Only two weeks after he raised his minority stake in Metricom Inc. from 14 percent to 33 percent, peripatetic billionaire Paul Allen and his Vulcan Ventures investment group have bought another piece of the wireless networking company. This time, the Microsoft founder will raise his interest to a full 49 percent of money-losing but promising wireless modem-maker, and take a "leadership position" on Metricom's board.
"It was a good scheme to consolidate a reasonable position in the company," says Metricom CEO and chairman Bob Dilworth, referring to the timing of Allen's two-stage investment since 30 September. The market met the news Monday by moving the stock up 1.875 to close at $14.75.
Metricom's main product is the Ricochet wireless modem service, which serves about 17,000 mobile computer users in the select cities where it is currently offered, including San Francisco and Washington, DC. Metricom sells the Ricochet modem for $349, and, for now, guarantees subscribers modem speeds of up to 28.8 Kbps for a $29.95 monthly fee.
The Ricochet service relies on a series of relay radios hanging from lampposts in metropolitan areas to transmit data between a wireless modem user and a central hub. Those radios use spread spectrum technology and operate in a slice of the radio spectrum which doesn't require an FCC license, between 900 and 920 MHz.
Metricom's big promise lies in an upgrade of Ricochet to guaranteed 128 Kbps service. That speed would make it competitive with land line services like ISDN, and helps explain why Allen - after sending staffers from another Allen company, Interval Research, to haunt the Metricom offices and vet the technology - saw enough promise in Metricom's future to increase his stake. "They've been around a lot lately," Dilworth says of the Interval visitors.
The additional funds from Allen will help fuel the capital spending Dilworth says Metricom needs to complete before it can aim for profitability. "We like the idea of finishing off the product on equity money," Dilworth says, instead of taking on additional debt.
But despite the increased Allen investment, Dilworth won't commit to any acceleration of its rollout of 128K service. "I need to sit down with the new leadership of the board," Dilworth says. Metricom is currently lab-testing an internal 128K demo, and projects completion of the public upgrade sometime in 1999 after alpha and beta tests in select cities in 1998.
Metricom reported an operating loss of more than $15 million for the quarter ended 30 June, and has total net losses of a reported $120 million since it was founded in 1985.
Besides Interval, Metricom, and, of course, Microsoft, Allen has stakes in companies that include DreamWorks SKG, Ticketmaster, Starwave, the NBA's Portland Trailblazers, and the NFL's Seattle Seahawks.
