In our last commentary, we defined categories as a means to identify nano companies. But general talk of science and its applications are all well and good as appetizers. We're Foolish investors, so let's have a look at the entrees.

We'll focus on some of the companies and name three from each sector: one an up-and-coming pure-play nanotech, another an established mega cap incorporating nano solutions into an existing business, and the last a nano pretender.

Nano biotechnology
Four years ago, Advanced Magnetics (AMEX:AVM) applied for an FDA license for its patented imaging agent Combidex and patiently waited. Late last June, it received validation based on trial results from the company's U.S. agent Cytogen (NASDAQ:CYTO). Combidex uses nano particles to illuminate magnetic resonance imaging (MRI) scans in greater detail, letting surgeons identify actual cancerous cells instead of just a cancerous area in the body. Despite an uptick in the price on favorable news, Advanced Magnetics is continually looking for new ways to apply Combidex's use, which could in turn spur further revenue growth.

Three years ago, Elan (NYSE:ELN) was mired in financial troubles and plagued by alleged scandals. As a result, Elan needed to raise cash and at one point was looking to sell its drug-delivery division to King Pharmaceuticals (NYSE:KG). Thankfully for Elan, that deal did not go through, and that same division has celebrated recent success with its patented NanoCrystal drug-delivery technology.

Altair Nanotechnologies (NASDAQ:ALTI) is a company with arguably more press releases than revenues. It announces a drug going into preclinical trials yet will not generate revenue from it for at least another five years. (Can you guess whether this is the pure play, the mega cap, or the pretender in this sector?)

Nano materials
NEC (NASDAQ:NIPNY) discovered carbon nanotubes and will someday reap riches from royalties it'll earn on the everyday uses for these unique structures. Still, it's debatable whether that'll impact NEC's share price enough to affect its $12 billion market cap. For now, carbon nanotubes are very expensive to produce, but increased research and breakthroughs have dropped the cost a hundredfold. Production costs will continue to fall, and then carbon nanotubes will be used in commercial products, eventually making them a commonplace nanomaterial.

Alternatively Nanophase Technologies (NASDAQ:NANX), producers of nano oxides and nano powders, would like to see just one or two more companies using its products. Despite being the first true nano company that went public in 1997, Nanophase has yet to generate extraordinary growth -- or a profit, for that matter. Soon it will need further cash injections in addition to those received in the past five years. However, the company still has first-mover status and is busy solving the unique problems it encounters when particles of this minute size interact differently in clients' premises. These are problems other nano powder companies have yet to encounter, let alone overcome. Nanophase recently announced a new collaboration, including an equity investment from BYK Chemie, a subsidiary of Altana (NYSE:AAA), a German chemicals company. The partnership may just be the answer Nanophase is looking for, but the jury is out until we can see revenues from new applications.

And again we have Altair Nanotechnologies. Previously, the company was a titanium pigment manufacturer, even though it didn't sell very much of the material. When Altair scientists discovered that the fine residue from processing titanium was of a nanoparticulate size, the company called itself a nanotechnology company. Still, it has not made much of an impact on sales.

Nano electronics
It might seem disingenuous to call Intel (NASDAQ:INTC) a nanotech company at first, but when you consider that in time its chips will shrink, the label in fact fits. As it stands, Intel produces 90-nanometer chips despite technical problems. And with investments in fabrication plants to make 65-nanometer chips, Intel is certainly at the forefront of moving back Moore's Law. Advanced Micro Devices (NYSE:AMD) is not far behind with a commercial launch of its own 90-nanometer chips slated for December 2004. Advanced Micro is also one of the leaders in the race to develop next-generation data storage solutions -- again incorporating the use of nano chips. This is a race without end, and the chip makers can't promise high returns simply because they're working on nano-sized components. They are semiconductor investments rather than nano investments.

On the other hand, semiconductor wafer maker Kopin (NASDAQ:KOPN) very much wants to be seen as a nanotech firm and recently dubbed itself "The NanoSemiconductor Company." Kopin manufactures CyberDisplay technology, the science of ultrasmall screens, which has been used in digital cameras, camcorders, simulation training and virtual reality gaming devices, and cameras mounted on race car drivers' helmets. So far, the smallest display Kopin has produced is the size of a grain of rice, and its NanoPockets technology promises to go smaller still.

Then there's NVE (NASDAQ:NVEC), patent holder of the biggest, brashest technology for next-generation flash memory chips, which power up your computer memory. Apparently, NVE's spintronics lets users quickly turn on their computers like a TV. But despite many promises made over several years, NVE hasn't yet delivered a valid working model.

Nano tools
Pure plays, mega caps, and even pretenders in the nanotech tool market are hard to discern. For instance, only those in the advanced microscopy industry with atomic-force microscopes are equipped with the necessary tools to read surfaces at the nano level. To date, no single company dominates this field.

Since 2000, Veeco Instruments (NASDAQ:VECO), which makes tools to produce, measure, and test microelectronics, went on a buying spree until debt prohibited further acquisitions. The company has been generating positive cash flow, but that's been siphoned off to pay down debt. Veeco was slated for an all-stock merger with nano toolmaker FEI (NASDAQ:FEIC) in 2002, but it was called off because of economic and market concerns. Since that time, FEI has arguably executed better than Veeco in terms of ramping up its nano tool product line. This year, Keithley Instruments (NYSE:KEI), which makes test equipment for high-tech production, announced a partnership with Albany NanoTech Center at Albany State University of New York to collaborate on nanotechnology research.

Nano miscellany
With some 700 nano patents, IBM (NYSE:IBM) may well be the first to commercialize nano products across several different industries. Currently, it is developing the first organic computer, which is years from fruition. IBM is closer to being first to market with the Millipede chip, a nanomechanical data storage solution.

Accelrys Software (NASDAQ:ACCL), formerly part of Pharmacopeia (NASDAQ:PCOP), is fast gaining first-mover status in providing computational nano science software that analyzes and solves key research problems.

These companies represent only a fraction of those involved in nanotechnology. We highlight them here to spark further interest into the nano sector's investment opportunities. As always, there's no substitute for your own due diligence.

Do you dream of a nanotech world, or just the profits this nascent science can reap? Share your views with other Fools on the Nanotechnology discussion board.

Fool contributor Carl Wherrett owns shares of Nanophase Technologies, but John Yelovich has no stake in any of the companies mentioned in this article. You can reach them by email. The Motley Fool has a disclosure policy.