.
CISCO SYSTEMS (1984) Equipment for company networks San Jose Sales: $649 million Employees: 2,200 -- Wall Streeters are always looking for a stock with a good story behind it. Well, here's Cisco with not one good story but four. No wonder it was the darling stock of the Nineties until investors got spooked two months ago. Story No. 1: an aw-shucks entrepreneurial origin. Leonard Bosack and Sandy Lerner were husband and wife working in different departments at Stanford University. Each department had a local area network, but they weren't connected, making it hard for the couple to share data. The only available solutions were expensive hardware intended for mainframes. Frustrated, Leonard and Sandy enlisted some grad students and developed a device called a router that connects PC networks for a fraction of the price. They bought the rights to their invention from Stanford and founded Cisco. Eight years later the pair retired rich, leaving the company to professional managers. Story No. 2: a sexy product pitch. Every company downsizing from mainframes to so-called client-server networks needs routers to stitch its departments together for companywide file sharing and e-mail. Routers are also indispensable for any cost-conscious company wanting to connect its internal network to the kudzulike Infobahn. Story No. 3: market dominance. Cisco commands more than 50% of the router business and is more than twice the size of its nearest competitor, Wellfleet. Under CEO John Morgridge, 61, the company cultivated demand by introducing products that knit together many types of networks. It also built a market for routers abroad. No one is likely to break Cisco's dominance soon. Embedded in its routers is a formidable barrier to entry: proprietary software that solves networking problems few others have been able to crack. Over the past three years, well- heeled rivals like IBM have been lured into the router market by Cisco's fat margins. None made more than modest inroads. Story No. 4: socko numbers. Revenues have roughly doubled each year since 1990; Cisco's net margin last year was 26%. The company's stock market performance makes it one of the great missed opportunities for investors who did not buy early: its shares have appreciated some 30-fold since it went public in 1990. In four years, Cisco has become a bellwether for the entire networking industry, says George Kelly, a managing director at Morgan Stanley. Being a bellwether cuts both ways, as shareholders discovered in May. Cisco reported a slight tapering of its growth, triggering an abrupt 20% drop in its stock and those of a dozen other networking companies. Kelly and other influential analysts simply reiterated their buy recommendations. Based on Kelly's estimate of 1995 earnings, the stock now sells at a multiple of only 11. That story, he contends, speaks for itself. -- Dan Lavin
INFOSAFE SYSTEMS (1993) Data meters New York City Sales: N.A. Employees: 17 -- They call themselves "the over-the-hill gang" because the youngest executive is 51 and the oldest 67. They operate in an unlikely setting for high-tech pioneers: a skyscraper one block from New York City's bustling Grand Central Terminal. Infosafe Systems is chipping away at a problem that has inhibited publishers and other traditional information providers from entering the digital age: how to control and meter the delivery of data via telephone or CD-ROMs. Publishers need a way to market their huge inventories of "content" electronically. They'd like to be able to retail it piecemeal, billing customers for each chapter, article, photo, map, or table they use. And they want to avoid intermediaries like Compuserve and Prodigy that typically keep 60% to 80% of what subscribers pay for data. Infosafe's alternative is a data meter that attaches to a PC and a phone line. About the size of a cable TV converter box, it incorporates a modem, encoding and decoding chips, and memory circuits that keep track of billing information. The customer uses the box to download data directly from the | information provider or to release information encoded on a CD-ROM. For example, a disk from Infosafe's first client, International Typeface Corp., offers 4,000 typefaces, pieces of art, and photographs; artists whose PCs are equipped with a CD-ROM drive and an Infosafe box can browse through the disk and buy the items they need. Infosafe licenses its system to information providers and collects a royalty from each subscriber. A key selling point is ease of use. Ten minutes is all a customer needs to install the software that activates the data meter. The meter is utterly simple: It has no knobs, switches, or buttons, just two tiny lights -- green ("all is well") and red ("call Infosafe"). Says co-founder and CEO Thomas H. Lipscomb: "We come from businesses like book and magazine publishing where people are interested in making money, not in flashing lights and vertical lines on the screen." Former CEO and publisher of the New York Times Book Co., Lipscomb, 55, met his co-founders at parties or through friends. Chairman Alan Alpern, 67, is a lawyer, investor, and marketing executive; technology chief Robert Nagel, 58, a noted computer scientist and brain researcher. They recruited Massimo Vignelli, 63, a well-known Italian-born graphic artist whom Alpern's late wife had met. What the over-the-hill gang members foresee makes them feel young: a huge market in corporations, law and accounting firms, libraries, and schools. Such customers, says Lipscomb, spend as much as $15,000 a year for on-line information, vs. $150 for the typical subscriber to services like America Online. By going after "low hanging apples," as Lipscomb calls the fat targets, Infosafe expects to earn its first operating profit next year. -- Gene Bylinsky
LUCASARTS ENTERTAINMENT (1982) Videogame software San Rafael, California Sales: N.A. Employees: 120 -- No sign identifies the headquarters of LucasArts, which occupies a set of low-rise buildings in an office park some 20 miles north of San Francisco. The Lucas people took down the signs years ago because rabid fans would come snooping around, prying for clues about how the auteur's epic Star Wars films would unfold. While they wait for the remaining six installments in the projected nine- film series, some one million devotees of Luke Skywalker indulge their fantasies by playing videogames that immerse them in the Manichaean world of the films. LucasArts is a hot publisher of games for PCs, Macintoshes, and + Sega and Nintendo machines. The games use 3-D graphics and lots of film footage -- some borrowed from the trilogy, some brand-new -- to make the player feel as if he's a fighter pilot in the cosmic struggle. Sales are as hot as Han Solo's temper. Last December, Rebel Assault sold over 100,000 copies in its first month on the market. In June, LucasArts came out with Star Wars Screen Entertainment ($36), a nifty program that includes screensaver animations (in one, Obi-Wan Kenobi and Darth Vader spar with light sabers across your screen), trivia about the characters, a copy of the original screenplay and artists' storyboards -- and a message from Lucas himself offering teasing hints about upcoming movies. (Colleagues say the director has the rest of the Star Wars story worked out in his head and speculate that he'll make the next installment by May 1997, the 20th anniversary of the original flick.) Beyond its mandate for exploiting the fecund piece of intellectual property that is Star Wars, LucasArts has been turning out original and delightful titles that appeal to adults who aren't into flying or shooting. Example: Sam and Max Hit the Road ($48), a zany adventure starring an unusual pair of detectives -- a dog and a rabbit. Based on comic books by underground artist Steve Purcell, this solve-it-yourself mystery mockingly imitates the patter of film noir as the characters travel to imaginary, wacky tourist attractions around the country to solve their case. Even in mid-afternoon, eerie darkness pervades the LucasArts offices. Blindsblock out the California sun as game designers gaze at PC screens. President Randy Komisar, 39, got hooked on working with creative people in the mid-1970s, when he began his career by promoting concerts for rock artists such as Elvis Costello and the Grateful Dead. He went on to earn a law degree from Harvard and worked as a lawyer at Apple. His boss, George, as everyone calls him, plays the role of counselor, mentor, and visionary. When it comes to creating software, the Force is with these guys. -- A.D.
NORRIS COMMUNICATIONS (1988) Inventions Poway, California Sales: $8 million Employees: 138 -- Eureka and gadzooks! At Norris Communications, good, old-fashioned, I'll-be-out-in-the-garage-Honey inventing is alive and well. That's because founder Elwood G. "Woody" Norris, 55, is a tinkerer who squirts out ideas the way a lawn sprinkler sprays water on a hot summer day. His latest brainstorms include the EarPhone, which combines a speaker and a microphone in a peanut-size device. The microphone detects the voice of its wearer through vibrations of the bones of the skull but doesn't set off the screechy feedback that usually occurs when microphones and speakers are in close proximity. Apple Computer is using EarPhone in a hardware and software package that enables a Macintosh to dial phone calls, send faxes, and play voice mail. Another creation, Flashback, is a palm-size voice recorder that works with no tapes and no moving parts. It incorporates flash memory chips -- circuitry from Intel that, unlike ordinary random-access memory, doesn't forget everything when the power is turned off. Similar recorders are on the market, but they hold only a few minutes of conversation. Flashback can pack up to two hours of conversation into a four-megabyte cassette slightly larger than a poker chip. Users can dump the data from the recorder into any computer that accepts PCMCIA cards, or transfer voice mail from a computer to Flashback. The device, with 30 minutes of memory, will cost about $200 when it hits the market in August. Norris is a classic inventor: too busy and full of ideas to finish school, but smart as a whip. He spent 11 years at the University of Washington, studying engineering, philosophy, and business. He wanted business training because, he says, "inventors die poor." After he sold a device he called a "transcutaneous doppler" (an early version of sonogram) for $300,000 in 1970, Norris left the university and set up shop in his garage in Poway, 15 miles north of San Diego. He invented a digital sparkplug and sired nine children, six of whom work for him. For its bread and butter, Norris Communications assembles electronic parts for clients such as Kodak and IVAC, a division of Eli Lilly that makes digital thermometers. It can be a rocky existence. Last year the company lost some $5.7 million as it moved to larger quarters and geared up to manufacture Flashback. Yet Norris is exuberant. "We haven't invented anything yet," he says. "It's just beginning." He has engineers at work on flash memory for digital music recording and for a digital camera.--P.N.
VERIFONE (1981) Transaction automation systems Redwood City, California Sales: $259 million Employees: 1,800 -- Even if you've never heard of VeriFone, you may be one of its best ; customers. It builds those little boxes that sit on retailers' counters and authorize credit card transactions. The company holds an intimidating 60% of the U.S. transaction automation market. All this, and VeriFone doesn't even have a proper headquarters. The company is a near-virtual organization in which employees scattered among 30 global offices keep in constant touch via computer. The company's outward focus comes from the charismatic leadership of CEO Hatim Tyabji, 49, a soft-spoken native of Bombay who lunches on Kit Kats and potato chips. Tyabji spends 85% of his time on the road visiting as many as 200 customers a year. "There isn't an opportunity our competitors can discover before I do, " he brags. One example of an opportunity exploited is SmartCash -- which VeriFone is introducing next year in a joint venture with Gemplus in Gemenos, France. Smart cards are already popular in that county. SmartCash allows users to conduct transactions under $20 by means of a plastic card. Stick the card into a reader on the merchant's counter, and your purchase is deducted from the card. Once the amount on the card is used up, you can replenish it at an ATM- like machine. The consumer doesn't have to carry around pesky coins, and the merchant saves cash-handling costs, which may eat up 2% of a transaction's value. VeriFone boasts about its computer network, but don't envision the shiniest new technology. In fact, most of the company's business is conducted on dusty DEC VAX machines. Even so, its software provides employees an awesome amount of information. Every night, at midnight Pacific time, VeriFone collects data on each division's progress and broadcasts it on the system. About 30% of the VeriFone staff spend half their time on the road, but they're never out of touch. All traveling VeriFoners get a laptop of their choice, which they are expected to hook up to the main network many times each day. Thus critical projects can be passed without pause from worker to worker, time zone to time zone -- incurring nary an hour of overtime. Recently, for example, senior vice president William Pape put a plan on his system at the end of a Friday in Santa Fe. Through the night, employees in San Francisco and then Honolulu reworked the plan. Says he: "When I logged in Saturday morning, I had a totally new document to play with." In part because of its heavy investments in travel and technology, VeriFone's sales have grown on average 25% a year since 1988. And soon the public might actually learn the company's name. In May, VeriFone introduced the Folio, a portable device designed to mimic the sleek folders in which tony restaurants present their checks. It allows diners to pay their bills electronically with a credit or ATM card right at the table, saving time and sparing the restaurant the uncertainty of authorizing the charge before the customer fills in the amount of the tip. -- S.L.
COLLABRA (1993) Groupware Mountain View, California Sales: none Employees: 18 -- Rich Waters had a problem that many managers today could relate to. A marketing vice president for A.C. Nielsen, he wanted to foster teamwork among widely dispersed sales people and other employees. They were using e-mail for one-to-one communications, but Waters wanted on-line group discussions. He envisioned an electronic bulletin board on which far-flung team members could pool information and talk shop. Unlike a basic electronic bulletin board, this one would organize the information. If you wanted to see all the postings on a topic -- the quarterly sales meeting, say -- you wouldn't have to scroll through unrelated chitchat; messages about the meeting would be in a file reserved for that subject. What Waters needed was electronic forum software, a type of groupware, programming for networks that supports just such collaborative work. What he didn't need was Lotus Notes, the only option on the market. At $495 per user, Notes offered many features Waters just didn't want. It also required a whole new e-mail system, and Nielsen's was working just fine. Why replace it? Last year at a software industry meeting, Waters met people from a tiny new company, Collabra, who seemed to want to do one thing: solve Rich Waters's problem. They were developing software to link scattered computers into electronic groups -- not by replacing existing e-mail but by adapting to it. Their software, Collabra Share, was in its modest way revolutionary. "The minute I saw the way Share was executed, I said, 'This is my answer,' " Waters recalls. It didn't hurt that Share cost just $69 per user. How could a startup solve Waters's problem so neatly? CEO Eric Hahn, 34, a former Lotus vice president, had studied the market before founding the company and had met a lot of people like Waters. Says Hahn: "Companies told me: 'We've invested a lot of money in e-mail, and we'd like to get more out of it. We don't want to scrap it all to deploy Lotus Notes.' " So far Collabra has installed Share on a trial basis at 12 companies, including Nielsen, and feedback has been positive. This should come as no surprise: The company was listening to customers before it had any. --J.R.
PF. MAGIC (1991) Videogames San Francisco Sales: N.A. Employees: 25 -- Parents of videogame-addicted kids, brace yourselves for this September's phone bill. That month AT&T will introduce the Edge 16, a $150 gadget that hooks up Sega Genesis machines and phone lines so kids can play games against each other while talking, as if they were in the same room. But don't spend all your ire on AT&T. Partly at fault is tiny PF. Magic, the inventor of this new obstacle to homework. Co-founder John Scull, 38, is an Apple Computer alum who worked closely with John Sculley and complains that he mistakenly received quite a few of his boss's phone calls but none of his paychecks. The son of a Baptist missionary, Scull says his childhood in Indonesia and Singapore turned him into a permanent game nut. Says he: "Over there, games are not little kids' stuff; 45-year-old men play marbles, winner take all. And you had to make your own games -- in Indonesia you didn't go to Toys "R" Us and buy stuff." Scull, who heads marketing while co-founder Ron Fulop, 35, oversees R&D, claims that PF. Magic's strength is "constraint design" -- creating a great experience within the limits of current technology. One example is the upcoming Ballz, the only 3-D fighting game available for the Sega Genesis system. Until now, true 3-D -- involving characters that both look three- dimensional and move in three-dimensional space -- have been almost impossible to pull off on systems like Sega's and Nintendo's. Reason: The consoles don't have enough processing power or memory to quickly resize 3-D characters as they move. PF. Magic solved the problem by creating villains constructed entirely of spheres, who bloodlessly break apart and then reassemble whenever they receive a direct hit from an opponent. Balls are easier for the computer to recalculate than irregularly shaped human body parts. PF. Magic's employees seem immune to the amnesia adults suffer when they try to remember what it was like to be a kid. The company's office in San Francisco's warehousey Multimedia Gulch is covered from floor to ceiling with toys of every description, from stuffed animals to Chutes and Ladders. Says Scull, apparently unaware that not all employees may yearn to fill their offices with G.I. Joe dolls: "I want this to be a place where they feel comfortable. People spend a lot of their time here." Even the company name is like a grammar-school secret password; you have to either join the company or buy the company to find out what it means. (The betting is on Pretty F-ing Magic.) It's certainly a culture that promotes productivity; PF. Magic has more paradigm-breaking games slated for release this year. One is PaTaank (pronounced Puh-TONK), whose name is an onomatopoeicism for the sound of impact. PaTaank is a point-of-view pinball game, which means you're the ball. You crash into bumpers and go careening through tunnels to change play levels, all the while pressing controls that help you change direction and avoid falling into the drain. And yes, it does give you motion sickness. --S.L.
ITERATED SYSTEMS (1987) Digital image compression Norcross, Georgia Sales: $7 million Employees: 65 -- Who would quit jobs guaranteed for life to build a company around a set of equations? Who else but two mathematicians. Alan Sloan and Michael Barnsley, both tenured professors at Georgia Tech, decided that their arcane field of fractal equations had enormous potential in the real world of digital imaging, especially in compressing the vast amounts of data needed to produce moving images on computer screens. When Iterated opened for business, compression was small potatoes. But the founders could see that coping with image data will pose a fundamental challenge for any new information infrastructure. Sending video data down a wire is to the 1990s what sending sound down a wire was to the 1870s, when the telephone was invented. The traditional approach to storing images on computers takes its cue from printing: Reproduce a picture using lots of little dots, step back, and it gives a reasonable impression of the original. Want more realism? Add more dots. This is called a bitmap model. Technologists employ various schemes to cut the amount of data required to store the dots. But Sloan, 48, and Barnsley, 47, believed it possible to forgo the dots entirely and break down images into fractal equations. Fractals are arcane math formulas that seem uncannily suited for describing the convolutions of nature, such as a fern frond or the jagged outline of a mountain ridge. For compressing images, fractals can be much more efficient than bitmap techniques.
Like true academicians, the pair found their first customers and attracted venture funding by writing scholarly articles in computer magazines. Iterated developed a hodgepodge of software development tools as well as hardware and software for technical markets. More important, it poured money into R&D, building up a trove of patents. Microsoft uses Iterated formulas in its Encarta encyclopedia CD-ROM; Berkeley Systems uses them in some of its popular screen saver programs. In 1992 the U.S. government awarded Iterated a $2 million grant to apply fractal compression to HDTV. Lately Iterated has jumped into the market for security systems. It sells a $495 circuitboard that can send video from a surveillance camera over ordinary phone lines. All this helped the fledgling company more than double its sales in 1993. Sloan and Barnsley realized that they needed professional management. Recently they recruited John Festa, 43, an executive from an Atlanta transaction- processing services company, as CEO. Who would hire someone from a number- crunching operation to run an image processing company? You guessed it. Two mathematicians. --D.L.
SCIENTIFIC COMPUTING ASSOCIATES (1980) Software for idle workstations New Haven Sales: N.A. Employees: 20 -- Arguably the most underused resource in business today is not a vice chairman's time or corporate jets, but PCs and workstations that mostly sit idle. Hard data on utilization of such machines in corporations are lacking, but estimates put them at only 10% to 20% during the day and virtually zero at night. Yet many companies are buying more desktop systems -- whose destiny is to be equally underemployed. Scientific Computing Associates has leaped into this gap. Its Linda software is designed to patrol an office network, taking over idle computers and orchestrating them into an ad hoc parallel processor equal in might to a mainframe or even a supercomputer. Founded by two Yale professors to serve the oil industry, the company began offering Linda in 1990 and boasts users at some 400 organizations, many of them FORTUNE 500 companies. IBM, Hewlett-Packard, and Intel offer Linda for use with their machines. The software runs only on networks of workstations now; versions for PC networks are scheduled for release later this year. Geophysicists at Phillips Petroleum use Linda to construct images of underground formations; financial experts at ITT Hartford Life analyze bond portfolios. Some Wall Street firms, after testing supercomputers against Linda, have forgone purchases of the big machines in favor of Linda. No wonder: Instead of spending $2 million to $5 million on a supercomputer, a user can get the same power from a $5,000 basic Linda program and as few as ten workstations that cost $20,000 each. In principle, there's no limit to how many workstations Linda can link. A major manufacturer that asks to remain unnamed for competitive reasons connects more than 300 workstations with the program. What's Linda's secret? Her creator's genius. Linda is the brainchild of David Gelernter, the Yale computer scientist who was nearly killed last year by a crank's letter bomb. Gelernter, 39, serves as a consultant to SCA; he began working on Linda as a graduate student in the 1970s. An iconoclast, he named the program after Linda Lovelace, the porn-movie star. (It was a complicated pun on an earlier computer language, Ada, named after Ada Lovelace, a pioneering 19th-century programmer who collaborated with Charles Babbage, inventor of a mechanical computer.) Linda frequently checks how heavily each computer on the network is being used. If you daydream at your keyboard or turn away to talk on the phone, Linda will assign your workstation a task. But she'll cede control the instant you touch your keyboard or mouse. "Elegance in writing software is achieving maximum functionality from minimal complexity," says Gelernter. "It's the same as good prose -- getting the most value from each word you write." He may well have composed an elegant new chapter in computing. -- G.B.
INDIGO (1977) Digital offset color printers Eindhoven, The Netherlands Sales: $31 million Employees: 550 -- In the annals of printing, right beside the Gutenberg Bible there may be a place for a full-color sales brochure from Indigo. The company has developed the first digital offset color printer, the E-Print 1000. Its aim: to combine the convenience of laser imaging with the quality of a traditional offset press. Offset printing produced the page you are reading; it involves creating master copies, or plates, that transfer ink to rubbery rollers, which in turn press the image onto the page. Indigo's edge is in its ink. Benzion Landa, a Canadian-born inventor, founded the company to try to develop a liquid ink that would work with electronic printers. Laser printers use dry toner, which limits their resolution and speed. Industry heavies Canon and 3M joined the race but eventually gave up. Landa found the formula in 1983. Ordinary ink particles, viewed under a microscope, look like marbles; Indigo's look like jacks. In the E-Print, the ink gets attracted to the images a laser traces on a charged metal drum, just as toner does in a laser printer. The ink is then transferred to a roller where it is heated slightly and becomes a film one-millionth of an inch thick. The roller presses against paper, depositing the film. The E-Print makes color images by superimposing films of different hues. It can crank out 30 letter- size pages a minute, vs. five for a color laser printer. Because it is digital, the E-Print has advantages over an offset press. The press needs professionals to make plates, balance inks, and supervise, while the E-Print can be operated from a workstation or PC. Color offset is too expensive for jobs of fewer than 5,000 copies, whereas at a cost of roughly 25 cents a page -- about the same as a color copier -- the E-Print can handle even small jobs. Indigo has shipped 45 E-Prints at about $500,000 each, mostly to printers. In January the company opened a sales office in Woburn, Massachusetts; its R&D and manufacturing remain in Rehovot, Israel, where Landa, 48, lives. Competitors may have a hard time catching up. Landa holds more than 200 patents that protect both printer and ink. That was enticement enough for investor George Soros, who paid $50 million for a minority stake. Landa himself boasts about Indigo's prospects: "We're going to have the same kind of product Xeroxhad from '59 to '74." That's not the first time an entrepreneur has touted his company as the next Xerox, of course, and ordinary investors still need to be convinced. Since Indigo went public on May 25, its stock, which trades over the counter, has sagged from $20 to around $16 a share. -- Justin Martin
DAVINCI TIME & SPACE (1994) Interactive TV network for children San Mateo, California Sales: N.A. Employees: 13 -- DaVinci co-founders Carol Peters and Jeff Apple knew their business plan would be a tough sell. They wanted venture capital to produce interactive TV software for children, what Peters calls "a product that didn't exist for a technology that didn't exist in an industry that didn't exist." Their resumes persuaded investors to put pen to checkbook. Apple, 45, produced the film In the Line of Fire, besides producing and directing over 1,500 TV commercials. He also developed the Shopping Channel, the first interactive shop-at-home cable TV program, in 1981. Peters, 47, is an artist and engineer who spent 16 years at DEC and went on to lead the team that designed the successful Iris Indigo workstation for Silicon Graphics. Three months after hitting the venture capital circuit, the pair had nearly $5 million in their pockets. The money is paying for the beginnings of an interactive channel for boys and girls ages 3 to 12. The goal, say Peters and Apple, is to create a virtual reality for kids to play and learn in, not just a bunch of computer games transferred to TV. Using a remote control, kids will explore a theme park filled with trails and playgrounds. They'll interact with characters, listen to stories, and play games with one another via the network. Virtual reality generally means wearing a goofy helmet to achieve the sensation of performing an activity that isn't actually happening: Peters and Apple want their productions to be so engrossing such hardware isn't needed. Tiny daVinci doesn't expect to program a network all by itself. It is crafting a software stylebook and introductory programs to entice other developers to create places and amusements. Advertising on the network will be as interactive as the entertainment. When a child "walks by" a "billboard" on a "street," the billboard could be playing an ad she can fool around with if she likes. DaVinci will help companies make their first stabs at multimedia advertising, but Peters says jokingly that such handholding is a one-time-only offer: "We just want to jump-start you as our revenue source." Apple and Peters aim to run an organization that stays small, sane, and smart. Says Apple: "We're designing a network for kids, but we're assuming that everyone who works here is an adult." There are no company hours, and no preset vacation benefits. The theory is that daVinci employees work hard, and when they're tired, they rest. They have to settle for the hand-me-down furniture typical of a startup, but not when it comes to the all-important office chair. Each employee can buy his or her own at company expense.-- S.L.
MICROMODULE SYSTEMS (1992) Multichip modules Cupertino, California Revenues: N.A. Employees: 125 -- As long as MicroModule was a division of Digital Equipment Corp., its existence seemed secure. Its $300 million plant was producing multichip modules, combinations of two or more integrated circuits in a single enclosure, for the mainframes in DEC's VAX line of computers. The modules were expensive to produce, but when compared with silicon chips packaged individually, they offered big advantages in speed, energy efficiency, and miniaturization. Prospects dimmed when VAX sales fell a few years ago. Suddenly DEC didn't need all the modules the plant could produce, and the division couldn't sell its surplus because there was no outside market. (Other builders of big computers manufactured their own modules, and the gizmos were too expensive for makers of small computers.) So in 1992, DEC sold the operation in a leveraged buyout to a team of its executives led by W.C. "Bill" Robinette, now chairman and CEO, and Michael Grove, now president. They bet their careers that the division could adapt to the brambles of open competition and, like Brer Rabbit, prove to be perfectly at home in the briar patch. Robinette, 51, and Grove, 50, make a good case for being the rabbit. The race to make computers smaller and faster favors multichip technology. Modules win by reducing the length of connections between chips to about one-third the distances common on state-of-the-art circuitboards. "We integrate the integrated circuits," says Grove. Multichip modules are one reason for the compactness of personal digital assistants like Apple's Newton and the PCMCIA circuit cards that slip into them. To stimulate demand, Robinette and Grove had to bring down the cost. The first thing they attacked was the high number of lemons coming off their production line. Chipmakers usually mount those flakes of silicon that are integrated circuits in ceramic or plastic enclosures and test them before they are sold. But Micromodule was assembling its modules using "bare dies" -- unmounted, untested chips. Many modules ended up duds. The company worked with Texas Instruments to develop a temporary enclosure that can house the integrated circuits for testing. The improvement reduced the cost of the modules by up to 50%. In the two years since it became independent, Micromodule has lined up over 35 customers, and revenues (which the company does not divulge) are growing between 200% and 300% a year. That's almost twice as fast as the overall market for multichip modules, which Robinette estimates will swell from about $1 billion this year to $2.5 billion next year. Not bad for a briar patch. -- P.N.
SPECTRALINK (1990) Wireless office phones Boulder, Colorado Sales: N.A. Employees: 70 -- Bruce Holland, 42, just can't seem to stay out of the startup game. Fresh out of college in 1973, he co-founded NBI, an early maker of word processors. He formed Cadnetix, a pioneer in computer-aided design, in 1982. When Cadnetix was bought six years later, he decided to take his winnings, which he says amounted to millions, and go home. To stave off boredom, he started a think tank where he and his engineer buddies could fiddle with new technologies and maybe license their ideas commercially. The fiddling soon led to SpectraLink. After reading a prediction in a technical journal that one day office phone systems would have wireless extensions, Holland wondered, "Why can't that day be now?" The technical obstacles to creating an indoor wireless phone network were substantial. Ordinary cellular phones use an analog signal that is susceptible to interference and eavesdropping and sometimes cannot penetrate office walls. To solve the problem, Holland and co-founders Gary Bliss, 44, and William Palumbo, 51, turned to the 900-megahertz bandwidth that had been recently cleared by the FCC for commercial use, and a digital transmission technology employed in World War II to secure radio communications. SpectraLink's Pocket Communications System uses ceiling-mounted "cells," each the size of a smoke detector and with a range of 5,000 to 50,000 square feet. The cells pass along the signal as a caller walks from room to room in a building or across an office campus. While ordinary cellular charges can run 45 cents or more per minute, SpectraLink's system relays conversations through the office PBX, so wireless calls cost the same as calls placed from a desk phone. The system costs between $700 and $1,500 per handset, depending on the number of cells and phones required. Hospitals are among SpectraLink's best customers. Hewlett-Packard, MCI Communications, and Whirlpool have the phones; managers at Nordstrom distribution centers carry them so they can roam about supervising employees without missing calls. According to Dataquest, the market for wireless office phone systems could hit $279 million by 1997. Rivals are scrambling to catch up with SpectraLink, or waiting for the FCC to allocate bandwidth for fully digital cellular phone networks. But for now, Holland seems to have the best game in town. -- A.S.
SECURITY DYNAMICS (1984) Digital keys Cambridge, Massachusetts Sales: $12 million (est.) Employees: 85 -- At the headquarters of Security Dynamics, in staid and tweedy Cambridge, Massachusetts, the receptionist sits behind a wall of bulletproof glass. The waiting room is what security experts call a man trap, a space where both doors can be locked to isolate an intruder. These touches are meant partly to impress customers, partly to deter thieves: Security Dynamics holds the entry codes for hundreds of corporate computer networks. The company dominates the market for portable security devices known as dynamic tokens, which function as a kind of digital key. Each SecurID card, the same size as a credit card, contains a tiny and powerful random number generator powered by a watch battery. A fresh number appears in the card's LCD window every minute. That number is what a user must enter, along with a password he has memorized, when he wants to log onto a network that has been protected with Security Dynamics products. The entry must match a number produced by an identical algorithm in a computer that serves as the network's gatekeeper. The odds of a hacker's randomly coming up with both a password and a SecurID six-digit number are less than one in a trillion. A SecurID system costs from $34 to $70 per user; major customers include Motorola, Glaxo, and Northern Telecom. SecurID is the brainchild of chairman Kenneth Weiss, 52, whose office is the messiest in the privately held company. An expert in human factors engineering, the oldfangled term for user-friendliness, Weiss moved to Boston in 1974 after chairing a college psychology department. He ran a small company that built systems to help dispatchers keep track of taxis, and lived in Boston harbor on a yacht. "I had a thing about landlords," he says. In 1983, Weiss hit on the idea of a credit-card-style dynamic token. He traded the yacht for a brownstone in Boston's South End, where he lived on the top floor and set up shop below. SecurID's first prototype was a jerry-rigged Radio Shack calculator, affectionately known as "the brick" and lugged from trade show to trade show. As the prototypes got smaller, the company's prospects improved. In 1987, < Charles Stuckey, 51, an IBM and Control Data Corp. veteran, came on board as CEO. Another industry veteran, James Geary, 37, joined as marketing chief in 1990. They're the ones with the clean offices. In the Nineties, sales have grown by some 40% per year, driven by the proliferation of corporate networks and growing concern about the hacker threat. With the future looking bright, Weiss has bought another boat, a 40-foot vintage Elco sedan cruiser constructed entirely of double-planked mahogany. There was never any question of christening it Dynamic Token or some other nerdy name. It's called Corsair, after J.P. Morgan's yacht. --J.M.
MEDIO MULTIMEDIA (1993) Multimedia software Redmond, Washington Sales: $1.7 million to date Employees: 16 -- Multimedia and CD-ROM have been hyped for years as the next big thing, but many education and entertainment titles have been duds. That's partly because too many are "shovelware" -- printed material or ordinary software simply dumped onto CD-ROMs. Newcomer Medio fulfills the promise of multimedia in ways few other companies have been able to match. Its CD-ROMs blend video, text, graphics, sound, photos, and animation so cleverly that they deliver an experience wholly different from what books or ordinary software can provide. Take Medio's JFK Assassination: A Visual Investigation, which retails for about $40. Mitch Ratcliffe, editor-in-chief of the newsletter Digital Media calls it "a seminal moment in the recreation of archival material." JFK lets you analyze the tragic events of November 22, 1963, by viewing footage from the famous Zapruder film and three other amateur films. There's also the complete text of the Warren Commission report and the book Crossfire: The Plot That Killed Kennedy. An animated model shows the assassination frame by frame from the perspectives of several key witnesses, allowing you to decide for yourself whom to believe. Multimedia programs like this usually take at least six months to create. Yet CEO Steve Podradchik, 27, a former product manager at Microsoft, started Medio last August and pushed JFK and two other products out the door by November. With less than $500,000 in startup funds from the sale of his Microsoft stock, he couldn't afford to do what many larger companies do: Hire software developers and graphics specialists to develop one product at a time from scratch. Instead, the be-earringed, hyperkinetic Podradchik, who calls himself a "facilitator," brought together musicians, graphic artists, and subject experts to work on several projects at once, promising them royalties to conserve cash. He also solicited the opinions of software buyers at large distributors like Egghead Discount Software before the products were finished, incorporating many of their suggestions and winning their support. The strategy has paid off. Retailers nationwide, including every Wal-Mart store, now sell JFK and other Medio titles. Just hitting the shelves are Jets!, a history of jet-powered aircraft complete with 3-D animations and an interview with Chuck Yeager; World Beat, a lively introduction to musical styles around the world, and Medio Magazine, the first monthly general- interest magazine on CD-ROM. Podradchik hopes Medio's head start will eventually enable the company to graduate from the CD-ROM business to deliver information and entertainment on the information highway. --A.S.
HIGH TECHSPLANATIONS (1987) Computer simulated surgery Rockville, Maryland Sales: N.A. Employees: 15 -- When a new surgical procedure emerges, physicians often learn it during a weekend crash course in which they practice on animals. Two days is hardly enough to become expert, however, and the animals' anatomy can differ significantly from that of humans. The upshot often is increased risk to patients: According to estimates by prestigious medical journals, the typical surgeon makes mistakes on as many as two dozen patients before mastering a new procedure. High Techsplanations thinks it has a better idea. To reduce the cost of training surgeons and the risk to patients, the company is developing 3-D computer simulations that let doctors learn without spilling a drop of real blood. These "virtual surgery" programs, which run on high-powered Silicon Graphics workstations, are so realistic that a surgeon can poke inside a make- believe body on-screen, cut and reattach organs, and see dye light up a blocked artery. The system even includes a soothing voice that suggests the surgeon move his scalpel or catheter a bit to the left or right to avoid mistakes. A heart-catheterization simulation was mobbed by 1,500 physicians at a conference this year; they stood in long lines to try their hand operating on the digital patient. The surgeon manipulates scalpels, clamps, and other instruments on-screen by attaching real instruments to a controller that looks like the arm of a robot. By pressing a button, he releases a simulated dye into the heart artery; he then uses the arm to guide a balloon catheter through a hollow guiding wire to the obstruction. Once the balloon is in place, the surgeon inflates it to expand the artery and restore regular blood flow. All this takes place before his eyes in 3-D color graphics. The tissue of the computer body can be stretched or squeezed and responds to a scalpel or blunter instrument just as real tissue would. High Techsplanations was founded by Gregory and Jonathan Merril, brothers who come from a long line of physicians and surgeons. CEO Gregory, 29, is a psychologist and biologist; Jonathan, 32, is an internist. They started with a few thousand dollars in their parents' basement. The company works closely with Silicon Graphics, whose workstations, with graphic performance about 5,000 times as fast as a 486 PC, supply the "operating room." The Merrils hope to develop a whole library of surgical simulations. Their company will market them, bundled with the workstations, to medical schools and surgeons for under $50,000 each. So far, however, High Techsplanation's customers have been pharmaceutical companies that use the simulations as marketing devices. It devised the heart catherization procedure for Marion Merrell Dow, which makes Cardizem for treating cardiac patients. Merck, which makes prostate medicine, funded the development of a simulator to help doctors learn to operate on that gland. --G.B.
MICROUNITY SYSTEMS ENGINEERING (1988) Microprocessors for communications Sunnyvale, California Sales: none Employees: 125 -- MicroUnity CEO John Moussouris and his brain trust are showing a visitor around their new semiconductor plant like a bunch of 9-year-olds with their own chocolate factory. Collectively they are the inventors of a half-dozen key hardware and software technologies at other companies. They have built Silicon Valley's first new chip fab -- Sili-speak for fabrication plant -- in over five years. They may also have the Valley's most ambitious aspirations, or at least the most ambitious ones backed up by brick and mortar. If plans become reality, the chip they make will be ten to 100 times faster than the fastest in the world today. It will be cheap. And it will fulfill what Moussouris believes is the destiny of the computer: to serve as a tool not for number- crunching or control, but for communications. MicroUnity is one of the most secretive and yet most talked-about little companies that never made a product. It raised the $50 million or so it took to build the plant from corporations in the information and communciations business. MicroUnity is contractually obliged not to disclose its benefactors, the chip's specifications, or why the backers need it. The investors don't want their customers to halt orders for existing products that MicroUnity's technology might render obsolete. But they are said to include TCI, Hewlett- Packard, and Microsoft, and the chips will go into devices that will direct all kinds of information as it leaves the superhighway -- set-top converter boxes, for example. Until FORTUNE's visit in late May, Moussouris had talked publicly only about the plant and some of his patents (secrecy about them was impossible, patents being public documents and 100,000-square-foot factories hard to hide). With his team inching toward completion of the chip's design, he is now ready to talk about the rest. What lets him sleep at night in Intel's shadow is the software MicroUnity is creating to make the chip work. MicroUnity has more software engineers than hardware engineers. Its chip will store changeable sets of instructions and enable a computer or television to display video according to rules tailored to the content -- one set of rules for a basketball game with lots of fast movement, another for a blueprint with lots of fine lettering. The instructions will travel over the info highway along with the video signal. Today's microprocessors, including the mighty Pentium, lack the speed and mathematical sophistication to execute commands of such complexity. Moussouris, 44, has assembled a dream team of experts, including Curtis Abbott, former chief programmer for Lucasfilm; Al Matthews, inventor of Intel's breakthrough 386 chip; Jack Holloway, who designed video chips for AT& T; and Craig Hansen, a key designer for makers of engineering workstations. Moussouris is a physicist and Rhodes scholar who did pioneering work in chip technology at IBM and at Silicon Valley's MIPS. MicroUnity's first backer and co-founder was Moussouris's old Harvard roommate, William Randolph Hearst III. The impetus to science came early for Moussouris, and from an unlikely source: New York's finest. Growing up in the Washington Heights section of Manhattan, he says, "I had an interest in chemistry and electronics that $ expressed itself in things like bombs, rockets, and stun guns, all of which were useful technology in our neighborhood." He deployed enough of this gear to be designated a juvenile delinquent when he was 8. The police told his parents that if they found him with another bomb, they'd send him to reform school. His folks dumped his chemicals down the toilet, and Moussouris went straight. A year later he won the New York City Science Fair. His project: an infrared guidance system for rockets. It didn't hurt his chances that the fair came shortly after the Russians launched the Sputnik. If Moussouris and his colleagues can make their suave communications chip work, his timing will once again prove impeccable. --Andrew Kupfer