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Reinaldo Normand is terrible at remembering dates, but Feb. 17, 2006, is one he won't easily forget. That afternoon he was chatting with colleagues during a break at the downtown So Paulo offices of Tectoy, a Brazilian gaming and electronics company, when an idea popped into his head. What if he were to make a living-room gaming console for emerging markets that would connect to the Internet over wireless phone networks and sell at prices middle-class families could afford? In Brazil, the choices weren't great: Consumers could pay $150 for a 20-year-old Sega console, $250 for a pirated version of Sony's nine-year-old PlayStation 2, or $1,000 for the latest Xbox 360 made by Microsoft.

Normand, who was then in Tectoy's mobile video games business, admits it was a crazy thought. In the $50 billion global video game industry, Sony, Microsoft, and Nintendo dominate the console market. They have spent billions of dollars developing the technology and marketing the machines and games that go with them. Their brands are well known globally. It would be financial suicide for a no-name with no money to take on such formidable tech giants.

But a half-hour later, Normand called his boss, Stefano Arnhold, who was traveling in Europe on a business trip. "I told him, 'We need to do this,'" Normand recalls. "'This will be a billion-dollar company. We need to find investors in America.'"

Multimillion-Dollar Investment

A day after Normand's epiphany, Mike Yuen was at his office in San Diego, writing up a business idea that bore similarities to Normand's. As a manager in the gaming division at mobile-phone chipmaker Qualcomm, Yuen had often heard developers complain that playing games on the tiny screens of mobile phones was an unsatisfying experience. He was determined to do something about it.

Two men, separated by nearly 9,500 kilometers [5,900 miles],...