ust over a year ago, Reebok CEO Paul Fireman was standing before angry shareholders at his company's annual meeting, vowing to resign if he failed to turn Reebok around within two years. At the time, Reebok's sales were flat. Profits were declining rapidly. The stock was languishing. Consumers had decided that Reebok does not sell shoes that make them jump highest or run fastest. Even Fireman admits that Reebok, No. 2 to Nike in worldwide sales, had fallen way behind in terms of product quality. "We kind of forgot one of the key ingredients of our success--that the product is more important than the celebrity athlete," the CEO says.

Fireman attacked the problem personally. He put himself in charge of product design and immediately answered a question that had been confounding people for years: Is Reebok a sports/performance brand or a fitness/fashion brand? "We realized we had to focus on the sports/performance end of this business. We needed a leadership product," says Fireman, 53. In the labs, Reebok's shoe engineers were working on a technology that had the potential to take on Nike's Air system. Nike shoes contain squishy air pockets that cushion impact; Reebok's idea was a more complex ten-pocket system that actually moves air throughout the sole, from heel to toe, then toe to heel, and so on, as the sneaker pounds the ground. The sensation is something like running on marshmallows.

The new high-tech shoes hit the market in April, with a racy name: DMX Series 2000. They're a success. Reebok's footwear sales in the U.S. are growing again for the first time in three years, and the company's reputation is rebounding. "Reebok has reinvented itself," says Jack Smith, the CEO of Sports Authority. Smith says his superstores sold out of the DMX shoes shortly after they arrived. Runner's World magazine tested the DMX running shoe and called it a "breakthrough" technology. "Has Reebok hit a home run with the DMX?" Runner's World asked. "Some runners will think so. Others will find it more of a solid double with a very promising future." Fireman plans DMX shoes designed for a variety of sports. Next up: a DMX basketball sneaker this fall.

Now Wall Street is cheering Reebok again. The stock has risen more than 70% since that clamorous annual meeting last year, and at $51 a share, it is selling near its all-time high. The company sold underperforming acquisitions like Avia athletic shoes and Boston Whaler boats, while keeping one jewel: Rockport, which generates over $400 million a year in sales of ultra-comfortable, non-athletic shoes.

Now comes the hard part: convincing the consumer that Reebok really has changed. Its advertising pales beside Nike's. Fireman is currently looking to hire his fifth new ad agency. How will Reebok distinguish itself from Nike, and from the newly energized Adidas? "That's like asking how one basketball team distinguishes itself from another," says Fireman, a bit testily. "You distinguish yourself by winning."