The Tech Specialists

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THE VIDEO-CLUB KING
NETFLIX | U.S.A.
The idea for Netflix, like many other great eureka moments in business, came from a mundane experience. It was 1997, and Reed Hastings was six weeks late in returning a copy of Apollo 13 to his local Blockbuster in San Jose, Calif. The late fee was $40, and the former computer scientist thought to himself, 'Never again.' He came up with a simple solution — so simple that Silicon Valley entrepreneurs are still kicking themselves for not having thought of it first. Netflix customers keep a wish list of DVDs they want to see, in order of preference, on www.netflix.com. Netflix then mails out the selected discs. The service costs $22 a month, for which customers get to keep three titles at a time. When they're done with a DVD, they send it back and receive another one.

That's it — no late fees, no standing in line, no walking out of the store with a movie you didn't really want to see. It's working for Netflix's 2 million U.S. subscribers, almost 1 million of whom signed up in the past year alone. In Northern California's Bay Area, Netflix's largest market, the company accounts for an astonishing 10% of all movie rentals. Launched in 1999, the company, based in Los Gatos, Calif., posted its first profit last year ($6.5 million) as revenues grew 78%. It has inspired copycats abroad — Zip in Canada (www.zip.ca) and Lovefilm in Britain www.lovefilm.com). Netflix skillfully exploits two defining consumer trends of the past decade: the ubiquity of the Internet, and the rocket-fueled growth of DVD players. The first commercially available DVD players hit the market only in 1997; by the end of this year, two-thirds of U.S. homes will have one.

Hastings, 43, is modest about his firm. "I'm a funny kind of guy to be running a consumer company," he says, admitting that he would just as soon discuss artificial intelligence. He thinks he can win the battle with WalMart, which launched a copycat service in 2002, and Blockbuster, which plans to try a similar rental program in the U.S. soon. Hastings has an advantage: like Amazon, Netflix relies on ratings — up to five stars — by its members, who are asked to weigh in on what they rent. These ratings go into the system's algorithm, and out come recommendations for movies you never knew you wanted to see. Hastings intends to start a trial download service next year. But downloading is still too daunting for most users, and who wants to watch movies on a PC anyway? "DVDs have got a good decade left in them," he says. For Netflix, chances are it will be a very good decade indeed. --Chris Taylor/Los Gatos

THE GODFATHER OF SECURITY
SYMANTEC | U.S.A.
When most people hire a security guard, they don't expect him to be a computer programmer and a secretary as well. But that, or its electronic equivalent, is the range of services Symantec provided at the end of the millennium. The Cupertino, Calif., firm was best known for its Norton AntiVirus software for consumers and small businesses. But during the dotcom boom, it was also hawking software for creating Java applications and managing business and personal contacts. Confused investors and big corporate clients gave Symantec a wide berth.

Enter John Thompson, an IBM veteran of 28 years, who became Symantec CEO in 1999, the first African American to head a major U.S. software company. Thompson sold off the extraneous software divisions and replaced his entire sales team and nearly all his vice presidents. (Thompson's favorite movie: The Godfather.) Then he started buying stuff — like ON Technology, a $100 million infrastructure-management company — and he massively expanded the Live Update service, which for an annual subscription automatically downloads the latest antivirus software to your computer. "Security is a process, not a product," he says. Thompson, an avid amateur chef, is constantly tweaking Symantec's recipe.

As the corporate world faced a plague of computer viruses, Symantec thrived. The Love Bug and Sobig spread faster than any other viruses in computer history, becoming household names. Since then, virus writers have become terrifyingly shrewd. One report put the cost of bugs to global business last year at $55 billion. Symantec's sales rose, from $634 million when Thompson took over, to $1.9 billion in fiscal 2004, and more than half the firm's revenue comes from corporate sales. The company's stock has also soared more than 470% since Thompson took control. "Never in my wildest dreams could I have forecast what unfolded," he says, "but we were well positioned for it." Thompson wasn't adverse to cashing in; he made $14 million selling his options in May. Now, Symantec is buying Brightmail, an e-mail security firm. Purveyors of spam are even more cunning than virus writers, and Brightmail sends updated antispam defenses to its client computers at least once an hour. "It's a very natural marriage," Thompson says. Sifting your mail for unwanted stuff while protecting your front door — now that's something you would expect from a security guard. --By Chris Taylor/San Francisco