During 2001, as the company's sales fell 6 percent to $385 million, NI hired 350 new employees, including 217 engineers. Over the next year and a half, the test-and-measurement software company based in Austin, Texas, hired another 200 employees, bringing its workforce to more than 3,000.

"As the economy continues to be slow, it's new product investment that allows you to grow," says Truchard, who founded NI in his garage in 1976 with help from two fellow University of Texas research scientists and a $10,000 bank loan. And indeed, despite a lingering industry recession, NI has resumed growth. Its sales have increased during each of the past four fiscal quarters through this June 30, and company officials now expect 2003 revenue to surpass the previous record of $410 million, set in 2000.

NI also has remained steadfastly profitable throughout the industry slump, even while boosting R&D spending, completing a $57 million R&D building in Austin, and setting up a new, lower-cost manufacturing operation in Debrecen, Hungary. In July, flush with a record $168 million in cash and no debt, company directors approved NI's first-ever quarterly dividend.

Meanwhile, the company's investments in innovation are paying off. In May, NI introduced the biggest overhaul in more than a decade of its flagship LabView software. The upgrade improves ease-of-use and adds numerous features, such as the ability to use LabView on handheld computers. Sales of the new LabView 7 Express version are just starting, but the company is promoting it with a 200-city tour in hopes it will trigger a major upgrade cycle and expand the product's already wide user base.

Gopalan attributes much of NI's ability to withstand tough conditions to its remarkable diversification. Last year, the company sold products to more than 25,000 different companies in 80-plus countries, with no single customer accounting for more than 2 percent of revenues and no industry segment accounting for more than 10 percent of revenues.

"Our business model is to not pick any particular industry, but to be broad-based," says John Graff, NI's vice president of marketing. He notes that the company's diversification has allowed it to offset sales declines in slumping industries like telecom with growth in other areas, like factory automation and the biomedical industry.

NI gains further diversification by relying on a variety of software and hardware products. NI refuses to disclose revenues for individual business segments such as LabView, but Gopalan estimates the company sold about $108 million of PC-based instrumentation software during 2002, giving it a leading 36 percent share of that roughly $300 million worldwide market.

Several years ago the company pioneered a new industry standard called PC extensions for instrumentation (PXI), a type of rugged industrial computer that can be equipped with multiple T&M instruments. Although the fast-growing PXI equipment market is still relatively small, Frost & Sullivan estimates that NI's dominant 61 percent marketshare last year brought in about $92 million in sales.

NI also has been making impressive progress in factory automation, a potentially huge market it entered in the late 1990s with tools for machine vision and motion control, followed by LabView RT, a real-time version of its software. Richard Eastman, senior analyst with Robert W Baird & Co, estimates that PC-based factory automation products generated $109 million, or 28 percent of NI's sales in 2002.

And then there's the general-purpose interface bus (GPIB) equipment that NI started out making 27 years ago. GPIB connects traditional test instruments to external computers. Though that business has been declining, Eastman estimates it still contributed about $74 million, or 19 percent of the company's sales, during 2002.

Despite NI's broad product portfolio, its core business strategy revolves around LabView Express, which drives many of its other product lines and dominates the market for PC-based test software. LabView, introduced in 1986, ushered in the revolutionary approach of turning PCs into "virtual instruments" with capabilities that previously required expensive special-purpose test equipment. Besides costing less, virtual instruments allow users to use the same PC for other computations and to more easily connect to other design tools.

Although dedicated T&M equipment still offers higher performance than virtual instruments, more-powerful PCs, software, and data-acquisition capabilities are closing the gap. "Since we started this company, PC performance has gone up by a factor of 10,000," Truchard says. "We're riding on the coattails of a pretty strong driver, and our job is to make that capability available for our customers."

Other companies offer competing T&M software, but none has had the success of LabView, which has attracted a devoted community of users. The software's key strength is its use of graphical menus and pre-designed "wizard" tools that simplify many commonly used functions. "They're making programming more accessible to those who aren't trained to program," says software analyst Chris Lanfear of Venture Development Corp.

Lanfear sees new growth opportunities for NI following its February purchase, for an undisclosed price, of the MATRIXx design and simulation software lines from Wind River Systems. Military, aerospace, and automotive engineers use MATRIXx to develop real-time embedded systems.

One of NI's challenges, says Frost & Sullivan's Gopalan, will be to manage its expansion into new markets while continuing to grow fast enough to justify its lofty stock price. Then again, he adds, "I don't see that management is going to be a problem for this company."