E. Digital has a history of being in the right place at the right time. Founded in San Diego in 1993, its R&D team was the first to use removable digital recording media in a handheld device, the first to create a portable voice recorder capable of interfacing with the Internet and the first to enable recording and playback of CD quality music from the Internet.

The company is confident that San Diego is the right place. The region's emergence as a leading center of online music distribution has earned it the nickname "audio alley." E.Digital currently manufactures offshore. All other operations are in San Diego, which will also be the site of future expansion. Its current market capitalization of $1.7 billion — shares are trading at $14 — is just one indication that the company’s expansion will be substantial. E.Digital employs a staff of two dozen and is growing.

An important pillar of E.Digital's growth strategy is its set of strategic partners. E.Digital has entered into alliances with leading information technology providers such as IBM and Lucent, as well as major consumer electronic manufacturers including Toshiba and Panasonic. In addition, it is working together closely with top recording studios to develop recording standards which will allow high quality audio to be transmitted over the Internet. It also has a partnership with Lanier Corp. which is refining speech recognition technology to create new handheld dictation devices that can convert speech to text which is downloaded to a personal computer.

Company CEO Alfred Falk expects additional growth opportunities from converging technologies. He reports, "We’re looking at new digital voice techniques and researching video and we see all these technologies converging into single handheld devices." He credits industry cooperation in establishing common standards with advancing technological development, such as the Secure Digital Music Initiative (SDMI), which held its latest worldwide conference in San Diego last month.

— Max Donner