Forbes Magazine
On The Cover
www.forbes.com/Forbes/99/1115/6412186a.htm
The bashful billionaire, sports team owner and beau of Mick Jagger's ex found digital religion long ago. It just might make him richer than Bill Gates.
PAUL ALLEN Bandwidth Believer
By Toni Mack and Phyllis Berman
WHAT ON EARTH HAS GOTTEN into Paul Allen? For most of the 1990s the man who cofounded Microsoft seemed content to sit back, reap the soaring value of his passive stake in Bill Gates and invest here and there in high tech.
Yet since early 1998, Allen, second only to Gates as the world's richest man, has flung some $24.5 billion into a mad buying spree aimed at broadband plays--cable systems, wireless modems, Web portals and more. In October he paid $1.65 billion to raise his 5% stake to as much as 27% in RCN, a fiber builder that bypasses the Bells' "last mile" wiring.
This month Paul Allen, 46, makes his boldest move yet. In two years he has cobbled together the nation's fourth-largest portfolio of cable systems, serving 6.2 million homes in the South, Midwest, southern California and elsewhere. Now he is staging one of the biggest initial public offerings on record, hoping to raise about $3.5 billion for his cable firm, Charter Communications. Allen won't talk about it--he's still in an SEC-imposed blackout period--but the offering provides the best blueprint yet for the emerging strategy of one of the world's most enigmatic empire builders.
Now wait a minute--just who does this guy think he is, climbing into the ring with cable heavyweights Time Warner and AT&T? He has neither the mass nor muscle to go head-to-head against them. As for brains, this is the man once dismissed as the "Accidental Zillionaire" by Wired magazine, bible for the digerati.
The rap on Paul Allen went like this: He's no visionary--he's just an incredibly lucky fellow who got in on Microsoft early, left a few years later and held on to most of his stock. Allen's piece of Microsoft, at about 36% in 1975, is now a 5% holding worth $24 billion.
While Gates built the world's most valuable company, Allen looked more like a billionaire playboy.
He reportedly paid $70 million to buy the basketball Portland Trail Blazers in 1988 and $200 million more recently to buy football's Seattle Seahawks. He hosted lavish parties--a masked ball in Venice, a chartered luxury liner bound for Alaska, bashes at his vacation home in the south of France. He is said to date Mick Jagger's ex-wife, former fashion model Jerry Hall, and he attended the party for the 25th anniversary of Saturday Night Live.
And for years Allen frittered away a fortune on a seemingly incoherent mix of far-fetched ideas and ill-timed decisions. The most painful one of all: In 1994 America Online spurned his offer to buy a bigger stake in the on-liner, so Allen got impatient and sold his 25% chunk for a profit of $100 million.
If only he hadn't: Today it would be worth $33 billion--more than his Microsoft stock. "Why has a person who played a vital role in the creation of one of the nation's great businesses failed so often on his own?" indelicately asked one of Allen's many doubters in 1994--FORBES.
Looks like we were wrong. But five years ago Paul Allen's investments looked random, like a food fight--throw a little of everything against the wall and see what sticks. Only now is it clear that, all along, his strategy was crystallizing, taking form as his portfolio grew.
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