Muse Wants More Than Virtual Presence

Muse Wants More Than Virtual Presence<@VM>Muse Technologies Inc.

Dean Dowling

By Nick Wakeman, Staff Writer

A budding maker of powerful software training and simulation tools is hotly pursuing acquisitions as it moves to beef up its federal presence and penetrate new markets worldwide.

Muse Technologies Inc. of Albuquerque, N.M., acquired Virtual Presence Ltd. of London Nov. 18 for about $2.5 million in cash and common stock.

This deal marks the first acquisition by the four-year-old company, which is trying to make a name for itself quickly in the perceptual computing marketplace. Additional acquisitions of companies with complementary technologies and annual revenue of $5 million to $20 million are part of the company's strategy for 2000, Muse officials said.

Muse Technologies, which develops and markets products that enhance a computer user's ability to visualize and analyze large and diverse forms of data using Unix and Windows NT-based systems, had revenue of $6.2 million in 1998. Figures for 1999 will be available later this month.

The company went public in November 1998 and raised about $9.6 million. In the past year, the company's stock price ranged from a high of $13.75 per share to a low of $2.63 per share. On Dec. 3, the stock was trading at $3 per share.

Muse officials estimated overall revenue for all Muse units in the teens for 2000. The company, which has shot up from 17 employees in 1998 to 77 in 1999, should top 100 early next year, officials said.

The Virtual Presence acquisition gives Muse defense customers in Europe as well as software products that complement its own offerings, said Dean Dowling, president of Muse Federal Group Inc., the subsidiary that handles U.S. government work. Dowling, who was named president of Muse's new federal group in August, plans to hire 30 systems engineers as he builds the federal group from the ground up.

"Right now, I'm still sponging off the rest of Muse," said Dowling, who is looking for office space in Arlington, Va.

Dowling's unit, which operates as a wholly owned subsidiary of Muse, has inherited several Muse contracts, including work for NASA and the Navy.

Muse Technologies got its start in 1995 when the company licensed the multidimensional user-oriented synthetic environment (Muse) software developed at the federally run Sandia National Laboratory in Albuquerque. The software converts vast amounts of data from multiple sources into a three-dimensional environment.

With that core software, Muse has done work for the Navy, NASA, the Transportation Department and commercial clients such as Goodyear Tire & Rubber Co., company officials said.

As he recruits systems engineers to his federal group, Dowling also is looking to expand the number of systems integrators that work with the company. Currently, Muse has relationships with Analytical Mechanics Associates Inc. of Hampton, Va., Federal Data Corp. of Bethesda, Md., Intergraph Corp. of Huntsville, Ala., Hewlett-Packard Co. of Palo Alto, Calif., and Science Applications International Corp. of San Diego.

Muse's marquee work has been with NASA, for which the company built a virtual space station that allows researchers to run tests and simulations. For example, NASA has run docking exercises and also conducted mock ups of operations on the space station to see how pieces of equipment interact. On one mock up, NASA operated a sensor to see if it would interfere with the station's solar array.

The Muse system allows NASA researchers at Ames Research Center at Moffett Field, Calif., the Jet Propulsion Laboratory in Pasadena, Calif., Johnson Space Center in Houston, Kennedy Space Center at Cape Canaveral, Fla., Langley Research Center in Hampton, Va., and Stennis Space Center in Bay St. Louis, Miss., to work together in virtual space.

In a project for the Navy, the Muse software takes data collected during training exercises and converts it to a virtual world, which makes it easier for the Navy to analyze what worked and what did not, Dowling said.

The Muse software converts data into a virtual world that includes not just the look of the space station or a naval vessel but also sounds and even tactile sensations, Dowling said. The environment allows users to process information just as they do in a real-world experience, he said.

"There are three things the mind is good at: pattern recognition, trend analysis and detecting anomalies," Dowling said. "Muse lets you explore things that way."

The Muse software is a powerful tool for working on large complex projects, said Jackie Fenn, an analyst with the GartnerGroup of Stamford, Conn. The software can save the government and manufacturers money by building a "virtual prototype" where "you can explore design decisions before building an actual prototype," she said.

Muse is alone in the realm of high-end simulation tools, Fenn said. "They don't really have any competitors," she said.

The addition of Virtual Presence fits with what Muse already has been doing because it brings a virtual reality training capability among other applications, Dowling said. "We have separate and distinct technologies, but the technologies are complementary, too," he said.

One of Virtual Presence's major customers is the British Royal Air Force. The company developed a program for training personnel to work on Tornado fighter aircraft. The program has a virtual plane on which an instructor can create problems for students to solve. For example, students can remove parts, turn them over and examine them just as they would in the field, Dowling said.

The Navy is interested in a similar training system, he said. The program also can be adapted to tanks, trucks or nearly any other piece of equipment, Dowling said.

In addition to leveraging Virtual Presence's technology into the U.S. government market, Virtual Presence gives the company a foothold in Europe. "Many of the things we do dovetail nicely together," he said. Business: Develops and sells software to create virtual-reality environments for simulation, testing and training.

Based: Albuquerque, N.M.

Founded: 1995

Employees: 77

1998 Revenue: $6.2 million

Ticker: MUZE on Nasdaq

Web site: www.musetech.com

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