The Problem
Three years after Augie Grasis founded Handmark in 2000, the company had cornered 50 percent of the market for PDA software, selling mobile versions of everything from Scrabble to the Bible, mostly in brick-and-mortar stores. Then in late 2003, Handmark's biggest client, Best Buy (NYSE:BBY), announced plans to slash the number of PDAs and related software on its shelves to make room for cell phones. After a series of emergency meetings, Grasis and his team decided to focus on selling software that delivers cell phone content, such as mobile test preparation guides. "We became a start-up again," Grasis recalls.

What The Experts Said
Matthew Diamond, CEO of Alloy Media + Marketing (NASDAQ:ALOY), said that the success of Handmark's new strategy would depend on the ability of Grasis's retail partners to attract young consumers. Fabrice Grinda, founder of Zingy, an online store that sells cell phone ring tones and games, doubted that people would buy such applications in stores instead of on their mobile devices.

What's Happened Since
Handmark's sales stayed flat in 2004 and 2005, as the company invested in new wireless services and products, including Pocket Express, an application that delivers content such as sports scores and movie listings to subscribers' cell phones for a monthly fee of $6.99. Since last September, the company has raised $10 million in venture capital financing, some of which Grasis has plowed into a push into Europe and Asia that helped Pocket Express pass the one million user mark this year. Handmark still sells one-off products for both cell phones and PDAs. Online stores, including Amazon (NASDAQ:AMZN), now drive 35 percent of the company's sales, but business is also brisk at CompUSA and other brick-and-mortar stores.

What's Next
Grasis plans to focus on continued overseas expansion and the development of new Pocket Express content and infotainment services. "We're back," he says.