Buddy System

By Stephen Koepp

Starting with their bearlike countenances and their fascination with toys and children, Nolan Bushnell and Stephen Wozniak have much in common. Each is an idea man who once came up with a billion-dollar blockbuster. Bushnell, 43, started Atari in 1972 and developed Pong, the first successful video game. Wozniak, 35, designed and helped build the first Apple computer in a garage in 1975. Both are engineering wizards at heart who have proved far more adept at creating companies than managing them over the long haul. And each is restlessly angling for an encore.

So last week the two aging wunderkinder announced that they want to join forces in an effort to score a breakthrough or two in what they see as the next big thing: computer-based toys. They hope to merge Wozniak's current venture, CL9, which makes remote-control devices for home electronics, with Bushnell's Axlon, the manufacturer of talking bears and other high-tech pets. The deal, which they are still negotiating, could involve a cashless swap of each other's stock.

The pairing of two unpredictable inventors, who will serve as co-chairmen of Sunnyvale, Calif.-based Axlon, could turn into an epic personality conflict that might make a good movie: The Wizard of Woz vs. King Pong. Right now, though, the two share the same electronic daydreams of ever smarter toys. They worked together once before, in 1974, when Bushnell hired Wozniak, then 23, to design a video game called Breakout, which became an early hit. They kept in touch over the years and started talking about the current partnership a month ago at a barbecue in the backyard of Bushnell's Woodside, Calif., home. Wozniak observed his two children, ages 1 and 3, playing with some of Axlon's robot toys and decided that his old friend was on to something. Recalls Bushnell: "I think we were able to light each other's imagination a little bit."

During the time since their early smash hits, both men have launched some money-losing flops. Wozniak dropped as much as $20 million in 1982 and '83 as promoter of California's US Festivals, two Labor Day rock extravaganzas. With some $70 million of his fortune left, Wozniak resigned from Apple early last year to develop an infrared remote-control device capable of simultaneously operating several types of components, including TV sets and videocassette recorders. So far, his CL9, an abbreviation of "cloud nine," is not profitable and has produced only one product, a $30 device that amplifies the signal of remote controllers.

Bushnell's baby, Atari, which he left in 1979, lost $539 million in 1983 when the video-game industry crashed. The following year his second big start-up, Pizza Time Theater, a chain of restaurants featuring singing robots with names like Chuck E. Cheese, filed for Chapter 11 bankruptcy protection. Despite these debacles, Bushnell sold off the ventures early enough to pocket about $70 million.

Bushnell has used part of that nest egg to bankroll Axlon, which is aiming for its first profitable year in 1986. Among the company's products are A.G. Bear, a teddy that burbles and growls in response to human speech, and Petster, a cat on wheels that motors around in response to handclaps. What more can Wozniak bring to this menagerie? Remote control, of course. If the wizards have their way, children could soon be sending armies of infrared-operated robots crawling and clanking all over their homes. --By Stephen Koepp. Reported by Robert Buderi/San Francisco

With reporting by Robert Buderi/San Francisco