O.T. Where's Paul Allen's Money?
(03/08/01, 3:52 p.m. ET) By Cynthia Flash, TechWeb Finance
Even Paul Allen, one of the nation's top technology titans, isn't holding tight in this waning technology market.
For more than a year, the Microsoft co-founder has reduced his technology holdings by selling stock in some companies while watching his investments in others dwindle to nothing as the companies go out of business.
"We've been selling pretty aggressively in the tech sector for a year and a half," said Susan Pierson Brown, spokeswoman for Allen's Vulcan Ventures, the billionaire's venture capital fund.
Vulcan Ventures, Seattle, has invested billions of dollars in Internet content, communications-infrastructure companies, cable and wireless holdings, and computer-hardware and software companies to make up what Allen calls his "Wired World."
But recently Allen's Wired World has taken on a different look. As of Dec. 31, Vulcan Ventures liquidated its stake in a number of holdings, including Priceline.com (stock: PCLN), Egghead.com (stock: EGGS), Internap Network Services Corp. (stock: INAP), and Net Perceptions Inc. (stock: NETP).
Vulcan also reported that it lowered its holdings in theStreet.com to a 2.5 percent stake and its holdings in Edison Schools Inc. (stock: EDSN) to a 4.2 percent stake, according to documents filed with the Securities and Exchange Commission.
And this month Vulcan filed to sell 300,000 more shares of competitive local exchange carrier Allegiance Telecom Inc. (stock: ALGX). That followed the sale of 1.5 million shares in October, and a move in February to sell 3.2 million shares.
In 2000, Vulcan sold 1.15 million shares of Beyond.com (stock: BYND), which sells software over the Internet, and Allen sold more than 683,000 shares of Liquid Audio (stock: LQID), an Internet music service. Those sales were reported by the Washington Service, which tracks insider stock sales.
Allen has also lost money in companies that have gone out of business.
In January he declined to continue funding Mercata, an online retailer that later fell short of enough cash to continue operating. Mercata had received $90 million since its inception; Vulcan Ventures owned 55 percent of the company.
Other Vulcan investments that are struggling include RCN Corp. (stock: RCNC), a telecommunications company that is building digital networks in urban markets, and Metricom Inc. (stock: MCOM), which supplies wireless data. Vulcan put $300 into Metricom, owning a 43 percent controlling stake. That company is valued at about $140 million; having lost $106 million in the last quarter, it warned it might have to cut operations if it can't raise more money soon.
Despite the recent divestitures and failures, however, Allen remains heavily invested in technology, as well as non-tech holdings like the Portland Trail Blazers basketball team, the Seattle Seahawks football franchise, and the wacky Experience Music Project museum in Seattle.
His website lists 53 investments, most of them in technology companies. Allen is the majority shareholder in some of those, including Charter Communications (stock: CHTR) and Click2learn (stock: CLKS). Others are small, private companies that will not disclose Vulcan's total investment.
Bill Savoy, head of Vulcan Ventures, recently told the Puget Sound Business Journal that he doesn't think the market has hit bottom, and that Vulcan will likely continue to divest itself of technology stocks. "There's a lot more downside in front of us," he said in a Feb. 27 interview.
One Allen watcher cautions against reading too much into what the billionaire is doing.
"I don't think anyone understands where this market is headed, so I don't think he has any more wisdom than anyone else does," said Scott McAdams, president of the Seattle investment firm McAdams, Wright, Ragen. "Just because you're worth a couple billion doesn't mean you have a better grasp than anyone else."
Savoy said a high percentage of Allen's multibillion-dollar portfolio is now in cash, much of that generated from Allen's sale of Microsoft (stock: MSFT) stock. Allen filed to sell $9 billion in Microsoft stock last year, following his practice of routinely selling the stock of the company he co-founded with Bill Gates.
Allen also resigned from the Microsoft board of directors in September so he could focus more of his attention on his other technology holdings.
Overall, Allen's net worth has decreased over the past year, according to Forbes. In 2000, the magazine ranked Allen as the third richest American with a net worth of $36 billion, down from 1999 when he was listed as the second richest American with a net worth of $40 billion.
Gates, ranked first both years, also saw his net worth fall from $85 billion to $63 billion between 1999 and 2000.
Gerry Langeler, who has observed Allen's investment moves as a fellow venture capitalist, said he sees Vulcan Ventures switching directions from a sort of technology index fund to one that is more focused.
"Paul had created a very big footprint with his technology investments. To some degree I think he was playing the entire field, which for the decade of the 1990s was a good strategy," said Langeler, a partner at OVP Venture Partners, Lake Oswego, Ore.
"Where the index fund model may have been a good model in the 1990s, it may not be the best model now."
Langeler said Allen now seems to be focusing his efforts more on cable and wireless companies, which make up the centerpiece of his portfolio |
