Dov Moran, chief executive officer of flash subsystems maker M-Systems Flash Disk Pioneers Ltd. (Kfar Saba, Israel), still recalls the day in 1998 when his PC froze as he tried to deliver a 6-Mbyte presentation to Wall Street in­vestors. Out of his fear and frustration came the idea for a new portable medium that would be more compact, denser and easier to use than recordable CDs—the USB flash drive.

Eli Harari remembers when he first heard about the product. The CEO of flash chip designer SanDisk Corp. (Sunnyvale, Calif.) has been closely allied to Moran as both competitor and collaborator for 18 years. "Every time I visit Israel, I invite him to cheesecake and coffee, and we talk in riddles. I think it was one of these cheesecake meetings in 1999 or 2000 when he talked about a new device he was excited about that he thought could become a billion-dollar market. It turned out to be the USB flash drive," Harari said.

M-Systems launched DiskOnKey in late 2000, but it took a year or two before San­Disk caught on to the new market that M-Systems had created. Now the world is on fire for the USB flash drive, snapping up 51 million of the thumb-size devices in 2004.

The next step for Moran is leveraging the 32-bit ARM7 processor on his drives to create smart devices that can launch a user's working environment and applications on any host PC. Moran and Harari decided to collaborate on the new devices after a meeting at the 2002 Consumer Electronics Show—sans cheesecake.

"We were both developing concepts independently, and it was obvious we were going to butt heads and end up competing with solutions that would fragment the market," said Harari.

Dataquest projects that more than half the estimated 167 million USB flash drives that ship in 2010 will be smart devices like the U3 products that started shipping this fall from M-Systems, San­Disk and their partners. "Ultimately, these will be bundled with every PC, and users will have multiple devices they use like floppy-disk replacements," said Joe Unsworth of Dataquest.

People in and out of M-Systems say that success is a natural by-product of Moran's hard work and high ambition. "Dov is a very serious, competitive guy with a lot of integrity," said Harari. This year, The Wall Street Journal listed M-Systems as the company on Nasdaq with the highest one-year sales growth: 179 percent.

Moran says that his grandfather was his role model.

"He was an incredible entrepreneur," Moran said. "He established in Poland a mechanical workshop and factory for cutlery. He was also a director of a bank, imported equipment for oil drilling, purchased and managed his own oil fields, and succeeded in every business endeavor he undertook, until the Holocaust. He lost six of his seven children, his wife, his leg and all his property, but he never lost his lust for life and his creativity."