It's fun to be the king
Apparently Paul Allen ascribes to the theory that only fools rush in to a long-term relationship.
But that hasn't stopped Microsoft Corp. co-founder from escalating his courtship of Metricom Inc. on a weekly basis.
Shares of Metricom soared up $2.06 per share, or 16 percent, to $14.94 Monday in afternoon trading after Allen's investment group Vulcan Ventures Inc. announced it plans to raise its stake in the wireless network company to 49 percent and take a leadership position on the company's board.
Monday's announcement marks the third-consecutive week that Allen has increased his investment in the Los Gatos, Calif., company.Last week, Vulcan filed with the SEC to acquire an additional 2.5 million shares of company stock, giving it a 33 percent stake. The week before, it made a similar stock purchase.
Based on Monday's development, Metricom will defer its pending $125 million bond offering, the companies said.
Vulcan is buying 4.65 million Metricom shares for $56 million, and has entered into an agreement to acquire 2.583 million more Metricom shares from Lindner Group, a statement issued by Vulcan and Metricom said.
The transactions raise Vulcan's interest in Metricom to 49 percent and are subject to shareholder and antitrust approval, the companies said.
Vulcan has been an investor in Metricom since 1993."Our employees and board of directors welcome this investment and commitment by Vulcan," said Bob Dilworth, Metricom chief executive and chairman.
The developer of wide-area wireless data communications products has enjoyed a steady upswing in sales in the past year, but continues to post heavy losses.
In Metricom's second quarter, which ended in June 1997, it lost $15.3 million, or $1.17 per share, on revenue of $4.7 million, compared with a loss of 63 cents per share on revenue of $2.6 million in the year-ago quarter.
Despite Metricom's losing second quarter, some analysts said its management has made some shrewd moves in the past year.
"A lot of people and investors were real skeptical when they went to these auctions and bid for a part of the frequency spectrum," said Albert Lin, an analyst at SoundView Financial Group. "Often, it costs a lot of money and takes too long before something like this bares any fruit. But getting that extra frequency space allows them to ramp up their throughput and provide many of the services that local telecos have been providing in the past."
In April, Metricom paid $1.45 million for licensed spectrum that covers 21 of the nation's 25 largest metropolitan areas. Using licensed and unlicensed spectrum, Metricom is developing a network that will provide customers with user speeds of 128kbps.
"With the deregulation of the telecommunications and cable markets, Metricom could become quite popular among local phone companies that want to add more wireless services to their menu," Lin said. "And for Paul Allen to show that he believes in the company, that's certainly viewed as a big positive by the market."
As of June 30, Metricom had more than 15,000 subscribers.
Reuters news service contributed to this report.