or some reason, popular waves of computer technology tend to be personified. The personal computer era had two faces: Steve Jobs and Bill Gates. In its boom years, the Internet, despite being decentralized technology with countless contributors, had a leading man: Marc Andreessen, co-founder of Netscape Communications, who wrote code and became rich, the first of the young Internet millionaires, smiling from the cover of Time magazine at 24, barefoot and wearing shorts.

Advertisement

What a difference six years make. Last month, Mr. Andreessen, 30, spoke to a group of potential customers at the Four Seasons Hotel in Manhattan. There were all of five people representing four companies: two investment banks, a media company and a consumer product marketer. Outnumbering the potential customers were Mr. Andreessen and his colleagues from Loudcloud Inc., an Internet company based in Sunnyvale, Calif.

Mr. Andreessen remarked after the customer meeting that, a few years ago, there would have been 40 or 50 people at such a gathering. During those days of Internet euphoria, dot-coms and old-line companies alike seemed desperate to hop on the bandwagon, seeking to emulate ways and buy the tools of the high-technology stars.

"Everyone wanted to be like Silicon Valley," said Mr. Andreessen, Loudcloud's chairman. "These days, nobody wants to do that."

Times have indeed changed, and Mr. Andreessen and Loudcloud have changed with them. This week, the company is taking another step in its struggle for survival, moving beyond providing corporate Internet and computing services to become a supplier of software to big companies. Loudcloud is also expected to receive an endorsement this week of its software strategy from a major technology company, an industry executive close to Loudcloud said.

The pending deal, the executive said, would include not only a commitment to buy Loudcloud software, but also probably an investment in the young company and perhaps an agreement to take over some of its services business, enabling Loudcloud to focus more and more on software.

Recently, Mr. Andreessen and other Loudcloud executives discussed the new software strategy, which the company is announcing this week. They refused to talk about the expected deal with the technology company or to name the company.

The software strategy represents a sharp reversal from the founders' intentions three years ago. "This is not the way we drew it up on the chalkboard when we started," said Benjamin Horowitz, Loudcloud's chief executive.

In the fall of 1999, several months after America Online had acquired Netscape, Loudcloud was founded by Mr. Andreessen, Mr. Horowitz, Tim Howes and In Sik Rhee, all former members of the Netscape team.

Their experience at Netscape, the software company that commercialized the Web browser, and a brief stint at America Online, a services business where customers pay monthly fees, made a big impression on Mr. Andreessen and his colleagues.

"We loved the recurring revenue model at AOL," Mr. Andreessen said. "It's so much more stable than software companies, so prone to cycles of rapid growth and then blowing up. We agreed we never wanted to be in the software business again."

At AOL, they had also become familiar with the challenges of running a big computing utility — which is the technical engine of the online service, a collection of huge data centers. So Loudcloud jumped into the outsourcing business, being a utility-like provider of computer services to companies and charging monthly fees.

Mr. Andreessen and his team also bet that Loudcloud could develop a competitive advantage over other contractors that run corporate Web sites or data centers — many of which have failed during the technology slump — by emphasizing Loudcloud's in-house software expertise. After all, it had been Mr. Andreessen, with a friend, Eric Bina, who in the early 1990's wrote the first version of Mosaic, the browsing software that made the World Wide Web accessible to millions.

The Loudcloud founders all have computer science backgrounds, and they set up a research and development program as soon as the company was started.

Its objective was to create software that could monitor and automate the operations of complex data centers running Web applications — traffic cop software, in a sense, for data centers, much as a software operating system is a manager and traffic cop for the basic operations of a personal computer. Loudcloud called its in-house software Opsware.

Loudcloud was begun during the heights of the Internet boom. Customers flocked to its door, mostly dot-com companies, eager to get Internet operations up and running quickly, and impressed by Loudcloud's pedigree. Big investors were enthusiastic as well, putting a value of $700 million on Loudcloud for shares purchased in a private financing in June 2000.

Yet by the time Loudcloud went public in March 2001, the Internet euphoria had faded and the slump in technology stocks was under way. The stock offering was completed, but only after underwriters trimmed the price considerably, to $6 a share, valuing the company at $450 million. Loudcloud used the funds to scale up its operations, running 12 data centers and employing 630 people shortly after the stock offering.

The company's retreat began a few months later. Its dot-com customers went out of business, and the courting of large corporate customers went slowly, especially in the midst of a technology spending slump. Loudcloud was burning through cash at an alarming rate.

Last August, Loudcloud reached an agreement with Qwest Communications International under which Qwest, the big Denver-based regional Bell company, would stand behind Loudcloud's outsourcing agreements — an effort to comfort corporate customers worried about doing business with a start-up. Yet this year, with Qwest's accounting questioned, its debt rating downgraded and its shareholders disgruntled, it is looking more like a troubled company than a Loudcloud guarantor.

Over lunch in New York last month, Mr. Andreessen mentioned that he had just seen the latest "Star Wars" movie, and that life at Loudcloud at times reminded him of riding on Han Solo's battered starship. "It feels like we're in the Millennium Falcon going through an asteroid field — ka-chung, ka-chung, ka-chung," he said, jerking from side to side with each imaginary blow.

Loudcloud's has cut its payroll by more than 40 percent from its 2001 peak, down to 370 employees. Its data centers have been trimmed to five from a dozen. Those moves have helped slow the quarterly cash burn rate — how much more is spent than taken in — to $22 million last quarter from $35 million in the period a year earlier. The company has nearly $100 million in cash remaining. And yet Loudcloud's stock closed on Friday at $1.63, way down from the $6 offering price in March 2001.

Investors and analysts say, though, that there are encouraging signs. Revenue in the recent quarter, at $17.4 million, was up 50 percent from a year earlier. And despite the technology investment slump, Loudcloud has managed to sign up a growing roster of corporate clients including Adidas, Blockbuster, Ford, Knight Ridder, the News Corporation, Nike, Orbitz and USA Today.

Loudcloud moved swiftly to adjust to the technology spending slump, cutting costs, pursuing a new group of customers and switching its strategy. "The story isn't over yet, but these guys have the signs of being a survivor," said Roger McNamee, a general partner of Integral Capital Partners, an investor in Loudcloud.

Whether Loudcloud survives and prospers will largely depend on its software strategy. Early on, Mr. Andreessen recalled, the senior technology executives at large corporations often told him they had no intention of outsourcing their data centers to Loudcloud. Computer outsourcing is increasingly a field for big established providers, like I.B.M. and Electronic Data Systems.

Many companies shun outsourcing altogether, preferring to run their own data centers. But what some big banks, brokerage houses, insurance companies and government agencies told Mr. Andreessen was that they were interested in licensing Opsware, which the company had only occasionally done in the past.

So now Loudcloud is going to develop and market Opsware as a stand-alone offering. The first version will be called Opsware 3.0, a recognition that Loudcloud produced two earlier versions for in-house use, as well as the reality that versions of large corporate software programs labeled 1.0 carry a maiden-voyage stigma that keeps them from selling well. Four customers have signed licensing agreements already, including J. P. Morgan Chase. Such large enterprise software can cost hundreds of thousands of dollars or more, including maintenance contracts.

The software strategy, analysts say, does seem to be Loudcloud's best path forward. "Its automation software is pretty unique," said Ted Chamberlin, an analyst at Gartner Inc. "That's where Loudcloud's advantage lies."

Still, as it emphasizes software, Loudcloud must be careful not to neglect its managed-services business, which is what generates the company's revenue today. Many industry analysts expect Loudcloud to become a software business in the future. At the point, it would probably make sense for Loudcloud to hand the outsourcing business to a large trusted computer services supplier — which could be part of the pending deal Loudcloud hopes to announce this week.

Or, as Mr. Andreessen observed: "In this environment, there are not enough customers for outsourced services. O.K., that's fine. Back to the software business. It's like, `Honey, we're home.' "

Mr. Andreessen's style and appearance have changed somewhat since his Netscape days. Back then, his attire was invariably casual; his eating habits collegiate, tending toward pizza and milk shakes, and he carried some extra pounds on his 6 foot, 4 inch frame.

These days, he opts more toward business attire and his frame is trimmer. His lunch in New York recently was creamless mushroom soup, a Diet Coke and a shrimp salad with no dressing, the slices of Parmesan cheese left untouched.

Asked about lessons learned from the Loudcloud experience, Mr. Andreessen replied that good ideas count for only so much.

"What really counts in getting through a tough period like this is a sheer level of energy and willpower," he observed. "You need a group of people who are willing to walk through brick walls."