But Can It Leap Tall Buildings?

No one wants to talk about General Magic Inc. Not the founders. Not the investors. Not even the company spokeswoman hired last August, presumably, to talk. In fact, so hush-hush are the goings-on at this 18-month-old startup that Apple Computer Inc. Chairman John Sculley, whose company holds a 20% stake, sidesteps questions with this whispered response: "What's General Magic?"

What, indeed. Despite the company's best attempts to keep its plans under wraps, word is leaking. And so far, the early word is good. For one thing, there's the intriguing array of investors who have anted up at least $22 million to fund General Magic. The list reads like a who's who in technology: Besides Apple and some big-name ex-Apple executives, there's Japan's Sony and chipmaker Motorola. Now, investors say, American Telephone & Telegraph Co. is set to buy a stake. The phone giant, of course, is mum.

What's attracting the heavy hitters is the potential in General Magic's upcoming technology. Under development, investors say, is a prototype handheld machine that is both a communications device and a personal organizer. So easy to use is the software, insiders say, that its screen symbols could someday become as well-known as the layout of a touch-tone phone. "This is no little joke company," says Guy Kawasaki, an ex-Apple software executive. "This one is a big deal."

STELLAR CAST. Such enthusiasm could be misplaced for a startup with no product, no track record, and designs on a market that hasn't yet materialized. But if it can live up to the hype, General Magic will do so by taking a different tack from other Silicon Valley startups. It's not a hardware maker or simply a software supplier. Instead, by mid-1993, it will create software and develop hardware specifications, then license the technology to its investors and possibly others. They will produce the products. Apple, for instance, is expected to use the General Magic software in a machine, similar to the prototype now under development, that acts as a personal organizer, electronic-message taker, and, using pen-sensitive screens -- like those in handwriting-recognition computers -- a note-taker. Sony Corp. may use the software to simplify hard-to-use products such as videocassette recorders. At the heart of all these products will be chips made by Motorola Inc. and, perhaps, communications gear from AT&T.

General Magic's roots go back to Apple's development labs. There, Marc Porat, head of business development for Apple's Advanced Technology Group, and Bill Atkinson, a top Apple scientist, hatched the concept of a unique, palm-size device for the traveling executive. They envisioned an under-$1,000 machine that could send and receive phone messages, electronic mail, and cellular-transmitted faxes. They figured the machine could be a big hit. But in 1990, Apple wasn't so sure. "The idea was endearing but did not make a lot of sense," says Jean-Louis Gassee, then head of Apple engineering.

So with Apple's blessings and $10 million from its coffers, Atkinson and Porat took off. They recruited Apple veterans, including Andy Hertzfeld, a key developer of the Macintosh's software. These days, General Magic has approximately 40 employees.

EDGY RIVALS. In a crunch year for computer makers, General Magic is living the old Silicon Valley dream. Its playful Mountain View (Calif.) offices were laid out by Tom Carlisle, who designed Steven P. Jobs's NeXT headquarters. Furniture is splashed with the reds, blues, and yellows of a toddler's blocks. Conference rooms have such names as Abra, short for abracadabra. Employees can buy General Magic T-shirts, tote bags, and beach towels at the company store -- all of it emblazoned with the General Magic logo, a magician's top hat with a rabbit popping out. There's even a company mascot: Caged under a desk is Bowser, a white rabbit.

But it will take more than exuberance for General Magic to succeed. Since Atkinson's original vision of the handheld device, there have been some glitches in development. And now, well-heeled rivals are zeroing in on the same nascent market. Experts say similar devices are in the labs at Hewlett-Packard, Japan's Sharp, and at McCaw Cellular Communications, which is collaborating with software maker Oracle.

At stake is the computer industry's next billion-dollar market. Sales of handheld personal organizers, such as the Sharp Wizard, and of palmtop computers, such as HP's 95LX, are booming: Researcher Link Resources figures the market reached $353 million in 1991 sales and will mushroom to $1.2 billion by 1996. "Someone is going to be successful on the scale of a Nintendo," says Roger McNamee, general partner in Integral Capital Partners, a Silicon Valley investment firm.

General Magic and its star-studded backers figure that it might as well be them. After all, they have the people, connections, and, maybe, a head start. Now, all they have to do is pull the rabbit out of their hat.

      APPLE COMPUTER $10 million
      SONY $5 million
      MOTOROLA $5 million
      BILL ATKINSON $1 million
      ANDY HERTZFELD $1 million
      DATA: BW
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