Monday, November 28, 2005

The human computer

Writing the fastest code, by hand, for fun
By John Markoff
http://news.com.com/Writing+the+fastest+code%2C+by+hand%2C+for+fun/2100-1022_3-5972844.html
Story last modified Sun Nov 27 19:50:00 PST 2005

SEATTLE--There was a time long ago when the word "computer" was a job description referring to the humans who performed the tedious mathematical calculations for huge military and engineering projects.

It is in the same sense that Kazushige Goto's business card says simply "high performance computing."

Goto, who is 37, might even be called the John Henry of the information age.

But instead of competing against a steam drill, Goto, a research associate at the Texas Advanced Computing Center at the University of Texas at Austin, has bested the work of a powerful automated system and entire teams of software developers in producing programs that run the world's fastest supercomputers.

He has done it alone at his keyboard the old-fashioned way--by writing code that reorders, one at a time, the instructions given to microprocessor chips.

At one point recently, Goto's software--collections of programs called subroutines--dominated the rarefied machines competing for the title of the world's fastest supercomputer. In 2003 his handmade code was used by seven of the 10 fastest supercomputers. (The Japanese Earth Simulator, which was then the world's fastest machine, however, did not use his software.)

In the most recent ranking of supercomputers, IBM machines overtook a number of supercomputers using Goto's software to capture the top three spots in the fastest computer rankings. Still, the Goto Basic Linear Algebra Subroutines, or BLAS, as his programs are known, were used by four of the world's 11 fastest computers.

Goto has become a legend in the supercomputing community because of his solitary crusade. And he shows no signs of flagging in the contest to wring every ounce of computing speed from the world's fastest microprocessor chips.

But for all the acclaim he has received, Goto is a relative newcomer to the supercomputing field, having made his breakthrough about a decade ago.

"At first I didn't know anything," he said in an interview at the annual supercomputing conference held in Seattle in mid-November. "This was all trial and error, but now I have experience."

The value of his work goes far beyond setting speed records. Because his programs can more efficiently solve complex linear equations, they can offer better solutions to virtually every computational science and engineering problem. For example, the subroutines are used in simulation programs to model the flow of air over the surface of a plane or a car more precisely.

Chip versus the hand
One of Goto's principal rivals is a software project known as Atlas, created by a group of researchers working with Jack Dongarra, a computer scientist at the University of Tennessee. Atlas is an automated effort to find the most efficient way to solve linear algebra functions for specific microprocessors--a task that Goto does meticulously by hand.

Like chess-playing software, the Atlas project tries to overcome the shortcomings of different kinds of computer designs by systematically testing thousands of solutions for each chip to find the most efficient one for each type of microprocessor.

By contrast, Goto uses only a program called a software debugger that allows him to track how data moves among different components of a microprocessor.

He then reorganizes the individual software instructions so that his subroutines perform crucial algebraic functions more quickly to gain small amounts of processing speed from a specific type of computer chip.

Typically these are highly repetitive operations that can consume vast amounts of computing capacity. For example, one challenging type of calculation requires the microprocessor to multiply numbers from two tables stored in memory together.

Dongarra acknowledges that Goto's hand-tuned programs are more efficient and can still outperform Atlas.

"I tell them that if they want the fastest they should still turn to Goto," said Dongarra, who is one of the researchers who maintains the Top500 listing of the world's fastest-performing computers from a computing speed race held twice a year.

Goto came to his passion for supercomputing almost by accident. Educated in power engineering at Waseda University in Tokyo, he worked as an employee of the Japanese Patent Office, doing research on early inventions like video recorders.

To help in his work, Goto purchased a Digital Equipment workstation based on the Alpha microprocessor in 1994 to perform a simulation.

But when it arrived he could not understand why it was performing so slowly. So he explored the Alpha's design to see where the performance bottlenecks were.

He later purchased a second Alpha-based computer and by rewriting the crucial subroutines was able to improve its performance to 78 percent of its theoretical peak calculating speed, up from 44 percent.

No formal training
Although he was not formally trained in computer or software design, he perfected his craft by learning from programmers on an Internet mailing list focusing on the Linux operating system for the Alpha chip. His curiosity quickly became a passion that he pursued in his free time and during his twice daily two-hour train commute between his job in Tokyo and his home in Kanagawa Prefecture.

"I would frequently work on these problems until midnight," he said. "I did it to relax."

As a teenager, Goto developed a passion for electronic design, building his own stereo equipment from the most basic components.

His current interest, he says, is not in the pure mathematics of the linear equations, but rather in finding clever ways to overcome the shortcomings of the architecture and internal organization of microprocessors that are used in every kind of computer, from hand-held devices to supercomputers.

Modern computers are organized to offer the programmer a hierarchical series of data storage areas that range from the computer's disk drive DRAM memory, as well as relatively small temporary memory areas called caches. Typically, the fastest memories are also the smallest.

One of the simplest ways to speed a program is to keep the calculation in the memory unit, which is closest to the microprocessor's calculating engine.

Every time the calculation engine is required to stop what it is doing to get new data from a more distant memory area, processing speed slows. But in some cases, keeping data in the closest memory cache may not be as efficient as keeping it in a larger cache that is farther away.
Robert A. van de Geijin, a computer scientist who works with Goto at the Texas Center, said that Goto's special skill was in the step-by-step reordering of software instructions to take the greatest advantage of the performance trade-offs offered by each type of chip.

"He combines both scientific insight and engineering skills," van de Geijin said.
They met in 2002 when Goto took a sabbatical from his job at the patent office to spend a year at the Texas center. (He has since resigned from the patent office.)

Once Goto arrived in Texas, he turned his attention to optimizing the speed of the Pentium 4 microprocessor. When computer scientists at the University at Buffalo added Goto BLAS to their Pentium-based supercomputer, the calculating power of the system jumped from 1.5 trillion to 2 trillion mathematical operations per second out of a theoretical limit of 3 trillion.

The increase was so astounding that the record keepers for supercomputing Top500 called the researchers in Buffalo because they did not think such a speed was credible.

"I teased them and suggested that the speed of light was faster in Buffalo than it was in Tennessee," van de Geijin recalled.

Recently there has been a quiet controversy around the Goto BLAS because Goto has been slow to offer his work as open-source software, the free model of software distribution.

Some programmers have suggested that Goto has not joined the open-source movement because he wants to protect his secrets and strategies from competitors.

That is not so, he said recently, noting that the Goto BLAS software is freely available for noncommercial use. And he said he was preparing an open-source version.

He said his next big challenge was to expose chip designers to his ideas to help speed their processors.

"Computer architects are stubborn," he observed. "They have their own ideas." His ideas on computing efficiency, he said, speak for themselves.

Entire contents, Copyright © 2005 The New York Times. All rights reserved.
Copyright ©1995-2005 CNET Networks, Inc. All rights reserved.

Thursday, November 24, 2005

PDAs? Smart Phones? Which is better?

Blogger's Note: With all the electronic gadgets in the world, simpler things may be sufficient. Read on ... 8-)

Picking the Perfect Pocket Pal
By David Strom
Published Wednesday 23rd November 2005 12:38 GMT
Original URL: http://www.tgdaily.com/2005/11/23/picking_the_perfect_pocket_pal/

Seemingly overnight, my pockets are overflowing with gear. Part of the problem is we get plenty of stuff here to try out, and I like trying them out. But the issue is that not every device is capable of satisfying every need, and they all have some fatal flaw. Here is a picture of what I am carrying around these days:

You'll notice the one non-electronic thing is my wallet/address book. I used to pride myself on carrying this around and called it my PDA. I would laugh and say that it was "instant on, always available, compatible with all operating systems, and a wallet too." But then I got to look at the new Palm Z22(http://www.mobilityguru.com/2005/10/17/palm_z22_disappoints/index.html). I wasn't all that excited about z22 until after I wrote the review and downloaded Andrew Gregory's Sudoku game (http://www.scss.com.au/family/andrew/pdas/palm/myprogs/sudoku/) to run on it.

That got me hooked on carrying that z22 around with me. For those of you that aren't familiar with this game, it is a crossword puzzle with numbers and the surface of the Palm is ideal for it, not to mention saving all those trees by not printing out the puzzles. The more I used the Palm/Sudoku, the more I grew attached to the thing. And having its rechargeable batteries last about four or five days and a big color screen was really nice too.

Then I was trying out a couple of cell phone games from Summus.com. I now was bringing along a second cell in addition to the Motorola that I normally use. These games are much less satisfying than my Sudoko/Palm combo. For one thing, the text is so small that I am going to have to get a new prescription for my glasses: I figure it is roughly 4 point type, or even smaller. For another thing, you have to have the magical combination of right carrier, right phone, and right service plan before you can even get started with downloading anything.

There was that initial attraction and motivation of downloading the Sports Illustrated swimsuit calendar pictures. But eventually I just left the phone at home as I realized that looking at tiny chix pix wasn't very satisfying. Not to mention that the fees were beginning to add up for all those downloads. Yes, they have other things that you can download to your phone, but those pictures aren't much bigger and certainly not as interesting as the SI girls.

About the best thing that I could find on the phone was a DIY ringtone maker called ToneMaker DJ (http://www.sonicbrandingsolutions.com/products/tonemaker.html). You have a series of controls that allows you to create your own music and save it to your phone. Apart from annoying all my co-workers that morning with my techno compositions, it did have that "you can be your own DJ" satisfaction to it. However, it was a lot of work to get something that sounded right.

While we are talking about ringtones, I should mention coming from the other direction is Xingtone.com's software. This runs on a PC and allows you to clip pieces of any MP3 sound file and then send it to your phone, provided that your phone has the ability to receive Internet-based messages. Probably a good audio editor and using the Active Synch properties of my Motorola phone would work better. It took some skill to zero in on the exact few seconds of music that I was trying to clip for my ring tones, and a true audio editor would have better controls.

The last item in my pocket is X Micro's Video MP3 player (http://www.edistributor.ca/x-micro/videomp3_400.asp). This is competition for Apple's latest Video iPod, but smaller than the Shuffle. With a gigabyte of RAM and a price of about $165, it has plenty of room, but again suffers from the Old Man syndrome of trying to cram too much into too small a space. The X Micro plays videos and MP3s, shows photos, has an FM radio and a voice recorder. But the screen is literally the size of a 37 cent stamp and the menus are also in tiny type. If you need help, the type in its miniscule manual isn't much larger.

While all this innovation around pocket-sized devices is great, sometimes it is better to go back to the basics. My paper diary, while very unexciting, is still compatible with every operating system, doesn't require batteries, and is still instant on.

© 2005 Tom's Guide Publishing. All Rights Reserved. Copyright of all documents and scripts belonging to this site by TG Publishing 1996 - 2005. Most of the information contained on this site is copyrighted material. It is illegal to copy or redistribute this information in any way without the expressed written consent of TG Publishing. Please use the Content Permission Form for such requests. This site is NOT responsible for any damage that the information on this site may cause to your system.

Tuesday, November 22, 2005

Nothing will stay the same anymore

Blogger's Note: Recent news in the hardware and software fronts reveals mammoth changes lay ahead. Intel's Pentium 4 is under scrutiny due to the potential of being hacked via its hyper-threading technology. The rest of the software makers are still figuring out how to make money with the advent of free software. Microsoft is even planning of releasing an ad-supported Microsoft Office with minimal or no license fees. We can all thank AMD and Linux for making Intel and Microsoft (and other software makers) to stand and become balanced competitors. Read on... 8-)

Does hyperthreading hurt server performance?
By Rupert Goodwins
http://news.com.com/Does+hyperthreading+hurt+server+performance/2100-1006_3-5965435.html
Story last modified Mon Nov 21 14:31:00 PST 2005

Intel's hyperthreading technology, which aims to improve the performance of its processors, is being blamed by some technologists for server performance problems.

With both SQL Server and Citrix Terminal Server installations, motherboards enabled to use Intel's Hyperthreading Technology show markedly degraded performance under a heavy load, some technology professionals have reported. Disabling the technology restores expected levels, they noted.

"Our customers were complaining about much worse performance than expected when running Citrix Terminal Server and our software on the same machine," said Peter Ibbotson, the technical director at Lakeview Computers, a British provider of accounting software.

"We've had fun and games in the past, when we've enabled hyperthreading for testing, and we'd seen that motherboards had started to arrive with it enabled. When we disabled hyperthreading, performance went back to normal," Ibbotson added.

Hyperthreading allows various elements of a processor to run different code at the same time. Intel says its HT technology will boost chip performance and allow a CPU to process nearly twice as much information as one without hyperthreading.

Slava Ocks, a developer working on SQL Server 2005 within Microsoft, reported similar problems in a blog posting earlier this month.

"Our customers observed very interesting behavior on high-end HT-enabled hardware. They noticed that in some cases, when high load is applied to SQL Server, CPU usage increases significantly but SQL Server performance degrades," Ocks wrote.

Ocks then detailed some testing that showed this behavior. In that case, a system thread cleaning out blocks of disk cache memory was running at the same time as worker threads. "With Intel HT technology, logical processors share L1 & L2 caches. As you would guess (this) behavior can potentially trash L1 & L2 caches," Ocks wrote.

The on-chip cache exists to speed operation by keeping copies of recently accessed data where it can be accessed without recourse to main system memory, which is much slower by comparison. Where multiple threads access different parts of memory, but are simultaneously processed by the chip's hyperthreading technology, the shared cache cannot keep up with their alternate demands, and performance falls dramatically, according to analysis by Ocks and Ibbotson.

"It's ironic," Ibbotson said. "Intel had sold hyperthreading as something that gave performance gains to heavily threaded software. SQL Server is very thread-intensive, but it suffers. In fact, I've never seen performance improvement on server software with hyperthreading enabled. We recommend customers disable it when running Citrix and our software on the same server."

Scott McLaughlin, an Intel spokesman, said Monday that hyperthreading has done well on most benchmarks. "Intel has been clear where it offers benefits and where it won't," he said.

Earlier this year, Intel hyperthreading was revealed to have a security flaw where threads could find information from each other through the shared cache despite having no access to each other's memory space.

Rupert Goodwins of ZDNet UK reported from London. CNET News.com's Greg Sandoval contributed to this report. Copyright ©1995-2005 CNET Networks, Inc. All rights reserved.

Software: No longer business as usual
By Martin LaMonica
http://news.com.com/Software+No+longer+business+as+usual/2100-1012_3-5958760.html
Story last modified Thu Nov 17 12:27:00 PST 2005

The software industry, already reeling from consolidation, is grappling with a new problem: finding the right sales model.

The old, traditional model of selling software, either through up-front fees or long-term licenses, is increasingly under strain as both consumers and big businesses demand change.

The latest sign of turmoil: an admission by Microsoft's top executives that ad-supported Web-based services pose a risk to the company's traditional business. Other internal memos show that Microsoft is worried by the growing reluctance of consumers to spend money on software.

The business software market has been wrestling with changes for several years now. Many companies, like PeopleSoft and Siebel Systems, have been acquired. Some have simply gone out of business. And all of the big software makers acknowledge that it has become harder to sell new software licenses. Oracle, SAP and others now rely on selling ongoing maintenance contracts.

News.context
What's new:
Recent internal Microsoft memos exploring advertising-supported software demonstrate how software companies are being forced to examine new business models.
Bottom line:
Several factors--including open source, advertising-supported and hosted services--are giving customers more choices and putting a strain on the traditional method of purchasing software with a one-time, up-front fee.

"There are some seismic shifts happening" in all areas of the software industry, said M.R. Rangaswami, an investor and software industry consultant. "It's not going to be a complete shift to open source, software-as-a-service or build-your-own. Will (this) have a major impact on the market? Absolutely."

The growing popularity of open-source software, particularly for server software like databases, has shifted strategies at Microsoft, Oracle and other large companies, which now offer free or low-cost products.

Similarly, hosted applications like Salesforce.com that allow companies to switch to a recurring monthly charge instead of a large capital outlay have forced Microsoft, SAP and others to offer similar products.

The confluence of these factors and others is causing dramatic changes in how software is bought, said analysts and company executives. Rather than just charging customers for a CD stuffed with code, providers are increasingly turning to the Web, and to new licensing models, they said.

"Finding new revenue streams is really important so (vendors) are looking at all kinds of contract models," said Joanne Correia, an analyst at Gartner. "When markets become really mature, what happens is people fight for customer control, and that is done via contracts."

In particular, big companies are demanding the ability to buy on an annuity basis, where they pay in smaller increments rather than shell out large sums up front, analysts said.

"It's not going to be a complete shift to open source, software-as-a-service or build-your-own. Will (this) have a major impact on the market? Absolutely." --M.R. Rangaswami, investor and software industry consultant

With tight IT budgets and slim increases projected for the coming years, corporate customers are eyeing shorter-term contracts--or no contracts at all--rather than pay a perpetual license fee and maintenance costs.

For instance, Joe Drouin, the global chief information officer of TRW Automotive, is taking a look at Salesforce.com, which delivers its product as a Web-based service, in part because of the economics. Drouin said TRW is already an SAP customer. But for new applications, he's looking to cut costs.

"You know, you go in and you spend millions of dollars in software and hardware and you put a big beast in place...The idea (with software-as-a-service is) that you wouldn't have to do that right up front. You can pay as you go," Drouin said. "It's a very compelling model."

Microsoft faces big changes
Customers like Drouin are pushing software makers to keep pace with a rapidly changing industry. One of the most visible transformations is taking place at Microsoft, the world's largest software maker.

Bill Gates, the company's chairman, sees the shift to online services as a "sea change" on par with the company's embrace of the Web more than a decade ago.

The recent launch of Microsoft's Live.com Web-based service, along with a major reorganization in September underscored the company's stepped-up commitment to deriving revenue from services, rather than strictly software licenses.

In addition, the company has mulled the introduction of free, ad-supported products, such as Works and Money. According to an internal strategy paper, consumers' unwillingness to pay for desktop programs is forcing Microsoft's hand.

"The outlook for the packaged consumer retail software market is poor," the authors of the paper, seen by CNET News.com, wrote. "The size of the market is shrinking, and consumers appear less willing than ever to buy software applications off the shelf."
Meanwhile, Google is expanding its array of Web-based products funded by advertising. Although Google's applications are limited to e-mail, photo-sharing and consumer-oriented services, George Colony, CEO of Forrester Research, expects to see much more.

"Google is also leading a pricing revolution," Colony wrote in a recent column. "Google's programs are free, funded through advertising and syndication. This is a prescient move. I foresee a world in which even enterprise applications like financials, ERP (enterprise resource planning), and supply chain software will be advertising-funded."

The growing viability of open-source products is already accelerating a shift in pricing models for businesses, analysts noted.

IBM, Oracle, BEA Systems and other infrastructure software providers have each shifted from a completely closed-source business and increasingly embraced open-source infrastructure software products. IBM even bought Gluecode, an open-source alternative to its WebSphere Java application server, and adopted its business model of monthly maintenance fees.

Open-source advocates argue that open-source software, such as databases or business intelligence tools, is cheaper than existing products. Also, by giving away software--at least, initially--open-source companies do not need to invest as much in sales and marketing, according to analysts and industry executives. Commercial software makers spend on average 82 percent of new license revenue on sales and marketing--that is, finding new customers--according to a Goldman Sachs report. That's up from 66 percent in 2000.

Open-source sales application SugarCRM, for example, does not employ direct salespeople, who are typically highly paid. Instead, the users of its open-source product are the primary source of sales leads, according to SugarCRM CEO John Roberts. A smaller sales and marketing budget allows it to divert its resources toward engineering, he added.

Larry Augustin, the founder of VA Software who sits on the board of a number of open-source companies, said that the rising cost of sales and marketing business software is driving up prices for customers.

"The traditional enterprise software business model is broken," Augustin wrote in a recent column. "A rabid search for new customers and revenue growth has caused sales and marketing costs to spiral out of control...We're charging the customer more to sell to them."

Still, some corners of the software world have been able to maintain the status quo.

Adobe Systems, which sells popular desktop software like Photoshop and Illustrator, has stuck with the model for consumers and has even been able to raise prices in recent years, noted Gene Munster, a financial analyst at Piper Jaffrey. But Adobe will likely explore different models, he said.

"The traditional enterprise software business model is broken."
--Larry Augustin, founder, VA Software

"I think you'll see companies move to different (pricing) models over time," Munster said. "I could see Adobe, like Microsoft, look at ways of charging less up front, have a subscription fee, and (have) products supported by ads."

Gartner's Correia said that the products that are most likely to be funded by advertising are those that are sold in high volume, such as consumer products. A subscription model, where customers pay a regular fee in place of one up-front purchase, are best suited for applications such as e-mail or customer relationship management, rather than custom-built applications, she said.

Rangaswami said that alternative pricing models and other larger industry changes, notably less-expensive offshore development and modern service-oriented architectures, ultimately benefit an increasingly demanding customer.

"The power has shifted to the buyer," Rangaswami said. "Five years ago, (vendors) could sell a million-dollar piece of software and run off to the next deal."

CNET News.com's Mike Ricciuti contributed to this report. Copyright ©1995-2005 CNET Networks, Inc. All rights reserved.

Gates memo warns of 'disruptive' changes
By Ina Fried
http://news.com.com/Gates+memo+warns+of++disruptive+changes/2100-1014_3-5940792.html
Story last modified Tue Nov 08 19:20:00 PST 2005

Aiming to stir up the same kind of momentum as his Internet Tidal Wave memo of a decade earlier, Microsoft Chairman Bill Gates has penned a memo outlining the challenges Microsoft faces from a host of online competitors.

"This coming 'services wave' will be very disruptive," Gates said in an Oct. 30 e-mail to top Microsoft employees, which was seen by CNET News.com. "We have competitors who will seize on these approaches and challenge us."

In the memo, Gates cites an earlier missive from Ray Ozzie, outlining the importance of tapping online advertising and services as new revenue sources.

News.context
What's new:
Microsoft Chairman Bill Gates sends a memo to top executives at the software giant, citing the challenges the company faces.
Bottom line:
Memo references another memo sent by the new services chief, who cited a laundry list of missed opportunities for the software maker, citing competitive threats from rivals such as Google, Skype, Research In Motion and Adobe.

"It's clear that if we fail to do so, our business as we know it is at risk," Ozzie wrote. "We must respond quickly and decisively."

Ozzie's memo, which was also seen by CNET News.com, includes a laundry list of missed opportunities for the software maker, citing competitive threats from rivals such as Google, Skype, Research In Motion and Adobe.

In September, Microsoft announced that it was reorganizing itself into three units and tapping Ozzie to lead a companywide services push. Last week, Microsoft announced the first fruits of that effort--products called Windows Live and Office Live. Windows Live combines many of Microsoft's existing MSN services into an advertising-supported product for consumers, while Office Live is a set of services, some free and some paid, aimed at small businesses.

Although Microsoft had already announced those moves, the two memos shed light on the urgency and importance the company is attaching to these plans.

Ozzie notes areas that Microsoft could have led, such as Web-based applications, but where other companies are instead more heavily focused.

"We should've been leaders with all our web properties in harnessing the potential of Ajax, following our pioneering work in OWA (Outlook Web Access)," Ozzie wrote. "We knew search would be important, but through Google's focus they've gained a tremendously strong position."

In the memo, Ozzie talks about Google as the most prominent of Microsoft's emerging competitors, but also makes reference to Yahoo and Apple Computer.

"Google is obviously the most visible here, although given the hype level it is difficult to ascertain which of their myriad initiatives are simply adjuncts intended to drive scale for their advertising business, or which might ultimately grow to substantively challenge our offerings," Ozzie wrote.
"Although Yahoo also has significant communications assets that combine software and services, they are more of a media company and--with the notable exception of their advertising platform--they seem to be utilizing their platform capabilities largely as an internal asset.

"The same is true of Apple, which has done an enviable job integrating hardware, software and services into a seamless experience with dotMac, iPod and iTunes, but seems less focused on enabling developers to build substantial products and businesses," wrote Ozzie, who joined Microsoft as chief technical officer earlier this year when his company, Groove Networks, was acquired by the software maker.

He also cites smaller, emerging companies that are developing software and services that use the Internet, rather than Windows, as their base platform.

"Developers needing tools and libraries to do their work just search the Internet, download, develop and integrate, deploy, refine," Ozzie wrote. "Speed, simplicity and loose coupling are paramount."

At the same time, Ozzie sees an opportunity if Microsoft can create a Web-based development platform.

"The work of these startups could be improved with a 'services platform'," Ozzie said. "Ironically, the same things that enable and catalyze rapid innovation can also be constraints to their success. "

Microsoft has talked of a developer platform in conjunction with Windows Live, but the company has offered few details of how third parties will be able to build on top of Microsoft's work.

He also points to the fact that although Microsoft's Office is ubiquitous, it is Adobe's PDF file that has emerged as the key means of sending formatted documents on the Web. Microsoft is proposing its own rival to PDF, known as Metro, with Windows Vista, its new operating system that is due out next year. The company will also support PDF in the next version of Office, due next year.

Gates says that despite the threats, "the opportunity for us to lead is very clear."

"More than any other company, we have the vision, assets, experience, and aspirations to deliver experiences and solutions across the entire range of digital workstyle & digital lifestyle scenarios, and to do so at scale, reaching users, developers and businesses across all markets."

Details of the memos were reported late Tuesday by the Wall Street Journal.
Copyright ©1995-2005 CNET Networks, Inc. All rights reserved.

Microsoft eyes ads as consumers close wallets
By Ina Fried
http://news.com.com/Microsoft+eyes+ads+as+consumers+close+wallets/2100-1012_3-5954406.html
Story last modified Wed Nov 16 04:00:00 PST 2005

Although Office and Windows continue to produce vast revenue and profits for Microsoft, some of the company's other well-known consumer titles are generating only a trickle of business.

According to internal documents seen by CNET News.com, Microsoft gets only about $2 for each copy of Works that is bundled on new computers. The standard version of Money isn't even a break-even proposition, and the company has had to heavily discount its OneNote application in order to get computer makers to include it.

Microsoft predicts that things won't improve from here, either.

News.context
What's new:
Some of Microsoft's consumer software products are generating only a trickle of business, internal documents indicate.
Bottom line:
Predicted decline in consumer revenue could be impetus for Microsoft to move the titles into free, ad-supported releases or other nontraditional sales models.

"The outlook for the packaged consumer retail software market is poor," MSN workers said in an internal strategy paper seen by CNET News.com. "The size of the market is shrinking, and consumers appear less willing than ever to buy software applications off the shelf."

In the paper, Microsoft said that worldwide sales of full packaged software--which includes Works, the Encarta encyclopedia, digital imaging software and Money--dropped by 7 percent in fiscal year 2004. In addition, the company said it was seeing similar trends for fiscal 2005.

The tepid forecast, combined with concerns that others might offer free versions anyway, is prompting Microsoft to take a hard look at selling free, ad-supported versions of many of its consumer titles, like Works. And, in some cases, the numbers may well add up.

Calculating that the average person keeps their copy of its entry-level productivity suite Works--a kind of "Office lite" for consumers--for about three years, Microsoft reasoned that it wouldn't take a lot of ad revenue to justify moving the product to an ad-driven model.

"That means that if ad revenues exceed 67 cents per year, we could actually give Works away and still make more money," two Microsoft researchers and one person from MSN stated in a paper presented to Chairman Bill Gates at a Thinkweek brainstorming session earlier this year.

Microsoft is not alone in seeing its consumer business trail overall software spending. IDC estimates that consumers worldwide spent $4 billion on software last year, and that total is pegged to reach $4.7 billion by 2009--a compound growth rate of just more than 3 percent.

By contrast, global packaged software revenue is much larger--$91 billion in 2004--and projected to grow to a healthy $120 billion by 2009.

Consumers just aren't seeing enough value in what's inside most software boxes, IDC analyst Albert Pang said. With programs like Excel and Word, Pang said, most people just use a fraction of the features and aren't willing to shell out big bucks.

"Only professionals are willing to pay the full retail price for the software," Pang said. "Somehow, somewhere, a better strategy needs to be developed to expand the market," Pang said.

Members not wanted
The MSN strategy paper argues that subscriptions are not the way to go, pointing to the success of Google's ad-supported Gmail. If Google's Web mail service is successful, Microsoft estimates the annual revenue per subscriber could top $20 per user, leaving "no room left at all for mass market consumer subscription services."

Instead, the paper points to nontargeted advertising as the way to go to pay for basic, low-cost services.

"High-cost services (many of which are currently paid) will be funded by an exchange of user information that will allow better targeted advertisements," the Microsoft paper contends.

The software giant has confirmed that both papers are genuine, but has declined to comment further. A Microsoft source noted that both papers represent internal brainstorming around new business models and that no decisions have been made.

In the MSN-drafted paper, Microsoft points to controversial adware maker Claria, noting that Claria claims ad rates six to 20 times those of traditional Web advertising because of its ability to target to a user's activity. Microsoft was said to be in talks to buy Claria earlier this year, though no deal was announced.

Microsoft has been building its own engine for targeted ads, known as AdCenter. The product, originally code-named Moonshot, combines context of what a user is searching for with demographic information about who is doing the searching. Initially, Microsoft is using AdCenter to serve up keyword-based search ads. However, the company has said its ambitions go much further.

"Today, it's keyword," Joanne Bradford, Microsoft's chief media revenue officer, said in an interview last week. "We believe in the future it will be about display (ads), video and all that is advertising."

Top Microsoft executives, such as Gates and Chief Technical Officer Ray Ozzie have also been calling for the company broadly to get more revenue from online advertising. Microsoft has already outlined two new ad-driven services: the consumer-oriented Windows Live and Office Live, which is aimed at small businesses.

Goldman Sachs analyst Rick Sherlund said Microsoft needs to consider a wide array of new models, including both advertising and subscriptions.

Candidates for freedom
Works, he agrees, is a good candidate to be offered for free and supported by ads. "They could deliver this as a service and get minimal ads and be money ahead," Sherlund said in an e-mail interview. "This would be market expanding."

Microsoft would likely see similar benefits if it offered Money, its personal finance software, as free and ad-funded, he said.

"I think (Microsoft) should not be afraid of offering most of their products in all three modes."
--Rick Sherlund, analyst, Goldman Sachs

But other software is better suited to being hosted on a server and offered up by subscription, Sherlund said. Still, other users, particularly business users, are likely to want software that they can run on their local PC, ad-free and without having to be connected to the Internet.

"I think (Microsoft) should not be afraid of offering most of their products in all three modes," said Sherlund, whose analyst firm has done banking work for Microsoft. "Better to cannibalize yourself and block competitors than have others step into the market unopposed."

The OneNote note-taking program represents an interesting example of, at the extreme, the types of products that could be funded by advertising. In one of the papers, Microsoft notes that it is trying to create a whole new category of software, something that is "not easy to do."

As a purely desktop application, it is maybe not in the first category of software likely to be thought of as suited for ad-based conversion. But, the Microsoft workers noted, it is also one of the Office application that users keep open longest (second only to Outlook e-amil).

"Since advertising revenue depends roughly on time used, this means OneNote has substantial potential," the paper posits. Plus, the authors noted: "OneNote's low sales to date…mean that so far, there's little risk of cannibalization."

But Pang isn't sure advertising is the answer. There are already so many Internet ads, that he thinks computer users will just get overloaded if their desktop software starts spitting out solicitations as well.

"I don't see how marketers will want to take that risk when there are so many more effective ways to reach end-users," Pang said.

Pang has a different idea. He suggests Microsoft and others should partner with service providers, who could underwrite some of the cost of software and integrate it into what they do. For example, your bank might bundle Microsoft Money with its own online account tools. Or perhaps Comcast Cable might pick up some of the cost of software for managing digital photos and bundle that product with its TV and Internet services.

There have been some examples of such pairings, as many Internet service providers have in antivirus software. That has a double benefit of adding to the perceived value of the subscription and helping to keep bugs out of their networks.

There have been other online examples. SBC Communications, for example, has its partnership with Yahoo, in which high-speed and dial-up subscribers get additional Yahoo features and services as part of their monthly fee.

"I see that type of bundling much more effective and palatable to the users," Pang said.
Copyright ©1995-2005 CNET Networks, Inc. All rights reserved.

Microsoft eyes making desktop apps free
By Ina Fried
http://news.com.com/Microsoft+eyes+making+desktop+apps+free/2100-1014_3-5951569.html
Story last modified Mon Nov 14 12:52:00 PST 2005

Even as Microsoft readies a host of new ad-supported online services to battle rivals, the software maker has been mulling a plan to offer free, ad-supported versions of some of its desktop products, CNET News.com has learned.

Although no specific plans have been made, executives within Microsoft are examining whether it makes sense to release ad-supported versions of products such as Works, Money, or even the Windows operating system itself, according to internal documents seen by CNET News.com.

"As Web advertising grows and consumer revenues shrink, we need to consider creating ad-supported versions of our software," two Microsoft researchers and an MSN employee wrote in a paper presented to company executives earlier this year. The document was prepared for one of Microsoft's twice-yearly Thinkweek exercises, in which Chairman Bill Gates and other top executives gather to consider potential new avenues for the company to follow.

News.context
What's new:
As part of its attempt to fend off Google and others, Microsoft is looking at whether it makes sense to release ad-supported versions of Works, Money, or even Windows, CNET News.com has learned.
Bottom line:
A move to bring ads into Microsoft's desktop software, though risky, would offer the company an ability to move the battle with rivals onto its home turf.

Microsoft officials confirmed the authenticity of the paper, dated Winter 2005, but declined to comment on its contents. However, a Microsoft source characterized the paper as an internal brainstorming exercise.

"It is simply an exploration of different models of delivering software to customers," the source said. "It is not policy, it is not a plan, and no decisions have been made--it's just some thoughts from our research and business units."

In recent weeks, Microsoft has identified a number of ways to increase its online advertising business as it seeks to fend off rivals such as Google. A move to bring ads into its desktop software, though risky, would offer the company an ability to move the battle on to its home turf.

The document also sheds light on Microsoft's concerns over the erosion of revenue from shrink-wrapped software, particularly in the consumer market.

Chief Technical Officer Ray Ozzie and Chairman Bill Gates outlined some of the opportunities and the challenges Microsoft faces in a series of October memos. In the more blunt of the two missives, Ozzie said Microsoft had an obligation to act on the shift to ad-supported software.

"It's clear that if we fail to do so, our business as we know it is at risk," Ozzie wrote. "We must respond quickly and decisively."

Already, the company has announced plans for Office Live and Windows Live, two products that are ad-supported complements to its existing desktop software. But in the internal documents, Microsoft workers maintain that the software maker may be forced to go further if rivals launch ad-supported versions of popular programs such as PowerPoint.

"If our competitors release free, advertising-supported versions of these programs, we may need to do the same," the two researchers and John Skovron, who works in MSN's Money unit, wrote in the winter 2005 paper.

Microsoft has been mulling a shift to ad-supported software for some time. A paper prepared for a summer 2004 Thinkweek gathering noted the decline in consumer software and suggested Microsoft's MSN online business might benefit from moving from a subscription model to one paid for through advertising.

The more recent paper outlines a number of factors for identifying which desktop software could be ripe for moving to an ad-based model. Such factors include whether the software is frequently used online, whether it contains good data for targeting ads and whether it is likely to face ad-supported competition. Among the products it identifies as meeting some of those criteria are Works, Money and OneNote.

But others both inside and outside Microsoft have called on the company to go beyond the types of services offered by MSN. An online version of Office is one of the products most often talked about. The company has in the past mulled such a move. But a commercial product never materialized, due to internal political battles and fears of cannibalizing revenue from Office, which is among the company's most profitable products.

Plan extends to Windows
The company's exploration of ad-supported software extends even to Windows, its most important product. An ad-supported version of the operating system could make some sense, the Microsoft researchers argue in their Thinkweek piece, noting that the product reportedly earns $9 per year per user.

"It seems possible that we could match that revenue via ads, but there are difficult UI (user interface) issues to solve, since the OS does not have a natural way to display ads that does not annoy users," the Microsoft workers said in the paper. One suggestion is a low-end version of the operating system that comes bundled with other ad-supported programs, such as Works, Outlook Express and Windows Media Player. However, the writers point out that "it's not clear how to prevent these elements from being replaced." The key is creating a robust enough advertising business to pay for more expensive content than what has been traditionally offered for free on the Internet. At the center of Microsoft's efforts here is a product called AdCenter. Its initial role is to offer the same kinds of text-based keyword ads as Google serves up though its AdWords, but Microsoft's ambitions for AdCenter go much further.

Executives see AdCenter, which has been known internally by the code name Moonshot, as a way to offer all manner of ads, text, display and video for use both online and offline on a PC, and on other devices, such as the Xbox gaming console or mobile phones.

"Are people willing to pay $100 every three or four years not to get bombarded with ads? I think a lot of people will." --Matt Rosoff, analyst, Directions on Microsoft

"It's not just about (ads that run) in your PC with your browser open," Joanne Bradford, Microsoft chief media revenue officer, said in an interview last week. "Today, it's keyword...We believe in the future it will be about display (ads), video and all that is advertising."

Microsoft is clearly looking to forge new ground with AdCenter, said Matt Rosoff, an analyst at Directions on Microsoft. "It's pretty clear that AdCenter is going to be more than a traditional paid search platform," he said. "They are taking the idea of contextual advertising and applying it fairly broadly."

Rosoff said it makes sense for Microsoft to explore which types of products might be supported by ads.

"It doesn't surprise me at all that they are looking at all possibilities, especially given that a lot of people feel Google is going to go this direction," Rosoff said. He notes that Money, for example, is already a hybrid product that has both a desktop software and an online component.

However, he is not convinced that consumers will accept a vast quantity of ads rather than pay for software.

"Are people willing to pay $100 every three or four years not to get bombarded with ads?" Rosoff said. "I think a lot of people will."

Finite market
He also notes that however promising the ad market, it is a finite one that can only support so many products. Today, online advertising is growing as businesses shift from things like yellow pages, print and TV ads, but, Rosoff said: "Eventually that tops out."

Microsoft faces other challenges as well. One problem with inserting ads served over an Internet connection into desktop software is that while broadband access has grown, many computers spend a significant amount of time offline. Also, to pay off, such advertising must be targeted and relevant enough to both generate higher revenue and avoid annoying users.

"It's definitely an idea to pursue, but it's fraught with perils," said Forrester Research analyst Charlene Li.

Li said the move could open up new markets for Microsoft, but notes that it is also a move into largely uncharted waters. "The challenge becomes users aren't necessarily used to having ads on desktop applications."

These concerns could explain why Microsoft held discussions to buy controversial adware maker Claria this summer, though ultimately no deal was announced.

Privacy is another major issue Microsoft expects to face. The paper suggests some options such as offering paid, ad-free upgrades; allowing users to turn off some of the personalization options in favor of more generic ads; and choosing applications to be ad-based in which users are already sharing private data. Even those moves may not be enough, the paper suggests. "Unfortunately, even where consumers are willing to make this trade, privacy advocate and perhaps European regulators are not," the authors wrote.

Li notes that some users might feel comfortable, say, writing a letter about their trip to Costa Rica in a free, ad-sponsored word-processing program and seeing ads for Costa Rica travel, while others may find that crosses a line.

"Everyone has different thresholds for how much their privacy is worth," Li said.

Despite the concerns, though, the researchers argue that Microsoft needs to act.

"As online advertising increases our competitors will enter many markets with free, ad-supported products," they wrote. "We must have free, ad-supported entries in these same areas."
Copyright ©1995-2005 CNET Networks, Inc. All rights reserved.

Wednesday, November 16, 2005

Murang laptop para sa kabataan




$100 laptop expected in late 2006 By Declan McCullagh
http://news.com.com/100+laptop+expected+in+late+2006/2100-1028_3-5956402.html Story last modified Wed Nov 16 13:55:00 PST 2005

TUNIS, Tunisia--A hand-cranked laptop that will cost roughly $100 is expected to be in the hands of schoolchildren in poorer countries by late 2006.

MIT Media Lab Chairman Nicholas Negroponte said at a United Nations Internet summit here that his nonprofit organization was negotiating with manufacturers and would have an initial order placed by February or March. Thailand and Brazil are among the six governments that have showed the strongest interest, Negroponte said.

The final design, shown for the first time here, incorporates a low-power display designed by project engineer Mary Lou Jepsen that's designed to run for up to 40 minutes in black-and-white mode with 1 minute of cranking.

The case color is a combination of a lime green and a yellow hue reminiscent of No. 2 pencils. "It was the hardest decision," said Negroponte, who runs the One Laptop Per Child nonprofit group that's organizing the effort. "We wanted to use color because it's a message of playfulness."

"This is truly a moving experience," said U.N. Secretary-General Kofi Annan, who showed up at the beginning of the event here. "It's also a moving expression of global solidarity and corporate citizenship."

In principle, the project seems simple: Design a laptop with built-in wireless and minimal power consumption, find manufacturers willing to build it for about $100, convince governments to buy it in quantities of at least 1 million as an initial order, and give it to schoolchildren to keep as their own property. (The goal is tens of millions produced and distributed within two years.)

But negotiating with governments has proved to be strenuous--Negroponte called it "very hard"--and the price quotes to build the machine remain closer to $110 than $100. "We're not even going to promise they're $100," he said. "They may be $115. What we're promising is that the price will float down."

Another worry is what happens to the laptops after they're handed gratis to students with families that are struggling to survive. The average Nigerian, for instance, makes $1,000 a year--so a family would have a strong incentive to sell the laptop because they need the money.

"One of the things you want to do is make sure there's no secondary market," Negroponte said. He said one solution would be to make sure "the machine will be disabled if it doesn't log in to the network for a few days."

The proposed design of the machines calls for a 500MHz processor, 1GB of memory and a unique dual-mode display that can be used in full-color mode, or in a black-and-white sunlight-readable mode. It's not clear yet how much cranking will be needed for the higher-power color mode.

It's expected to run an open-source operating system, probably Linux, Negroponte said, rather than a closed-source product from Apple Computer or Microsoft. Companies including Google, Advanced Micro Devices, News Corp. and Red Hat have donated to the project.
Copyright ©1995-2005 CNET Networks, Inc. All rights reserved.

Tuesday, November 15, 2005

Looking Back: Reflections of an Environmentalist

2004's Nobel Peace Prize winner looks back
Kenyan ecologist-politician Wangari Maathai suffered for her beliefs
By Petra Cahill, Reporter MSNBC
Updated: 8:22 a.m. ET Oct. 6, 2005

NEW YORK - Wangari Maathai received the 2004 Nobel Peace Prize for her “contribution to sustainable development, democracy and peace.”

Through more than 30 years of efforts with Kenya's Green Belt Movement, Matthai worked to develop grassroots solutions to environmental problems. In the process she encouraged Kenyan women to plant over 30 million trees to help tackle the massive problems of deforestation in their country.

The Nobel Peace Prize committee praised her for “thinking globally and acting locally.”

For years she was vilified by the government of President Daniel arap Moi when her fight against deforestation expanded to a battle against government corruption. She was arrested more than a dozen times, received death threats and was beaten unconscious by police.

In the last few years, Maathai, 65, who received much of her education in the United States, has been largely vindicated. In 2002, Moi stepped aside and Kenya held its first democratic elections. Maathai was elected to parliament with 98 percent of the vote in her district and was named the assistant minister for environment, natural resources and wildlife.

Her new role has not been without controversy. Last year Maathai was reported as saying that AIDS/HIV virus was a product of bio-engineering created by the West "to punish blacks." She says her remarks were misinterpreted.

With the Nobel committee set to announce this year's peace prize winner on Friday, Maathai talked about being the first African woman to win the prize, why she thinks she was chosen and how simply planting trees can lead to good governance.

What do you think is the significance of winning the Nobel Peace Prize as an African woman? Well, I think that the Nobel committee had a message to send to the world — that there is a strong link between sustainable, accountable and equitable management of resources and governance.

So many of the world’s conflicts are over resources — from smaller-scale conflicts in Kenya to issues like Darfur. They are fights over who has access and control over resources.

The Nobel committee saw that the Green Belt Movement was one organization in Africa that was actually pursuing solutions to these problems and I was the one that was leading it. But I also think they wanted to encourage Africa.

They wanted to tell Africa that here you have an excellent idea that has been struggling with itself. But it is like a streak of light that has refused to go out because there is something to it.

The message to Africa was that you should nurture ideas like this because these are the kind of ideas that will get you out of your situation, out of your sense of hopelessness and encourage and empower you. Manage your resources better, end conflicts over your resources, because, you, Africa, you’re rich.

If you had a message for Americans to help change their perceptions about Africa and Africans, what would it be?
Well, I really don’t think that Americans will change their perception about Africans until Africans change their perceptions about themselves.

It is very important for us in Africa to paint a different picture of ourselves. You have terrible pictures and terrible presentations of Africa. But we allow that. We believe that these people, when they project us very badly, they will get money and bring it to us, and we will be able to overcome some of our problems.

But what we really need is to encourage ourselves and rely on ourselves, because we have a lot of resources. We need to invest in education. We need to invest in skills. We need to be honest and responsible to ourselves.

Otherwise, we shall continue to be painted as a poor continent. But we have everything that everyone is looking for. We have oil, we have gold, we have diamonds, we have forest, we have water, we have land and we have people. But we have had bad leaders.

So it is we who have to change that perception. Once we have changed, then the rest of the world will say, yeah, it has changed.

Your movement, the Green Belt Movement, has been described as “elegant in its simplicity.” What inspired you begin to planting trees?
In 1975, before the United Nations hosted the first World Conference on Women, in Mexico, the women of Kenya began to talk about what issues they wanted to bring to the table.

Rural women kept raising the issues of clean drinking water, food, the malnourishment of their children and the fact that they didn’t have any money. That kind of surprised me, because many of these women came from the same area where I came from and there was plenty of food and clean drinking water when I grew up.

But from my own observations I could see what was happening to the environment. I could see that there was a loss of soil — due to soil erosion, deforestation and the removal of vegetation — especially along the hilltops, sloping areas and along the rivers. That was because cash crops like tea and coffee had been introduced and planted.

Unlike when I was a child, the land was just exposed and much of the vegetation had been removed. With these cash crops they had also encroached on the river lines and cultivated quite close to the rivers, which wasn’t done before. Before, we always got water directly from the river and drank it, and it was very clean and fresh. But then I was shocked to see that the rivers were brown with silt.

As I tried to understand those issues, I suggested to the women that we can plant trees. At least, I thought, it can provide firewood, fencing material, building material, protection against soil erosion.

I thought about that because it was easy. It was do-able. It wasn’t something required a lot of money or technology. So I said let us plant trees.
How does the Green Belt Movement work with the idea of good governance?When I first started working on the Green Belt Movement, I met with individual women and then it became necessary to form groups.
But, there was a law in place from our government, which was very dictatorial and very oppressive at that time — that if I had a meeting of more than nine people, I’d need a license. That was, of course, impractical and it instills fear in you because now someone else has control. So I started to challenge that law.I saw then that it was not the only law in place that was really interfering with freedom of speech, freedom of association, freedom of movement, freedom of information. All of these different freedoms were being curtailed, but in a very subtle way. I decided that that we needed was to educate ourselves on how we are governed and why we are governed that way.
That is when the movement became more than a tree planting movement, but also a human rights movement.
You made some controversial remarks in regards to the origins of HIV/AIDS being an engineered biological agent. Have your views changed? What, if anything, are you doing about educating people about AIDS? I’ve explained a lot about the misrepresentation that went with that.
I want to say that one of the great things about being a Nobel Laureate is that everybody thinks that you know everything there is to know about everything!
People are very keen to put you on the bandwagon for their issues. So, I’ve been trying very hard to stick to my issues and not go to other issues. So, to clarify that issue I did write a very comprehensive statement, “The Challenge of Aids in Africa.”
Also, as a member of parliament in Kenya, all of us are expected to do our best to pass information, get people tested and encourage those who can to take their medicine. Now that your year as the Nobel Peace Prize laureate is almost coming to a close, what’s next? Yes, the year is fast coming to the end. It has been an extraordinary year. I have been given this wonderful opportunity to share this message with the world.
Since this was the first time that the Nobel committee gave this prize to the environment and made that linkage — between peace, environment, and governance — there is a lot of interest in it.
The number of people interested in this issue has really grown in terms of groups — small children, children in high school, college kids, governments, kings, and princes — everyone is concerned about the environment now. So I’m sure it will be a long time before we see a waning off of this issue.

© 2005 MSNBC Interactive
© 2005 MSNBC.com
URL: http://www.msnbc.msn.com/id/9533147/

Entrepreneurs: How they become rich

How 23 young millionaires built their empires
The inside secrets to success of those blazing their own trails
Entrepreneur.com
Updated: 10:24 a.m. ET Nov. 8, 2005


Think it's nearly impossible to become a multimillionaire before you're 40? Meet 23 young entrepreneurs who did just that -- and learn the inside secrets to their success.

Billy Stade, 35, & Kari Stade, 25
The Closet
Costa Mesa, California
Projected 2005 sales: $6 million

Description: High-end clothing retailer with three locations in Orange County, California
Snowboard season: Billy Stade's passion for snowboarding led him to start selling snowboards out of a tiny 5-foot-by-20-foot retail space in 1993. With only enough money for first and last month's rent, Billy negotiated deals with vendors he knew to front him product. The snowboards sold well that first season, but as warmer weather approached, Billy realized he'd have to expand his product offering if he was going to stay in business during the spring and summer months. As he looked at the surf and clothing shops in his high-traffic Huntington Beach, California, location, Billy decided to get into the fashion arena. And there were other expansions: About six years ago, Billy hired Kari as an office manager, and the pair married in 2003.

Fashion forward: Going beyond typical surf wear, The Closet sells both men's and women's fashions that echo chic international styles with the relaxed California vibe mixed in. "We always had to be forward, progressive and intelligent to compete with such big surf shops around us," recalls Billy. Today, The Closet sells only a few high-end, limited-edition snowboard products, having shifted to focus on its extremely successful fashion retail business. With an eye for the high-end sportswear and casual trends exemplified by brands like Lacoste, Modern Amusement, Stussy and Volcom, The Closet has been compared to boutiques like Henri Bendel in Los Angeles.

Failed economics: It hasn't been all sunny days for this entrepreneurial couple, though. They recall late 2001, when The Closet launched a third location that was quickly toppled by the economic downturn after 9/11. "We just buckled down," says Billy. "We went completely bare-bones. It was just [Kari] and I working 9-to-9 shifts [to] build back up." With perseverance, they weathered the storm, and today the company again operates stores in three of Orange County's coastal locales--Costa Mesa, Huntington Beach and Newport Beach--with plans to add two more next year. --Nichole L. Torres

Babak Farahi, 32
Multivision Inc.
Oakland, California
Projected 2005 sales: $17 million
Description: Company that records and catalogs broadcast coverage for clients
Adrenaline rush: For Babak Farahi and his high-school friends, after-school activities like sports took a back seat to more urgent events taking place in their hometown of Walnut Creek, California. Their love of adventure and excitement kept Farahi and company glued to the radio scanner. At first mention of a fire or an accident, they would rush to the scene, capture footage and then sell it to the news stations that had arrived too late.
Hobby turned business: After high school, Farahi started a video production company specializing in custom video editing. While getting to know the industry, he noticed that news stations didn't record their own broadcasts, and he saw potential to profit by taping news shows, then selling the videotapes to the individuals who had appeared on TV. Multivision, created in 1996, also caters to large corporations wishing to track what is being said about them in the media. Currently, Multivision gathers information from more than 1,100 stations worldwide and creates tools such as DVDs, digital clips and transcripts so its clients can monitor, watch and analyze the information. Farahi's ultimate goal: to expand Multivision's coverage to include all broadcast stations worldwide.
Youthful ndeavor: Farahi was only 23 when Multivision was born, and he admits that being so young was difficult at times. "It is definitely a challenge when you're young to go out and hire a finance person who might have gray hair," says Farahi. "It's a challenge to make him believe in you."
Small World: Despite Multivision's eight offices nationwide and international expansion into Canada, Farahi has kept the company cohesive. He has established an intranet system to promote employee interaction, and organizes an annual sales meeting to bring all 125 employees together. He says, "We go for four days and work hard, play hard, and make sure we're all one company." --Sara Wilson
Mike Domek, 36
Ticketsnow
Crystal Lake, Illinois
Projected 2005 sales: Over $120 million
Description: World's largest online marketplace for secondary event tickets
The ticket master: If you're an avid event-goer in the Chicago area, you might run into Mike Domek at a Cubs game or in the front rows of a Def Leppard concert. These days, the founder of online ticket reseller TicketsNow has no problem getting good seats. But that wasn't always the case. When he first began selling secondhand tickets the old-fashioned way, he sometimes had to call over 20 different ticket brokers looking for the best locations and deals for an event. Domek decided to take the inefficiency out of the system by moving his ticket service onto the internet.
$100 and 7 years: Domek started his business with $100 and a one-bedroom apartment in 1992. He had run out of money for college and decided to try ticket brokering full time to save up for school. He never went back. It was seven years before TicketsNow, the online company, was launched from the foundation of that original ticket brokerage. All those years of slow growth and building relationships with ticket brokers across the country finally paid off. This year, TicketsNow expects to more than double its 2004 sales--money it won't have to share with investors. Says Domek, "I'm very proud to say we haven't had a penny of outside funding."
Size matters: Since the website was launched in 1999 from a 1,600-square-foot building with seven employees, Tickets-Now has exploded to 170 employees and has filled its 16,500 square feet of assorted office spaces to capacity. That sort of rapid growth would send some companies reeling, but Domek takes it in stride. "My plans are to keep doing what's best for the company, and right now what's best for the company is to keep growing."
Ticket, please: The secondary ticket market is hotter and more legitimate than ever, and TicketsNow's technology and security are a big reason. Domek is just excited to be a part of something he's loved since childhood. Says Domek, "There's so much emotion in buying tickets." And for Domek, frustration is no longer one of those emotions. --Amanda C. Kooser
Joseph Semprevivo, 34
Joseph's Lite Cookies
Deming, New Mexico, and Sebastian, Florida
Projected 2005 sales: Over $100 million
Description: Sugar-free and fat-free cookies and food products
Kid confection: Life can be tough for a diabetic 12-year-old. But in 1983, with a little help from his father, Joseph Semprevivo created a rich, sugar-free ice cream in his parents' restaurant that he could indulge in without harming his health. He and his parents began offering the ice cream to their customers, and the enthusiastic response led them to re-brand their business as a sandwich and ice-cream shop. Within three years, Semprevivo--with Dad as a chauffeur--had stocked the freezers of 197 grocery stores and ice cream shops in New Mexico.
Fortune cookie: Though his parents have long since retired from their business (and from helping Semprevivo with his), back when he was 15, his parents created a sugar-free oatmeal cookie that changed the course of Semprevivo's company. The logistical nightmare of keeping the ice cream frozen, combined with the success of the oatmeal cookies, led Semprevivo to leave ice cream behind in favor of sugar-free baked goods.
Proving ground: Concocting cookie recipes was one thing, but handling sales calls and meetings as a teen and young adult proved to be more difficult. "When you're pitching a 50-year-old Harvard MBA and you're 17, he's not amused," says Semprevivo. "Extra preparation for presentations was key." His hard work paid off--the business has since expanded to 13 flavors of cookies, bite-size cakes, brownies, pancake syrup and peanut butter. Introducing almost 40 new items this year, the line is now in 37 countries, and will reach 125,000 U.S. stores by year's end.
Singular sensation: Semprevivo's original intention was to help fellow diabetics, but his line's loyal followers also include hypoglycemics, cancer patients, and diet and health enthusiasts who shun sugar. Using all-natural ingredients, "we've set ourselves apart through quality and taste," says Semprevivo. Whether through Joseph's Lite or his fat-free food company, Santa Fe Farms, which he started in 1989, the goal, says Semprevivo, is "helping others live active, healthy lives." --April Y. Pennington
Amy Katz, 39, & Donna Slavitt, 38
World Packaging Corp.
New York City
Projected 2005 sales: $9 million
Description: Manufacturer and distributor of promotional, private-label and licensed items--most notably the Clik Clak line of mint- and candy-filled tins
Side project: Donna Slavitt worked in both the hospitality and retail arenas early in her career, but it was a job in Old Navy's prototype coffee and candy division that led her to her passion--creating fun candy and mint tins. Wanting to branch out with her own specialty retail creations full time, she enlisted the help of college friend Amy Katz, who also works as a corporate lawyer.
Explosive growth: The pair's first success came in 1997 with a retail product called WebFuel--a mint tin in the shape of a computer mouse that was designed to market websites. WebFuel attracted the attention of big names like AT&T, IBM and Microsoft at the beginning of the internet boom. Says Slavitt, "We started getting calls [saying], 'What can you make for us?'" That launched the company into the private-label arena, creating promotional tins for other companies. Their pivotal moment, however, came in 1999, when they signed an exclusive agreement to distribute candy- or mint-filled Clik Clak tins in the U.S. (the Clik Clak tins were being manufactured and distributed by a French company primarily to European outlets). Named for the sounds the tins make upon opening and closing, the Clik Clak line became a staple of World Packaging Corp. and quadrupled the company's revenue.
Success on the street: Slavitt and Katz have created specialty candy-filled tins and other items with official Major League Baseball, NBA and NFL licenses, and have worked with clients like Henri Bendel and Kate Spade. Next on the list: an organic confection line to complement their already-yummy candy offerings. The actual "we've arrived" moment for the pair? "I saw one of our Clik Clak tops melted into the tar of a New York City street," says Slavitt. "I thought, 'When you start seeing your own brand as litter, you know you've really made it.'" --Nichole L. Torres
Andrew Fox, 33
Clubplanet.com
New York City
Projected 2005 sales: $22 million, including Fox's other businesses
Description: Online nightlife destination service
All access: In 1995, this oft-rejected newcomer to New York City's club scene found a way to get past the doorman of every hot club he longed to enter--start a website offering club-goers free club reviews and information. The now-savvy Fox recalls his earlier, awkward days: "I showed up at a club wearing green shorts, and everyone was in black. The bouncer looked at me and said, 'There's no way.'"
A-lister: Working on the website in his off hours at first, Fox chucked his investment banking job in 1997 to give Clubplanet.com (then ClubNYC.com) his all. Volunteers provided early club reviews, until Fox hired a full-time editorial staff in 1999. Then he came up with a new idea: Start a guest list on his site for access to otherwise hard-to-get-into clubs. By offering a discounted cover charge to those who both signed up on the site and arrived at the club before midnight, Fox helped enhance the exclusivity of the clubs as well as increase revenue. Club owners were dubious about Fox's concept at first, but when hundreds of club-goers who signed up showed up at their doors, the owners gladly forged relationships with the innovator and paid him a "bounty" for every head he brought in.
Fight club: Fox installed a management team for Clubplanet.com so he could focus on two other businesses he was involved in, but he admits giving up control was a mistake. Upon learning of Clubplanet.com's mismanagement and financial woes, Fox engaged in a bitter struggle to regain control. He ultimately won, but the battle took its toll on the company. He was forced to lay off employees he had never met. With only two employees, Fox started back at square one, selling his other companies to refocus on his "baby."
The party syndicate: Clubplanet.com has grown to include thousands of club listings around the United States and the United Kingdom, and now syndicates its content to Citysearch, newspapers, Yahoo! and other third-party clients. Fox also recently launched NocheLatino.com, an upscale, urban Latino version of Clubplanet.com, and is working on a version for the gay community. He's since expanded his empire to include a New Year's Eve event ticketing site, NewYears.com; an exclusive club access site, CoolJunkie.com; a ticketing company, WantTickets.com; and an offline event and marketing company, Track Entertainment. --April Y. Pennington
Joe Palko, 33, & Scott Sanfilippo, 34
Neeps Inc. & Solid Cactus
Wilkes-Barre, Pennsylvania
Projected 2005 sales: $7 million
Description: Pet supply websites, including AnimalCages.com and TheFerretStore.com; website development and internet marketing group
Pet sanctuary: Scott Sanfilippo and Joe Palko became ferret owners in 1994--and soon discovered few pet stores carry ferret food or toys. While ferret supply manufacturers exist, retail stores are reluctant to devote any shelf space to such a small niche market. From their home, the friends decided to start a website, TheFerretStore.com, to serve ferret owners like themselves. Sanfilippo, an ISP sales engineer at the time, and Palko, a UPS manager, spent nights working on their venture until devoting themselves solely to their business in 1999. Today, they offer over 1,500 unique ferret products. Recently, Sanfilippo was thrilled to see another order from their first customer ever: "I found that to be a testament to our company."
Under development: In 1999, when the partners were ready to expand their company, Neeps, beyond ferrets, Yahoo! Merchant Solutions enabled them to create ActiveK9.com, AnimalCages.com, CritterStore.com, PetCareCentral.com, RabbitCentral.com and TheKittyStore.com. It also led them to a group of Kyrgyzstan-based recent college graduates who had responded to TheFerretStore.com's website redesign bid. Though he and Sanfilippo opted to use another developer, Palko developed a strong friendship with the young men. When the partners spun off their website development and internet marketing group to create Solid Cactus in 2000, Palko successfully immigrated two of the Kyrgyzstanis to the U.S. to work for them. Palko and Sanfilippo have since brought over two more Kyrgyzstanis and one Indian, and Solid Cactus has already created 1,700 websites for clients such as the Kennedy Space Center and the National Wildlife Association.
Single-minded approach: Today, Neeps continues to develop the specialty market with more supplies sold online for small and popular pets (three of the online stores also have print catalogs), while Solid Cactus creates and maintains websites for clients. Solid Cactus and Neeps are separate companies that share one philosophy. Says Palko, "It's about servicing our existing customers and making sure we did everything we possibly could." --April Y. Pennington
Chris Griffiths, 32
Garrison Guitars
St. John's, Newfoundland
Projected 2005 sales: Over $7 million
Description: Manufacturer of acoustic guitars using a patented bracing system
Brace yourself: A Garrison acoustic guitar looks like a regular guitar on the outside, but the inside is a modern marvel. Instead of wood braces, a one-piece injection-molded fiberglass structure called the Active Bracing System is encased in the guitar body. It's a high-tech leap for an instrument that's been around for hundreds of years. Garrison is on track to build 25,000 guitars this year, selling to more than 450 dealers in North America and to distributors in 35 other countries.
The long and winding road: Griffiths likes to mention that it took six minutes to come up with the bracing concept--and six years to build it. He was no stranger to running a business, having started Griffiths Guitar Works, a small custom guitar-building shop and later a retail store, in 1993, when he was only 19. "All the lessons and all the troubles and all the issues were extremely similar between both companies, just on a different scale," he says. With no factory and only five prototypes in hand, Griffiths went to the National Association of Music Merchants trade show--the industry's largest--in 2000 and came away with prospective orders for over 46,000 guitars per year. By February 2001, Griffiths had secured $4 million in funding. "We had no employees, no sandpaper, no wood, and we started to build a company," he says. By September 2001, Garrison was shipping its first batch of guitars.
Canada calling: From one of North America's oldest cities come the newest innovations in acoustic guitars. As Griffiths says, St. John's is "way out there. It's a big deal to have a guitar factory in this town. We've shown that you can be innovative in Newfoundland and still be a global company." The 37 employees at the 20,000-square-foot factory are all locals. "Without good people, it's just a building, a bunch of machines and a pile of wood," says Griffiths. That focus on the community has paid dividends in terms of loyalty and low employee turnover.
Making beautiful music: "I've transitioned from being a fan of the guitar and a guitar builder to being a guitar CEO," Griffiths says. But he still finds time to play the instrument he's loved since he was 12 years old. With Garrison Guitars looking to double in size over the next year and a half, Griffiths has definitely found his groove. --Amanda C. Kooser
Vinay Bhagat, 36, & David Crooke, 34
Convio
Austin, Texas
Projected 2005 sales: $20 million
Description: Provider of online constituent relationship management software and services for nonprofit organizations
The sound of business: Austin, Texas, is known for its music scene, but it has also built a reputation for innovative technology. While so many tech startups were sprouting in Silicon Valley, Convio decided to launch in the Lone Star State. "We could build a business more economically here than we could on the West Coast," explains chief strategy officer Vinay Bhagat. What he and David Crooke, Convio's CTO, built is a for-profit company that uses the internet to improve the way nonprofits communicate and work with their constituents.
Money matters: Bhagat and Crooke met while attending school at the University of Cambridge in England--a long way from Austin. "We had dreamed and talked about one day starting a company together," says Bhagat. Years later, after reuniting at Trilogy Software in Austin, they got their chance. The Convio concept was born when Bhagat volunteered for a public TV pledge drive and was amazed at how antiquated the fundraising system was. He was confident that his idea to build an internet system for nonprofits would fly. Says Bhagat, "What attracted me to this idea was that it could be a neat way to combine building a business with having a real impact on the world."
Without a net: When most entrepreneurs start a company, they risk losing capital if the venture fails. While Bhagat left his high-paying job to self-finance six months of research into Convio's business concept, Crooke risked being deported if the business didn't get off the ground--he was a British citizen who left his job to found Convio, despite the fact that he didn't have a green card. A $4.6 million round of venture capital from Austin Ventures in 1999 allowed the founders to breathe a sigh of relief.
Role models: Crooke's role as the technical force behind Convio hasn't changed, but Bhagat made a big move in 2003 to bring in an experienced CEO while he switched over to the chief strategy officer role. "I put my ego aside," says Bhagat. With the founders' focus, drive and passion, Convio has helped nonprofits raise over $175 million and put e-philanthropy on the map. --Amanda C. Kooser
Jonathan S. Bush, 36, & Todd Park, 32
Athenahealth
Waltham, Massachusetts
Projected 2005 sales: $38 million
Description: Internet-based revenue-cycle management provider for the health-care industry
Wisdom and war: Athena is the goddess of wisdom and prudent warfare. Athenahealth brings both qualities to its internet-based billing and revenue-cycle software solutions for medical providers. Wisdom is a quality the founders have picked up over the varied life cycles of the company. According to Jonathan S. Bush, "The prudent warfare is using technology to get large, impersonal insurance companies to pay their claims properly."
A business is born: In 1997, Athenahealth as it is today was just a gleam in the founders' eyes. Originally, Bush and Todd Park bought an OB-GYN clinic in San Diego county that they refer to as "the baby company." They both had backgrounds in health care and had met while working at strategy and technology consulting firm Booz Allen Hamilton. "We believe the battle for health care will be won or lost in the doctor's office, so we wanted to be close to that," says Park. But they didn't expect the jungle of red tape that came with getting claims paid.
Growing pains: Burned out and frustrated with the baby company's withering finances, they went looking for an internet-based billing solution to ease their woes. They couldn't find one, so they built one themselves--and discovered a larger truth. "Billing is killing and frustrating physician practices across the country," says Park. The founders realized they could do more good on a larger scale by making their technology available to physicians everywhere, and Athenahealth was born. Several rounds of VC funding got them growing.
Beyond billing: "We believe passionately that we are on the same mission we were on when we started the baby company, which is to make health care work the way it should," says Park. That mission doesn't stop with billing. Athena-health is rolling out a major new project for 2006 that will bring the same process control to the clinical side, helping to keep track of lab orders, results and prescriptions.
Athenahealth is the dominant online revenue-cycle management company in an industry that remains highly fragmented. "After all this success, we have less than 1 percent market share," Bush says. That leaves a whole lot of room for Athenahealth to grow. --Amanda C. Kooser
Ryan Duques, 29, & James Warner, 29
Shore Publishing
Madison, Connecticut
Projected 2005 Sales: $7.5 million
Description: Publisher of 16 community newspapers in Connecticut and Rhode Island
Class act: Walking around the halls of their high school together, childhood friends Ryan Duques and James Warner knew they wanted to start a business. They'd already tried their hands at lawn care and tie-dye T-shirts, and in 1994, just as both turned 18, they started a publishing company to help businesses market to the local community. Eventually, they produced promotional fliers and even a local restaurant guide. While attending college, their deep ties in the community as well as Duques' experience at his college's newspaper led the two to set their sights on something bigger--a community newspaper. Says Duques, "The first edition went out in March 1996, and we fell in love with the newspaper publishing business."
Set it free: The basic revenue model for Shore Publishing was to sell ads to local businesses and distribute the paper gratis to everyone in the community. But when Duques and Warner launched their second newspaper, they went the paid-subscription route. They quickly saw their mistake, as both advertisers and readers balked, and the company lost revenue. "We realized just how fragile things can rapidly become," says Duques. "You may feel that [your choice] is right, but if your customers aren't feeling the same way, you have to adapt." After re-evaluating the business model, they went back to what originally worked and re-launched the free paper.
Playing nice with others: Employee morale and passion are paramount to Warner and Duques. "We cultivate a corporate culture that is fun, creative, high-energy, aggressive and entrepreneurial," says Warner. The pair also entered into a partnership with New London, Connecticut-based Day Publishing, which took on an equity stake in the company in 2003, giving Shore myriad new resources, from IT support and better printing rates to capital and equipment.
Poignant press: Covering 9/11 through the eyes of a local businessman who traveled to New York City to distribute flashlights was a particularly moving moment for Duques. He and Warner love the niche they've carved out with Shore's 16 titles and plan to expand into even more Connecticut and Rhode Island communities. --Nichole L. Torres
Shawn Prez, 34
Power Moves Inc.
New York City
Projected 2005 Sales: $3 million
Description: Street promotion, marketing and event-planning company
Self-promoter: As senior director of promotions for Bad Boy Entertainment, Shawn Prez promoted CD and record releases for Sean "Diddy" Combs' label. Impressed clients sought out Prez to handle additional work after the initial projects with Bad Boy were completed. In 2002, Prez felt it was time to start his own business. "I knew promotions inside and out and was at a point where I made more money on the side than with my salary," he says. Combs supported Prez's entrepreneurial endeavors and became Power Moves' first client--he hired the company to be the marketing force behind his "Vote or Die" election campaign. Says Prez, "That was really my proudest moment."
Testy waters: Even with Combs as a client, startup wasn't totally smooth for Prez. Four months into business, a big client abruptly pulled out. "We lost a big chunk of our revenue, and it was sink or swim," Prez recalls. Rather than give up, he sat down with his staff and his accountant to strategically map out the next six months. Power Moves not only pulled through lean times, it flourished and has now served diverse clients ranging from those in the music industry to HBO to a labor union.
Street smarts: Prez knows traditional advertising doesn't work with Generation X and younger groups. Power Moves instead targets lifestyle locations, such as barber-shops, bodegas and even street corners, to embed clients' products in consumers' minds using posters, CDs and more. The company's handpicked "street teams" consist of hip, trend-dictating urbanites between the ages of 18 and 27. They're paid to report on what's hot and what's not, covering 31 markets in the U.S. as well as Europe and Japan. Prez stresses that the urban consumer isn't confined to a particular color or race. Says Prez, "It's a mind-set, a lifestyle." --April Y. Pennington
Joel Boblit, 29
Bigbadtoystore Inc.
Somerset, Wisconsin
Projected 2005 sales: Over $4 million
Description: Online toy retailer specializing in collectible action figures
Robo-biz: Joel Boblit parlayed nostalgia for his childhood toys into big-time business when he discovered how much Transformers--robot action figures whose popularity has continued since the 1980s--were being sold for online. He launched BigBadToyStore.com in 1999 shortly after graduating college, while he was reliving fond memories of trading his favorite childhood toys--GI Joe, Masters of the Universe and Transformers. The biggest challenge in those early days? Boblit admits: "Being teased by my friends."
Parental guidance: While in college, Boblit sold action figures as a hobby for extra money, but when he decided to turn his hobby into a business, his parents supported him on all levels. They went heavily into debt to finance the business, and worked 100-plus-hour weeks alongside him for BigBadToyStore. Housing his inventory at one point, his parents had to create aisles in their home to navigate around the ceiling-high boxes. Says Boblit, "They have been instrumental throughout all this and worked just as hard as I did to keep it all together during the tough early years."
Grade A service: BigBadToyStore caters to specialty toy buyers with vintage favorites like Star Wars figurines and Teenage Mutant Ninja Turtles. Boblit also branched out to comic- and movie-related items, earning loyal customers around the world. Serious collectors prize mint-condition toy packaging, so Boblit guarantees his toys by using a grading system to distinguish "standard grade" (mint or near-mint condition) from "substandard grade" packages. He also offers a premium packing service that ensures an item is in tiptop condition and handled with extra care when it's shipped. Another big draw is the "Pile of Loot" function, which allows customers to stockpile items they've already paid for in a virtual storage bin. Upon the customer's choosing, the company will ship out all the items at once, reducing shipping costs. Future plans include distribution to approved retailers, who can view volume pricing online. Boblit says, "We've got the competitive edge for convenience." --April Y. Pennington
Darrin King, 34, & Jeff King, 38
Clubfurniture.com
Charlotte, North Carolina
Projected 2005 sales: Over $5 million
Description: Online retailer of high-quality, upholstered furniture and accessories handcrafted in North Carolina
Model example: When brothers Darrin and Jeff King decided to open an online furniture retail business in 1998, they were so confident in the power of the internet that they established their business in North Carolina, the furniture capital of the world. Previously working at manufacturing companies, the two had noticed inefficiencies in the supply chains and calculated that the internet, if used correctly, could bring down costs and streamline their operations.
Cushy business: The Clubfurniture.com website offers a full line of fabric and leather furniture handcrafted by nearly 100 North Carolina artisans, but offering their goods solely online initially posed quite a challenge for the brothers. To convince manufacturers to supply them with furniture, the Kings had to pay for the initial product development and marketing. Since then, they have gained customers' trust by mailing them swatches and samples, producing a high-quality catalog biannually and taking advantage of their low overhead costs to keep prices competitive.
Sit back and relax: Clubfurniture.com didn't join the statistics as yet another dotcom failure thanks to the Kings' effort to maintain a slow but steady growth pattern and to build a solid infrastructure. In addition, they are able to compete with mass-produced overseas imports by offering customers the opportunity to partially customize their furniture. "We're going for sophisticated consumers who want to have some say in their products," says Jeff. "We compete mainly on quality, style and turnaround [time]."
Dynamic duo: For the first three years, Darrin and Jeff were a two-man show, which they now recognize as being one of the biggest mistakes they made early on. "As entrepreneurs, we took a lot on ourselves, put a lot of pressure on ourselves and tried to wear too many hats," says Darrin. Now they have eight employees and can step back to see the bigger picture, which will eventually include new furniture lines specifically targeted to kids and teens. --Sara Wilson
Emily Mange, 39, & Doug Zell, 39
Intelligentsia Coffee & Tea Inc.
Chicago
Projected 2005 sales: $12 million
Description: Coffee roaster, retailer and wholesaler
Picture perfect: Order a latte at Intelligentsia Coffee & Tea, and you've just ordered a work of art. Preparing your beverage is a team of professional espresso makers, or baristas, who have mastered "latte art" and deliver each cup topped with a rosette design so beautifully formed that it's a shame to spoil it with a sip. At Intelligentsia, employees must complete a two-month barista certification program. Consequently, the company is home to some of the finest espresso makers in the nation, three of whom placed in this year's United States Barista Championship finals. Says Doug Zell, "Having this whole latte art presentation and the craft of the barista is something I think is hard to instill across 5,000 stores and is really something that helps to distinguish us from our competitors."
Coffee 101: In a hot market like coffee, competition practically sizzles. But while entering such an industry might be intimidating for some, it didn't keep Zell and wife Emily Mange awake at night. To prepare, Zell worked for several San Francisco-based coffee roasters, moving up from coffee brewer to manager and learning the ins and outs along the way. Driven by a vision of delivering quality coffee in Chicago--a market they felt was overlooked--the couple headed east, where they disappeared into the basement of Zell's parents' house, emerging a month later with their first business plan. Founded in 1995, Intelligentsia has grown to two retail stores with a third set to open early next year, and will eventually expand to other major markets outside Chicago.
Lasting impression: Breathe deeply, and the scent alone will transport you to another world. Intelligentsia's team of coffee buyers will travel to more than 10 countries this year to meet with local farmers in an effort to create an unforgettable cup of java. With loyal customers and more than 700 restaurants, gourmet food stores and espresso bars carrying Intelligentsia's products, they must have made an impression. Why the obsession with quality? Explains Zell, "For me, the notion of quality has always been easier to defend than something like price." --Sara Wilson

Amanda C. Kooser is Entrepreneur's assistant technology editor. April Y. Pennington, Nichole L. Torres and Sara Wilson are staff writers. Additional research was compiled by Steve Cooper, James Park and Lori Kozlowski.

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