NOTES ON METHODOLOGY.

The Soft-letter 100, published annually since 1984, is defined formally as "a ranking of the top 100 personal computer software companies in the U.S., based on calendar year revenues." That definition (which continues to evolve with the industry itself) helps explain why some companies appear on our list and why others are excluded.

Our basic eligibility rules are simple: To be ranked, a company must be an independent, U.S.-based company (subsidiaries do not qualify) that generates at least 50% of its revenues from personal computer software development or publishing. For the great majority of the companies we review, eligibility is a straightforward issue. But every year we are challenged by several cases that we try to treat logically and consistently--not always to everyone's satisfaction.

Perhaps the biggest problem is creating a workable definition of "personal computing." Traditionally, personal computer software was any product that ran on a microcomputer-based machine. That definition has become increasingly obsolete, now that microcomputer architectures and operating systems have taken over large portions of the server and workstation markets. Hardware platforms and operating systems simply do not tell us much any more about the nature of the software they support.

So what defines "personal computer software"? In determining eligibility, we now look at several issues: patterns of use (does the user perform personal or small workgroup tasks or function instead as part of an enterprise-wide system?), pricing (is the price level appropriate for an individual purchase?), distribution (in particular, is the product marketed to individual end users or to corporations?), and the local computing environment (does the product function in an open, multi-product world or only as part of a closed and centralized system?).

Even with these guidelines, we're always left with borderline cases, especially in the area of Internet and workgroup applications. We continue to watch market trends closely in these areas, because we recognize that server-based connectivity models have become more important than ever for the PC software industry.

On another front, we currently don't include companies that create software for dedicated or single-purpose hardware platforms. This rule applies primarily to the videogame segment, where the basic platforms as yet don't support general purpose applications.

Finally, it's important to note that our rankings only include companies that supply data on the record. To insure accountability, we don't accept estimates from analysts or other outside sources; thus, many privately-held companies do not qualify for our rankings because they decline to provide us with on-the-record revenue data.