The colorful and oversize paintings that hang in the New York headquarters of Wave Systems are an appropriate metaphor for the company’s chairman and CEO, 56-year-old Peter Sprague. Before and during his 30 years as chairman of chip maker National Semiconductor, Sprague spearheaded a number of ventures, some of them admittedly quixotic: a chicken farm in Iran, a run for Congress, stints as chairman of luxury car maker Aston Martin and as a movie producer.
No one ever accused Sprague of being unwilling to take a chance. And with sevenyear-old Wave Systems, his chips are again on the table. The Silicon Valley entrepreneur is targeting the desktop PC with his unique product, a chip that can encrypt and meter access to electronic information, ranging from medical and legal libraries to photographic images. It is a pay-for-use proposition: The chip prevents hackers from hauling in freebies, but allows browsers to access an index for free, paying only to unscramble the text they need. Wave will make its money on back-office operations, taking a cut for metering usage, billing, and gathering marketing feedback.
In August, Sprague signed a deal with Hughes Network Systems and wire service providers Knight Ridder/Tribune Business News, PR Newswire, and Businesswire, which collectively will sell information to desktop subscribers, who will pay for downloading.
The venture, based in Reston, VA, and known as Network News, is only a piece of the pie. Sprague’s other line of attack is for publishers to sell a package of CD-ROMs with encrypted information and a Wave chip to unlock it. Fifty-odd publishing deals are in the works, he says, starting with tax, accounting, and legal information suppliers. And Sprague is not completely bypassing the Net: Users with the chip would have the option to retrieve encrypted information from the World Wide Web.
In a departure from his free-wheeling past-when he was juggling two or three companies at once-Sprague resigned his post last May at National Semiconductor to focus exclusively on Wave Systems. He faces a formidable challenge. Wave’s success rests on his ability to sell th both publishers and users. “We must convince users to put in the chip, and they won’t do that unless publishers are willing to supply information,” he says.
For the company to fly, Sprague also must convince PC makers to ship their computers with the chip already installed. Indeed, he reckons it will take 10 million chips in the marketplace to reach critical mass. That means he will have to sell the idea to PC manufacturers-who operate on razor-thin margins-by paying them a share of revenues from the back-office operations.
Clearly, Sprague has placed a hefty bet: He and his family own 2.8 million of the company’s 14 million outstanding shares. (Wave went public at $5 a share in August 1994, and recently was trading around $6.) He thrives on such risks. In any case, he’s hoping that in five years and with myriad technical and logistical issues resolved, “Wave will be the dullest company around: We’ll be just a service provider.”