FORTUNE VISITS 25 COOL COMPANIES What has the computer revolution done for us lately? Six writers fanned out across the U.S. and found a bunch of high-tech businesses bringing new ideas to life. They'll turn you on for sure.
(FORTUNE Magazine) – NOW that PC companies are worth billions and even software programmers are wearing shoes in the office, the whole technology thing is getting to be kind of a snore. Remember when Bill Gates was scared of IBM? That was when Microsoft was still cool. Not so many years ago, practically everybody in computing seemed cool, even the nerds. Especially the nerds. Arrogant boy geniuses groggy with sleep deprivation used to threaten to topple computing's old guard and revolutionize the way we all work. Well, okay, they did that -- but what have they done for us lately? Silicon Valley is like Mick Jagger at 50: prosperous, certainly, but no longer cool. We're all for prosperity, but cool is important too. It's one of the defining characteristics of information technology, a business where insight and creativity can lure lightning bolts from the ether. What's cool? Exciting new ideas brought to life. Hanging ten over technology's leading edge. Risk. Breaking the rules and winning. Getting rich without sacrificing humanity. Changing the world. Even failure can be cool, if accomplished with panache. Cool is subjective and hard to define, but you know it when you see it. It's not as simple as hot products or even profitability. It's what keeps us awake, what generates buzz. It's what we wish we'd done. We think the 25 companies in these pages are cool. We're not saying you should invest in them. Odds are that some will flame out, leaving behind nothing but crisps of charred ambition. (What's more, the companies are mostly private; we've marked the public ones.) Danger is part of what makes these companies so appealing. Though all offer some kind of information technology, they're not alike. Ranging in size from $1.1 billion in annual sales (Silicon Graphics) to zero (Continuum Productions, Interval Research), they include hardware, software, and service firms. Their offerings include monster computers with thousands of processors that sell for $30 million as well as ''cyberspace theme parks'' for the amusement of those rare computer wonks with spare time. Get ready for some serious strangeness, described by a vocabulary from Mars. You'll encounter flying toasters and ''platform agnostics.'' Executives with vegetable gardens outside their offices. Board meetings in hot tubs. A chairman who clones Jimi Hendrix guitar riffs. Most amazing of all, a CEO paid just $36,000 per year. And we're only talking about regular reality: Follow the propeller-heads out into virtual reality, and things get even spookier.
CYGNUS SUPPORT (founded 1989) Service for free software Mountain View, California Sales: N.A. Employees: 42
-- Some of the best software is available free. Academic types like to share their stuff, posting it on electronic bulletin boards for anyone who wants a copy. But freeware, as it's called, has a drawback. When you can't get it to work properly, whom do you call? Even though commercial software can be less capable, part of its appeal is that the makers provide help lines. For Michael Tiemann, 29, this spelled opportunity. He figured he could build a business by offering service and support for Gnu, a popular family of programming tools created by Richard Stallman, winner of a MacArthur Foundation genius award and head of the Free Software Foundation. Almost everyone told Tiemann it wouldn't work, but he found two believers: John Gilmore, 38, a top programmer at Sun Microsystems with whom Tiemann had traded E-mail, and David ''Gumby'' Henkel-Wallace, 29, with whom he'd linked up during a stint at Microelectronics and Computer Technology Corp., the high- tech consortium in Austin, Texas. ''We were the only two people who would literally work day and night,'' Tiemann recalls. At first the trio ran Cygnus out of the spare bedrooms of their apartments in Palo Alto. Henkel-Wallace postponed a round-the-world sailing trip, and four years later still hasn't had time to make the voyage. The company, christened after a constellation with ''gnu'' embedded in its name, was profitable from the start. It has doubled in sales every year and is shooting to reach $100 million a year by 1997. The revenues derive from service contracts with clients like Sun, Advanced Micro Devices, and Northern Telecom. Cygnus consults mostly on software used by programmers Cygnus has moved out of the founders' apartments, but its offices seem more like a college dorm than a corporate headquarters. A hammock hangs from the rafters of a cathedral ceiling. Electric guitars lie around in Tiemann's office, which looks out on a big vegetable garden. One employee recently sang a presentation to the tune of ''Alice's Restaurant.'' The three-man board of directors has held a number of meetings in a hot tub, which Tiemann calls a ''really conducive environment for thinking about the issues.'' He says it forces people to be ''reasonably concise.'' What's more, ''there's no place for ego in a hot tub.'' -- Alan Deutschman
SHIVA (1985) Remote computing software Burlington, Massachusetts Sales: $30 million Employees: 150
-- Shiva, the Hindu god of destruction and renewal, has many arms. So the name suits a maker of software that lets any number of homebound hands log on to a company's computer network as easily as if they were in the office. Yet the name is a happy accident, and in a way so is the business. Shiva wasn't started with any grand aim in mind. ''We were just two guys from MIT who wanted to build some sort of product,'' says CEO Dan Schwinn, 32, an electrical engineer. In 1987 he and chief technical officer Frank Slaughter, 31, an avionics expert, began selling a new sort of modem for Macintosh computers. Office users at the time typically had individual modems that they activated only a few minutes a day -- to dial up a bulletin board, for example. Schwinn and Slaughter decided they could save companies money by making a modem that could be wired right into the corporate network. Many people could then share it, just as they did printers. The idea that really made Shiva take off came from its early customers. They told Shiva that with a little extra software for their home machines, they'd be able to call the office and patch into the company network. Shiva wrote the software -- ''and now that's our entire business,'' Slaughter says. ! Before Shiva, telecommuting was a megadrag. At-home users wanting to log on by phone needed a separate program for each function -- fetching a file, say, or printing a report. Switching from one task to the next meant exiting the program, hanging up, starting up a new piece of software, and dialing again. Shiva, in effect, fools your computer into thinking it's at the office. Once you dial the modem's number and type in your password, you can use the same commands you use at your desk. It amazes Schwinn that Shiva had no competition until it brought out its fourth-generation network modems in 1991. Another bit of luck is the name, which the founders chose before they knew that the symbolism of many limbs would be so fitting. Slaughter says: ''We were having a terrible time trying to figure it out. Then I read that the world's most powerful laser, at Lawrence Livermore Labs, was called Shiva, and the name fit Dan's criteria: It had two syllables and it didn't sound tech-y.'' He adds: ''Maybe someday we'll get a swami to certify that Shiva is the Hindu god of computer networking.'' --Andrew Kupfer
REACH (1990) Workflow software Sunnyvale, California Sales: N.A. Employees: 40
-- All right, so your company has linked its zillions of PCs into networks, an exercise that cost you plenty of money and aggravation. You're ready for the payoff. Now you can finally get going with E-mail and . . . and . . . come to think of it, what else? One of the most promising new ideas for exploiting the power of networks is 'workflow.' It means applying software to get the right information to the right people at the right time. The founders of Reach think workflow is the next ''killer application'' -- software with benefits so utterly compelling that people will have to use it.
Workflow represents a step beyond ''groupware'' such as Lotus Notes, a program that has caught on in many companies with office networks. Groupware establishes a sort of repository for information contributed by various co- workers, each of whom can call up the material anytime. Reach's product, Workman, orchestrates the flow of information from person to person and keeps track of who decided what, and when. The software can automate the routing of documents that require the approval of several managers -- purchase orders, for instance. If a decision-maker isn't around, or procrastinates, the software can assign the task to someone else. Workman can help coordinate processes like product development that involve many steps and many people. Since Reach introduced Workman last March, it has clinched co-marketing agreements with Lotus as well as with Novell and Banyan Systems, the market leaders in PC networking. Reach's visionary is Anand Jagannathan, 40, who emigrated from India in 1974, worked at Bell Labs, and co-founded Banyan. To launch Reach, he raised $6.5 million from venture capitalists. Novell, betting that workflow will help sell networks, owns an undisclosed share. -- A.D.
THINKING MACHINES (1983) Supercomputers Cambridge, Massachusetts Sales: $90 million (est.) Employees: 500
-- The idea behind the fastest computer on the market came to Danny Hillis in a Milton Bradley workshop. A round-faced computer scientist with a Ph.D. from MIT, Hillis, 37, was designing toys that used microprocessors. He speculated that if thousands of the chips could be harnessed together, they might add up to a machine mightier than a supercomputer, which consists of a few ultrafast processors. Hillis was onto something. Soon he had built the first so-called massively parallel processor and joined up with Sheryl Handler, 46, a fellow MIT Ph.D. (in urban studies), to form Thinking Machines. The computers, which they christened Connection Machines, went on sale in 1986. ''Everybody laughed at first,'' says Hillis. ''Now competitors are copying us.'' The company has installed more than 100 of its machines. American Express bought one to analyze its vast customer database, but mostly the computers are in labs that do federally funded research. The behemoth of the product line, the CM-5, holds the speed record for a commercially available computer: 60 gigaflops (a standard measure, short for billions of floating-point operations per second; a Japanese government computer has hit 120 gigaflops). In its largest version, the CM-5 weighs 7.5 tons and costs $30 million. Maya Lin, who designed the Vietnam War Memorial, helped create its Star Trek look: flat black, with lots of flashing red lights. Impressive as its computers are, the privately held company hasn't been profitable recently. Last year it lost $17 million; the CM-5's introduction hurt sales of older models, while federal budget cutbacks and increasing competition sapped growth. Industry watchers say Thinking Machines' management is a puzzle. Hillis is chief technologist, consumed with his computers. CEO Handler, who is neither computer scientist nor hands-on manager, keeps the company in the public eye. So who minds the store? For seven months this year, it was Harvey Weiss, 50, an industry veteran the company promoted to president. The match didn't take. In August, Thinking Machines replaced him with Richard Fishman, 46, a lawyer who has represented the company in Washington. His new brief: to stave off growing competition from those other makers of massively parallel computers and to find more commercial customers. -- Andrew E. Serwer
MASPAR COMPUTER (1988) Massively parallel computers Sunnyvale, California Sales: $26 million Employees: 158
-- In computer lingo, massively parallel processing means setting thousands of microprocessors to work on segments of a problem, or on a set of problems, all at the same time. In human terms, for Jeffrey C. Kalb, founder and president of MasPar Computer, it has also meant spending Saturday mornings at the office, balancing a colleague's baby on his knee while working at a keyboard. As a way of reconciling killer schedules and family ties, Kalb, 50, encourages employees to bring their kids to work on weekends. He jokes: ''There are too many of us around.'' Kalb got interested in massively parallel processing as an engineering executive at Digital Equipment. Such computers, which are devilishly difficult to program, are used mainly by scientists and engineers. MasPar's goal is to move them into commercial applications by making them easier to use and less expensive. Two-thirds of the work force develops software and programming tools. The company has poured money into designing ultrafast input-output channels that let the computers handle tasks like tracking transactions for chains of retail stores and analyzing the data as they stream in. MasPar's low-end machine is by far the lowest-priced massively parallel processor: $75,000 for a unit that incorporates 1,024 processor chips. Kalb's strategy has begun to pay off: Of the 170 machines MasPar has sold, 30 have gone to commercial customers, a high percentage for a maker of such computers. Says Kalb: ''We're trying to do for corporations what the PC did for individuals -- make available low-cost, high-performance computing.'' That could lead to a revolution in the back room as dramatic as the one PCs sparked on the desktop.Gene Bylinsky
INDIVIDUAL (1989) Customized news Cambridge, Massachusetts , Sales: $5 million Employees: 60
-- Wouldn't it be fantastic if you could have custom-sorted news delivered right to your office or breakfast table? Dream no more. For $49.95 a month, Individual will send you a daily fax or E-mail message of the information you want culled from 300 sources such as Reuters and MacWeek. Says founder and CEO Yosi Amram, 36: ''We are in the business of spreading the power of knowledge.'' Amram, an immigrant from Israel, had his inspiration while working as a venture capitalist. The tricky part, he recognized, would be writing software to sort the data. For help he turned to Cornell professor Gerard Salton, who had designed software called Smart to solve complex text-analysis problems. Salton agreed to help, but Amram's venture capital partners passed, forcing him to raise funds elsewhere. At this stage Amram says the questions were: ''Would the software produce high-octane knowledge? Could we license the information? Would anyone buy it?'' The answers all appear to be yes.
Prospective customers of the company's HeadsUp product get a list of 700 topics, such as ophthalmology, petrochemicals, or wireless LANs. They select five to ten, and the next day start receiving summaries of pertinent stories that have flowed into Individual's database over the past 24 hours. To read more than just the summary, the subscriber simply calls; Individual will send an entire article for an additional charge. The key to the service is Smart, which is based on so-called fuzzy logic. Standard if/then computer logic requires a machine to seek a single solution to a problem. Ask a computer to search for the word ''train,'' for example, and it will find passages containing exactly that word. Fuzzy logic enables the computer to turn up related material as well -- passages with words like ''railroad'' or ''boxcar.'' The hardware through which Individual churns this intricate software is amazingly low tech: 100 ordinary Dell and Gateway PCs receive and parse an unending stream of on-line news stories. Then, using ten Sun Microsystems workstations, Smart sorts the data for 15,000 or so customers. It's all done in a warren of rooms in a small office building. Individual has yet to turn a profit, but already HeadsUp is turning heads. ''We have people creating newsletters off of our service,'' says Amram. ''Newspapers won't die tomorrow, but this is the growth end of the information business.'' -- A.E.S.
RADIOMAIL (1988) Wireless electronic mail San Mateo, California Sales: $2 million Employees: 20
-- There is a free lunch. Every day Priscilla Baird, RadioMail's corporate cook and concierge, shops for fresh ingredients and cooks the staff of RadioMail a tasty midday meal, which the company lays on gratis. She also prepares boxed dinners for the engineers to eat in the evening. It's one of the ways the company keeps employees happy and hard working, not to mention sentient. Says founder Geoffrey Goodfellow, 37: ''Left to their own devices, most of the people here will eat a bowl of cereal for breakfast and popcorn for dinner. How well do you work with that in your stomach?'' RadioMail produces software for an application that could make little computers like Apple's Newton really catch on: wireless E-mail. Subscribers hook up the devices to a special radio modem made by Ericsson or Motorola, and for $89 a month can send and receive an unlimited number of messages in thousands of U.S. cities without being tethered to a phone line. Messages travel over wireless data networks, including one developed by Motorola to help IBM stay in touch with field personnel. Goodfellow began working at the Stanford Research Institute computer center when he was 15. Says CEO Bill Hipp, 52: ''They hired him to keep him from breaking in.'' His grades followed the hacker's curve -- downward, fast -- and he never got a high school diploma. He started RadioMail in his condo with $50,000 borrowed from his grandmother's estate. When he moved the business into a grownup building this year, he decreed that no one would have a corner office. He and Hipp work in cubicles like everyone else. Goodfellow comes to work dressed for the beach. He goes to meetings outside the office that way too, no matter how many suits are in the room. If it's cold, he'll wear sweats. Since beginning service last autumn, RadioMail has signed up only around 1,000 customers, partly because the networks are relatively new and partly because of the modem's $800 price. The modem is an added piece of gear to lug around too, about the size and weight of a palmtop computer. But, says Alan Reiter, publisher of the biweekly Mobile Data Report, modems will soon shrink to credit-card size: ''By next year you'll be able to slip a radio modem into a palmtop.'' They'll also be cheaper. That's when RadioMail may really arrive. -- A.K.
CALIFORNIA SCIENTIFIC SOFTWARE (1985) Neural network tools ^ Nevada City, California Sales: $1.5 million (est.) Employees: 12
-- Mark Lawrence was looking for ideas when he attended a lecture at Caltech by neuroscientist Terrence Sejnowski in 1987. Lawrence's startup, California Scientific Software, had been producing engineering software for two years, but he wanted a product that was more exciting. Sejnowski demonstrated a stunning first-ever application of neural networks -- a new kind of computing that mimics the human brain. He and his students had trained a neural network to pronounce 20,000 English words. When Sejnowski played a tape of the learning session, the neural network sounded uncannily like a child learning to speak. Lawrence, 37, an electrical engineer, set out to commercialize the technology. In 1988 he launched BrainMaker, the first commercially available neural network program. To go with it, his then-girlfriend and now wife, Jeannette, known by her childhood nickname, ''Jet,'' wrote a book explaining neural networks so even a high-schooler could understand. The couple had no idea who their customers would be, but figured that by pricing BrainMaker at $99.95 (since raised to $195) they could attract enough buyers to succeed. Help came from the press. John C. Dvorak, an influential trade journal columnist, called BrainMaker ''the most fascinating software I've ever seen.'' This kicked sales into the stratosphere. ''For about two months, nobody slept,'' recalls Lawrence. ''We spent 24 hours a day packing floppies and manuals.'' Today, 15,000 BrainMakers later, the program remains the best-selling neural network tool. Doctors were the first big users (they applied BrainMaker to cell analysis and other tests). It's also at work picking stocks for such giants as Fidelity, doing real estate appraisals, handicapping horses, and detecting fraudulent credit-card transactions, among other applications. In 1990 the Lawrences moved the company to Nevada City, California, a gold rush town in the High Sierra, because they liked the scenery. From their house, where bobcats and deer often visit, the Lawrences can see the peaks that ring nearby Lake Tahoe. ''We could be anywhere -- in Alaska, if we wanted,'' says Mark. ''All I need to run the company is a driveway, telephone lines, and electricity. My heroes are AT&T, MCI, UPS, and Federal Express.'' Jet handles day-to-day operations while Mark works on software to be introduced next year. He says: ''Neural networks today are a seed, as the first microprocessor was. In 20 years they will be everywhere, just as microprocessors are now.'' -- G.B.
SILICON GRAPHICS (1982) Computer workstations Mountain View, California Sales: $1.1 billion (public) Employees: 3,800
-- Everyone in Silicon Valley is rushing to do lunch in L.A. now that ''multimedia'' is the buzzword du jour. Everyone except the people at Silicon Graphics Inc., which is already a Hollywood institution. For years SGI, which specializes in workstations geared for stunning 3-D graphics, has been a mecca for the likes of George Lucas and Steven Spielberg. SGI's Reality Engine ($99,950 and up) has the fastest graphics in the world; it can process more than 320 million pixels a second, about three times as many as a state- of-the-art PC. (Pixel is techspeak for picture element.) SGI's machines have generated special effects and animation for films such as Jurassic Park, Terminator 2, The Abyss, and Beauty and the Beast. At Grateful Dead concerts, its workstations create 3-D images of the musicians' faces that seem to float through space and merge. While the show-biz connection is a terrific source of publicity, Hollywood accounts for less than 10% of SGI's revenues, which have grown 38% a year, on average, since 1989. Biotechnologists use SGI machines to model molecules and search for an AIDS cure. The city of Los Angeles is employing SGI to help South Central residents envision what their neighborhood would look like under various rebuilding plans. At trade shows, SGI wows customers with Virtual Reality Cave, a room that can simulate the Big Bang or the inside of a human embryo. The company has pulled off an impressive expansion into both the high and low ends of the computing spectrum. Its offerings are now as inexpensive as a $5,000 desktop system called the Indy, which comes with a digital color camera for videoconferences. At the high end, SGI's supercomputers incorporate up to 24 high-performance RISC chips working together and cost as much as $500,000. Although designed specifically for graphics, the system is so powerful that some customers with no need for 3-D imaging use it to replace their mainframe. CEO Ed McCracken, 49, a 16-year veteran of Hewlett-Packard, runs the show. That frees founder Jim Clark, 49, to think about future technologies -- particularly interactive TV. A former Stanford professor, Clark wants SGI to supply the computers that will store vast digital libraries of film and video for transmission to consumers over networks. He also plans to turn today's SGI workstations into tomorrow's $350 computerized control boxes that will sit atop the TV set. A.D.
INTERVAL RESEARCH (1992) Pure R&D Palo Alto, California Revenues: none Employees: under 100
-- Few potentates of the computer industry are as mysterious as Paul Allen. Brilliant but painfully shy, the co-founder of Microsoft dropped out of the company's management while fighting -- and overcoming -- Hodgkin's disease. His 13% stake is worth some $2.5 billion. Allen, 40, doesn't like to give interviews, but lately his myriad projects have put him in the news. He's financing the construction of a Jimi Hendrix museum in Seattle. (Allen occasionally plays guitar in pickup bands with other techie zillionaires. He appears to have memorized virtually every Hendrix riff and move.) He owns Asymetrix, a startup that develops tools for creating multimedia software. He owns the Portland Trail Blazers. And recently he's been pushing to gain control of fast-growing America Online, a consumer computer network. But Allen's grandest venture is Interval Research, a Palo Alto company that's aiming to be a hotbed of innovation for the computer industry, much as Xerox's Palo Alto Research Center was in the 1970s. When Interval was launched, Allen agreed to pump in $100 million over ten years and to support as many as 100 researchers. Interval's chief is David Liddle (pronounced Lid-DEL), who worked at Xerox PARC and was one of the fathers of the Star, a computer that showcased many innovations later appropriated by Apple for the Macintosh. Liddle went on to found Metaphor Systems, a software venture he sold to IBM in 1991. Interval won't reveal what it's working on, but Liddle makes clear that the research goes ''beyond the current rage of graphic user interface, database access, local area networks, and object-oriented programming.'' The company's goal is not to turn out products but to supply research and funding to startups that will and to license ideas to other companies. -- A.D.
IDEO (1977) Industrial design Palo Alto, California Revenues: $20 million Employees: 170
-- Take any hot new piece of technogadgetry: IDEO probably had a hand in crafting its look and feel. This design studio is one of Silicon Valley's secret weapons, staffed not only by industrial designers but also by dozens of cognitive psychologists and computer scientists. It's the largest industrial design firm in the U.S. Founder David Kelley, 42, an engaging Stanford product-design professor with a Groucho Marx mustache, began consulting for Steve Jobs at Apple in the late 1970s and later helped design the sleek black cube of Jobs' Next workstation. He runs the firm with his brother Tom, 38, a former McKinsey consultant. Clients include an impressive lineup of computer makers (Apple, NEC), consumer products companies (Procter & Gamble, Black & Decker), and makers of medical equipment. IDEO has designed a surreal array of stuff: vacuum cleaners, PC motherboards, bicycle helmets, personal digital assistants, furniture, microwave ovens, telephones, toy guitars, removable hard disks, ski goggles, eye droppers, can crushers, navigational computers, virtual-reality workstations. Kelley says the key to IDEO's creativity is cross-fertilization. By working for many industries, it learns to challenge the conventional thinking in any one. Psychology is also crucial. In designing the Macintosh Duo system, which lets people connect a PowerBook to a monitor and other peripherals by inserting the computer into a ''docking station,'' IDEO's psychologists decided that users would be most comfortable if the dock ejected the PowerBook with the familiar sound and motion of a VCR ejecting a cassette. IDEO also brought psychology to bear in its work for Compression Labs, a San Jose company that had developed a videoconferencing camera to sit atop a PC. IDEO determined that even after users turned the camera off with a click of the computer's mouse, they still suspected they were being watched. So Kelley's team created a shutter that automatically closes over the lens when the user turns off the camera. -- A.D.
NEXTEL COMMUNICATIONS (1987) Enhanced mobile radio Rutherford, New Jersey Sales: $53 million (public) Employees: 368
-- Nextel had some new technology and a nifty strategy for breaking into the cellular telephone industry. But that wasn't enough. Perhaps the company's biggest accomplishment has been skirting a regulatory minefield while deep- pocketed foes lobbed lawyers across its path. Nextel prevailed, and the company has launched a campaign to become the third force in cellular in many big cities. The company is the brainchild of Chairman Morgan O'Brien, 48, a baby-faced . lawyer and former Federal Communications Commission staffer. In the late 1980s, he and CEO Brian McAuley, 52, began buying up rights in six big cities, including New York and L.A., to hundreds of radio frequencies that had been used for communicating with fleets of vehicles such as cabs and repair trucks. The plan was to install hundreds of transmitters in each city that would let Nextel provide a souped-up version of cellular phone service. Unlike today's cellular systems, which are limited by relatively old radio technology, Nextel's has digital transmitters. These will improve signal quality and let the system handle more calls. A digital system will also let Nextel phones display messages on built-in screens. The plan provoked howls from cellular operators, including the Baby Bells, GTE, and McCaw Cellular Communications. The FCC has licensed only two cellular operators for each city; companies have spent hundreds of millions of dollars consolidating rights to the most coveted franchises. These entrenched powers petitioned the FCC to make Nextel seek formal approval for a new use of the airwaves -- a procedure that can take three years. Nextel's lawyers parried that cellular systems in some cities were already so crowded that users have trouble getting through -- a logjam Nextel could break. In 1991 the FCC agreed. Nextel began offering car phone service in Los Angeles in August. Hand-held phones will come out later in the year. The phones, to be made by Motorola, will cost hundreds of dollars more than ordinary cellular phones -- at least $500 for a car phone and $700 for a hand-held. So Nextel will focus first on big-spending fleet customers. Later, individuals will be able to subscribe. But before signing up any Hollywood hotshots, Nextel wants to make sure the system is broken in. O'Brien says: ''We don't want Barry Diller to say this system is a piece of crap because it doesn't work at the intersection of such and such.'' -- A.K.
VOYAGER CO. (1984) Multimedia software New York City Sales: $12 million Employees: 50
-- In the late 1970s, Bob Stein was an editor at a left-wing publishing house in Chicago when he became intrigued by what Nick Negroponte, who later founded the MIT Media Lab, was writing about the digital future. Stein, 47, started an electronic publishing company, Voyager, along with his wife, Aleen, 39. ''We wanted to be the Random House of tomorrow,'' he recalls. He still sees Voyager as a publisher rather than a software company. The core of its line is Expanded Books, a collection of novels and nonfiction on floppy disks for Apple's Macintosh and PowerBook computers. More than 50 titles are available, including Waiting to Exhale, Of Mice and Men, and The Autobiography of Malcolm X (prices: under $20). ''Pages'' of text resembling the conventional paper-and-ink kind appear on the computer screen. Readers can take advantage of the digital format to change the type size, create their own indexes, search for passages, or read in bed without a light, relying on the PowerBook's backlit screen. Expanded Books sell mainly in college bookstores, but Stein says book chains are getting interested. In August, as an experiment, the company installed electronic kiosks in outlets of Waldenbooks, B. Dalton, and other chains, letting browsers sample Voyager's products. Voyager has pioneered bringing movies to the computer screen. Recently it released A Hard Day's Night, the 1964 Beatles film, on CD-ROM ($32). Other Voyager CD-ROMs include some of the finest examples of multimedia storytelling to date. Example: I Photograph to Remember, a slide show narrated by Mexican photographer Pedro Meyer that poignantly recounts his father's struggle with cancer. The company is driven by the love of art, not lucre -- and the financial results show it. ''We don't lose money, but we don't pay ourselves much of anything,'' says Stein. ''I make $36,000 a year -- and I have no complaints. You never go into publishing for the money.'' The payoff has been paltry for several reasons. Voyager publishes numerous titles it expects to be small sellers. It publishes almost solely for the Macintosh, which is especially suited to multimedia but accounts for less than 15% of the personal computer market. (Stein says Voyager will soon introduce products for IBM-compatible PCs.) Voyager remains something of a cottage business -- which it literally was around 1990, operating out of the house right on the beach in Santa Monica where the Steins were living and raising their children. The couple has since separated. Aleen is still with Voyager, and periodically leaves her new base in Paris to work the booths at trade shows. Bob, who says, ''L.A. wasn't intellectually stimulating enough,'' recently moved headquarters to New York City to be at the center of the publishing industry. -- A.D.
KNOWLEDGE ADVENTURE (1991) Educational multimedia La Crescenta, California Sales: $50 million Employees: 70
-- Bill Gross, 35, was a star software developer at Lotus when he came across a product that stunned him. In 1990 he saw a preview of a Voyager CD-ROM about Beethoven's Ninth Symphony. It lets the user listen to the music, follow the score on-screen, and call up expert commentary, musical definitions, and examples at the click of a mouse. The disk ''gave me shivers,'' Gross recalls. ''It opened me up to the beauty of music.'' Soon Gross was thinking about starting his own company to create multimedia educational software, even though ''it was a very dumb thing to do at the time.'' Multimedia was beyond the reach of most people. To run the $79 Voyager disk, Gross had to buy a top-of-the-line Macintosh system for $5,500 -- including a $1,100 CD-ROM drive. Gross launched Knowledge Adventure in March 1991. Fortuitously, that's about when PC prices began to fall. To reach a bigger audience, Gross avoided the CD-ROM format. Instead he wrote programs, replete with full-motion video clips and sound bites, that come on floppy disks and run on plain old PCs. That meant working out his own technique for compressing video signals to fit in an amazingly small amount of computer memory. He was so successful that other companies have licensed Knowledge Adventure's technology. Looking for a way to cut the cost of transmitting video over networks, AT&T and Paramount have signed up as strategic partners. Gross's presentation was innovative too. He decided to let kids learn by exploring and making connections on their own. The formula works: Dinosaur Adventure, which appeared months before Jurassic Park and includes realistic videos of moving dinosaur models, is selling 10,000 to 15,000 copies a month (list price: $50). Knowledge Adventure plans to expand into software for younger children -- 3- and 4-year-olds who don't read yet. And the company will add ''more richness and depth of content for adults,'' says Gross, since it turns out that one- third of the company's customers are grownups with no kids. Gross has been an entrepreneur since he went to school at Caltech, where he built and sold stereo speakers out of his dorm. The company is pretty much a Caltech and family affair. Its ten programmers are Caltech graduates. Gross's son David, 6, has tested all the company's products. Gross's sister, Marcee Kleinman, 31, heads a team of 15 ''content developers,'' who craft the words and art. Brother Larry, 32, who followed Bill to Caltech and worked with him at Lotus, is vice president of technology. ''We joke that we wish we had more siblings,'' says Bill. -- A.D.
INTEGRATED INFORMATION TECHNOLOGY (1987) Video-compression circuitry Santa Clara, California Sales: $40 million (est.) Employees: 135
-- They started out building math co-processors -- a kind of electronic turbocharger for PCs. But all along, founders Chi-Sing Wang, 46, a native of China who grew up in Taiwan, and Y.W. Sing, 39, from Hong Kong, felt sure that processing graphics rather than crunching numbers was where their company's future lay. In 1989 they attacked the thorny problem of video compression -- taking TV pictures that have been converted into the ones and zeros computers understand and condensing them for storage or transmission. Without compression, TV, which runs at 30 frames, or images, a second, would overwhelm computers and networks. To store a single frame requires two megabytes of memory; to send a 15-minute video over an ordinary 9,600-baud modem would take days. Compression technology like IIT's depends in part on the fact that TV images are highly redundant -- a background, for instance, often doesn't change from frame to frame. By cutting redundancy, among other things, IIT's circuits can compress video by factors as high as 80 to 1. IIT has emerged as a world leader in video-compression chip sets and circuitboards. There is IIT circuitry in AT&T's new VideoPhone; an IIT chip set has enabled Compression Labs of San Jose, California, to add videoconferencing to Macintosh computers (coming soon for IBM-compatible PCs too). Wang and Sing founded the company with $2.8 million from friends -- a puny amount by Silicon Valley standards. IIT has funded its growth internally ever since and has shown a profit in 14 of the past 15 quarters. Careful cost control is one reason. But the company doesn't skimp on employee benefits. A number of IIT engineers are getting advanced degrees at company expense, for instance. Another morale-boosting policy: promoting from within. IIT's managers of human resources, trade shows, and accounts receivable all started as receptionists. -- G.B.
C-CUBE MICROSYSTEMS (1988) Video-compression chips Milpitas, California Sales: $19 million Employees: 92
-- C-Cube's ambition is as big as all TV. The name is short for ''computer, consumer, communication''; the aim is to dominate the market in video chips for consumer electronics. C-Cube's primary products are chips that reconstitute video images that have been electronically compressed for faster transmission over a network or for more efficient storage on a CD-ROM. The company is a Silicon Valley polyglot: Founded by three men of different nationalities (French, Chinese, and Japanese), it is run by Ohio-born William J. O'Meara, 56, a veteran semiconductor industry executive. Its startup capital came from Kubota, a Japanese tractor company. Most of its chip designers are electronics engineers from China and Taiwan who studied at Berkeley or Stanford and decided to stay. The brainy guys who devise the algorithms, or formulas, for its chips are French. C-Cube chips will power the new wave of video players recently announced by Sony, JVC, Samsung, and others, which use CD-ROMs instead of cassettes or laser disks. Home models are due out this year, portable versions in 1994 (likely prices: $400 and $250). The chips also go into a video jukebox sold in Japan by JVC. Designed for Japan's huge karaoke market, it lets bar patrons call up their favorite MTV-style video and sing along. JVC expects to sell $1 billion worth this year. Another huge market C-Cube is aiming for: set-top boxes that cable-TV companies will deploy to handle wave-of-the-future services like video on demand. To compete against behemoths like AT&T and Intel, which also make video chips, C-Cube recently formed partnerships with Texas Instruments and Advanced Micro Devices. The semiconductor giants now have the right to design chips based on C-Cube's ideas, while C-Cube gets access to their massive chip factories for its designs. Says O'Meara of his allies: ''We're the inventors. They're our 300-pound linemen.'' -- G.B.
TRILOGY DEVELOPMENT GROUP (1989) Product configuration software Austin, Texas Sales: N.A. Employees: 65
-- Joseph A. Liemandt, 25, remembers wanting to start his own software firm since he was ''yea high.'' He got the idea for Trilogy as an undergraduate at Stanford, where he worked at a computer lab. New equipment, he noticed, never worked when it arrived: ''The problem was always something very simple. Some little thing they forgot to put in.'' He decided to try to invent software to help the makers of computers -- or any other product with a lot of options -- get complicated orders right the first time. Existing attempts at such a ''configurator,'' says Liemandt, were clumsy and expensive. He sold a consulting firm he'd started and with some classmates founded Trilogy. Three lean years later, they unveiled SalesBuilder. It works like this: Suppose you're a salesman for telephone switching equipment known as private branch exchanges, or PBXs. These built-to-order boxes are so complex that you have to lug catalogues and manuals on sales calls, then go back to the office to write up the order after the customer spells out what she wants. With SalesBuilder, you bring a laptop computer and work out the details with your customer on the spot by pointing and clicking at an interactive display. You enter information about what she wants to spend, how many phone lines she needs, and so on. Next, you click the ''configure'' button. Up pops a preliminary spec for her PBX. Now suppose she decides she wants to add voice mail. Another click, and SalesBuilder reconfigures the entire order. It knows, for example, that voice mail will require more software, disk drives to store messages, a cabinet to house the extra equipment, and so on. The program adjusts the price quote accordingly. Says AT&T vice president Glenn C. Hazard: ''It allows us to decouple the sales force from their offices. It increases customer contact.'' Trilogy's next software package, due this fall, is Conquer, a kind of intelligent catalogue for buyers of computer gear. Say you need to equip an office with desktop PCs. Conquer will quiz you about your requirements and help work out a detailed shopping list -- Dell PCs, Hewlett-Packard printers, 3Com network cards, and so on. When the list is complete, the program kicks out detailed purchase orders. Among the product lines that Conquer will carry: IBM, Compaq, and Dell. Predicts Esther Dyson, editor of Release 1.0, a software industry newsletter: ''Conquer and systems like it will become a part of life. It will give Trilogy an almost unassailable position as the middleman.'' -- James Aley
INTELLECTION (1988) Software for manufacturing Dallas Sales: $2.5 million Employees: 30
-- Sanjiv Sidhu and Ken Sharma talk about their mission of selling software to manufacturers like affectionate clerics bringing light to the heathen. Sharma, 53, who was born in Burma, is Intellection's ''senior partner'' and spends 120 days a year proselytizing at seminars around the country; President Sidhu, 36, who was born in India, says the company is ''like a church.'' Intellection's creed: In an era of so-called build-to-order manufacturing, the old way of making things -- turning out standard products in large quantities for future sale -- is dead. Customers want the goods now and want them their way, or they'll buy somewhere else. Rhythm, the company's software, models an entire production pipeline, from raw materials to finished goods (price per plant, $250,000 and up). It lets factory managers keep track of orders, schedules, inventories, equipment purchases, energy use, and other crucial data in real time. Esther Dyson, editor of Release 1.0, calls the program ''a spreadsheet for manufacturing.'' When a customer puts in a rush order, a manager can sit at a desktop computer and rejigger production schedules with the sang-froid of a pre-teen Nintendo pro.
Sound too good to be true? Last year Sharma visited various Black & Decker power tool plants to demonstrate Rhythm. Managers who showed up were skeptical at first, recalls Black & Decker executive Earl Mott. But by demo's end, he says, their reaction was, ''Why can't our plant be first?'' Rhythm has been on line for two months in the Easton, Maryland, factory, and late orders are already down 30%.J.A.
CHEYENNE SOFTWARE (1983) PC network software Roslyn, New York Sales: $51 million (public) Employees: 250
-- Cheyenne makes software that protects businesses from the quintessential cybernightmare: losing data from networks of personal computers because of program glitches, power losses, or viruses. For many companies these far-flung networks are replacing big hunks of mainframe metal as the chief repository of information. Cheyenne's software automatically makes backup copies of all files from each desktop machine in the network and from the powerful workstations that hold the data all users share. For safekeeping, the copies are stored on tape in vaults away from company headquarters. Another popular Cheyenne program automatically detects and isolates viruses before they spread across a network. Co-founder Barry Rubenstein, 50, created Cheyenne to piggyback on the success of Novell, the leading maker of software for connecting personal computers in networks. An electrical engineer, he'd helped mastermind the financing of Novell at Safeguard Scientifics, a venture capital company. Safeguard eventually sold its stake for a profit of several hundred million dollars. Rubenstein was betting that corporate PC networks would get really large and that company computer czars or czarinas would end up looking for a software safety net like the kind that protects data on mainframes. He recruited mainframe veteran Eli Oxenhorn, 46, who had spent 20 years running computer operations at Warner Communications and Western Union, to be Cheyenne's CEO. ReiJane Juai (pronounced Ray-Ann Why''), 34, a former Bell Labs computer engineer, came aboard to develop the software. Two things Cheyenne has done well: It has developed bulletproof software -- stuff that goes out the door with few, if any, bugs. And it has been a pioneer in so-called modular programming, which lets Cheyenne tailor its software to different customers without rewriting millions of lines of computer code from scratch. Juai says that because of its emphasis on quality and its devotion to elegant design, Cheyenne is ''a software engineer's paradise.'' An investor's too. Anyone who put $1,000 into Cheyenne stock when the company went public in 1985 would have more than $30,000 today. -- A.K.
BERKELEY SYSTEMS (1986) Screen-saver software Berkeley, California Sales: $20 million Employees: 100
-- Wes Boyd was a Macintosh programmer for the University of California at Berkeley, where his father taught courses in social welfare. Seven years ago they formed a partnership and applied for a $50,000 federal grant to develop software that would help visually impaired people use Macintoshes. In just three months they created inLarge, a $95 program that made everything on the screen look bigger. But sales were slow. At a Minneapolis trade show of products for the disabled, Wes Boyd sold only one copy. To keep the company afloat, he even thought of renting out the laser printer. Salvation came in 1989, when Wes Boyd, now 33, was approached by Jack Eastman, a physicist with an idea for a novel ''screen saver.'' Screen savers are graphics programs for people who leave their computers on but untouched for long periods. The idea is that by varying the image on-screen, the software prevents it from becoming permanently ''burnt into'' the monitor's phosphors. At the time only one screen saver was available commercially. Eastman's idea was for a saver that would let the customer pick a favorite image from a menu of options. In developing the product, the Boyds listened closely to users, who said they wanted something artistic. Berkeley's After Dark 2.0, introduced in 1990, lifted ''screen art'' to new heights. The software, which typically sells for $30 or less, offers colorful, even mind-blowing images, from shifting geometric patterns to the truly bizarre sight of winged toasters lazily flapping through outer space. Sales took off, rising from $2 million in 1990 to $18 million in 1992. Flying toasters became a cult object: Berkeley grosses $300,000 a year from sales of ties and T-shirts with the motif. The irony is that burn-in is a myth. It doesn't happen on modern PC monitors, no matter how long they're left on. ''To tell you the truth, we've never really investigated the value of screen savers because we don't really care,'' says Wes Boyd. People buy the products for entertainment, he says, for privacy (so colleagues can't read their screens while they're at the water cooler), and to personalize their PCs. Berkeley employs almost half as many artists as engineers; the head of marketing is Wes's wife, Joan Blades, 37, a lawyer and artist who put her own collages on the first packages. Boyd avoids hiring ''button-down people.'' Employees dress and perform as Star Trek characters at trade shows; Berkeley's booth at one this summer included replicas of the starship Enterprise's bridge and Cinderella's castle. (Star Trek and Disney images are among the latest additions to the screen-saver line.) -- A.D.
SIERRA ON-LINE (1979) Entertainment software Oakhurst, California Sales: $50 million (public) Employees: 530
-- Sierra On-Line's image changes almost as often as Madonna's. Fourteen years ago it was among the first of the alternative lifestyle companies. Husband- and-wife team Ken and Roberta Williams hightailed it out of L.A., where Ken had gotten rich as a mainframe consultant. The couple moved to a little town near Yosemite and combined Ken's computer know-how with Roberta's story sense to create a new genre: the PC adventure game. Their first big seller was King's Quest, an innocent fantasy in which the player must avoid pitfalls, collect magical objects, and find a crown. The following year Sierra switched to tongue-in-cheek sleaze. Leisure Suit Larry in the Land of the Lounge Lizards featured a protagonist in pursuit of big-breasted babes. Despite -- or maybe because of -- the wrath of religious groups and feminist software reviewers, it sold an unsleazy 300,000 copies. Next came a marketing war. Says Ken Williams, 39: ''We attracted competitors who had a lot of venture capital money.'' As Sierra fought for share, it switched identities again, this time to innovator on the electronic highway. Last year it launched the Sierra Network (TSN), an on-line service for playing games over phone lines. The network's 40,000 subscribers each pay $12.95 per month for software that creates a ''cyberspace theme park'' with snazzy graphics, and 30 hours of game credit. For a while it seemed as though TSN would turn out to be a curse. It ate up over $12 million, forcing Sierra to post its first loss and helping prompt it to lay off 10% of its work force. But then TSN grabbed the attention of AT&T, which bought 20% of the network in August and has an option to take control. You'd think that the Williamses now have a chance to relax in the Yosemite sun and focus on their other products, such as educational games for kids. But a funny thing happened to Sierra on its way to the perfect lifestyle: It outgrew Oakhurst. When Williams put in a bid for 170 acres to expand, he learned that the town lacked the necessary sewer system, water supply, and housing. Sierra's search firm was getting tired of trying to lure hard-driving MBAs to Oakhurst. So the corporate group, including Ken and Roberta, 40, is moving to Seattle. Not the programmers. ''I've never had any problem getting programmers to live next to Yosemite,'' Ken says. -- Stephanie Losee
AVID TECHNOLOGY (1987) Digital film and video editing systems Tewksbury, Massachusetts Sales: $80 million (public) Employees: 370
-- Sweat drips down the young Hollywood producer's neck. She's finished shooting her first major movie, but the budget is almost gone and the film isn't edited yet. Plus the picture is two weeks behind schedule. She's ready to jump into the La Brea Tar Pits, when suddenly she remembers. ''The Avid! We'll cut the picture on the Avid!'' The Avid is what movie industry insiders call Media Composer, Avid Technology's extraordinary workstation and software package that is revolutionizing film editing. Remarkably, movies are still assembled by hand. Film editors screen and log footage, mark pieces of film, and put the picture ) together by painstakingly splicing tiny snippets and running them through a viewer. Even simple visual effects, such as dissolves, must be sent out to expensive special-effects labs. Editing a major feature can mean a year of work by a half-dozen editors and cost up to $5 million. That's all changing. The Avid, which consists of a Macintosh Quadra 950 computer, 12 to 18 gigabytes of hard drive, two 19-inch monitors, audio speakers, circuit cards, and software, costs under $100,000. That compares with about a million dollars for a fully equipped film-editing studio. The saving on editing expenses is also, well, dramatic. Many visual effects can be done right on the machine. Fewer editors are needed, and the work goes much faster. Film editors, of course, don't care so much about money; that's the producer's headache. Editors love the Avid because it helps them work better. Says Steven Cohen, who edited Lost in Yonkers, the first major feature cut completely on an Avid: ''It gives you incredible creative freedom. You can access huge amounts of material instantly, and since you can edit so quickly, you don't hesitate to recut scenes.'' Avid was founded by Bill Warner, 38, and Eric Peters, 43, who began tinkering on Warner's kitchen table. They constructed a prototype on an Apollo engineering workstation and in 1988 won the backing of Greylock Capital of Boston, a venture capital firm. Then, says CEO Curt Rawley, 44: ''A guy from Apple saw the Avid and said, 'Right product, wrong platform.' The next day sitting by the front door was a Mac II. It was a little scary telling our backers, who just sent us money, that we were switching platforms, but they came around.'' So has Hollywood. -- A.E.S.
NEWTEK (1985) Video editing systems Topeka, Kansas Sales: $25 million (est.) Employees: 60
-- NewTek's graphics and visual effects package is truly mind-boggling, but why is it called the Video Toaster? Does it gently turn videotape brown? ''We needed a code name,'' says founder and CEO Tim Jenison, 38. ''The premise was that we were making something as easy to use as an appliance, like a toaster. We never came up with a better name.'' The Toaster is really just an add-on circuit card and software for the Commodore Amiga computer. Video editors use the system to create broadcast- quality graphics and effects. The whole bundle, Toaster plus computer, costs less than $5,000 -- remarkable, since pre-Toaster such work required a . $100,000 studio. Toasters excel at flashy promotional videos. Picture your company's logo in 3-D floating through a Day-Glo dreamscape, then exploding over an image of headquarters. You can jazz up home videos by flipping images and adding other effects like those on sports broadcasts and commercials.
Jenison, a college dropout and hacker, landed in Topeka ten years ago and ''never generated enough escape velocity to leave.'' He became obsessed with trying to run video images on a computer screen -- difficult, because it means converting the TV signal into the digital form computers understand. By the mid-1980s he was making prototypes of the Toaster. He teamed up with Paul Montgomery, 33, a Silicon Valley real estate agent and founder of the Bay Area Amiga users group. ''The Amiga is key because it was created to make videogames,'' says Montgomery. ''It comes out of the factory ready to hook up to a TV set.'' The company has just introduced software that links the Toaster to Apple products, so you can transfer graphics from a Mac to the Toaster. Jenison owns 100% of NewTek and won't reveal sales figures, but analysts estimate the company has sold more than 60,000 units. Though engineers toil up to 70 hours a week, the company maintains what it says is the largest corporate videogame room in America for them to blow off steam. -- A.E.S.
ECHELON (1988) Control technology Palo Alto, California Sales: N.A. Employees: 122
-- Ken Oshman had had about enough of startups when Apple Computer co-founder Mike Markkula began to talk him into becoming CEO of his new ''smart module'' company. Oshman, 53, was a founder of Rolm, which helped create the market for computerized PBX telephone switches for offices. He'd joined IBM when it bought Rolm and made him rich in 1984. Now Markkula was talking about creating yet another new industry, a revolution perhaps as great as the shift from mainframes to PCs. Oshman was a goner. Says he: ''Mike told me all kinds of stuff that was wrong -- which was okay because I knew it was wrong -- like that we'd have a product in the marketplace in six months. The first thing I did was write a letter to prospective investors and tell them it wasn't going to happen so fast. They said they'd still like to invest.'' Markkula's forecast was off by three years, but his talk of revolution wasn't nearly as hyperbolic. Echelon is the only company that makes truly interoperable modules for distributed controls. Translation: cheap little computers that piggyback on electrical circuits to pass along information and act on it. Walk into an office building that has been Echelon-enhanced. A motion detector senses your arrival. Noting that you've come during business hours, the network decides you're not an intruder. It follows your progress through the halls, making sure the lights are on to illuminate your path. It tells the thermostat to warm up your office. The network keeps thinking and processing through the day: Is there enough fresh air? Is it getting dark outside? Has everyone gone home? With each change the building adjusts. Echelon's modules help cut wiring and operating expenses for building owners and development costs for makers of appliances and equipment. For Oshman, who expects Echelon to make its first profit in 1994, the past five years have been a struggle. His small staff has had to design and manufacture hardware and software that can work with any product and wiring, and at the same time educate potential customers around the world. So far Echelon has attracted more than 500 companies, including Honeywell and Johnson Controls. Motorola, which makes chips for the modules, has invested $20 million for a 19% stake. Echelon will go public, says Oshman, ''once I can sleep at night knowing people are buying the stock and putting it in a safe deposit box.'' And if Echelon's vision is fulfilled and all of us take for granted that our bed knows when we're sleeping and our kitchen knows when we're awake? ''I hope like hell I'm smart enough not to do another startup.'' -- S.L.
CONTINUUM PRODUCTIONS (1989) Multimedia database Bellevue, Washington Sales: none Employees: 65
-- Bill Gates took some millions from his billions and bankrolled Continuum as a way of sticking a toe into digital interactive media -- the wave-of-the- future blending of video, photography, audio, and the written word in computerized form. While Microsoft concentrates on building software tools that will hurry the digital future along, Continuum lets Gates get into digital content, where much of the information industry's growth and power is likely to be. The job of Continuum's CEO, Stephen Arnold, 43, is simple: to assemble nonexclusive digital reproduction rights to the world's most famous images, from the Mona Lisa to Beavis and Butt-Head. So far Continuum has collected , rights to about 150,000, including hundreds of paintings from London's National Gallery. Arnold says Continuum will add moving images, text, and audio snippets to its database. Eventually users of IBM-compatible PCs, Macintoshes, or whatever computer happens to be the rage -- Arnold calls Continuum ''platform agnostic'' -- will be able to tap into the collection for all sorts of applications. Say a publisher wants to create a CD-ROM history of the bicycle. She goes on-line and sorts through Continuum's collection, assembling a grouping that includes a shot of Miguel Indurain triumphantly cycling into Paris, an animated clip of Bugs Bunny on a trike, and a vintage promotional brochure on Schwinn. When she's ready to publish her creation, though, she will probably have to pay a license fee to the images' owners. Much of the value of Continuum's database will depend on software that will let users find the image they want or simply browse. Developing commercial products using these tools interests Gates' other company: In August, Microsoft announced that it would buy a 50% stake. As growth in Microsoft's core software business slows, the company may find itself banking more and more on Continuum's growing array of sights and sounds. -- A.E.S.