Success at hand, but only in rush

Start-up: By beating a closing high-tech financing window, Owings Mills' Aether Systems leaps from wireless blocks with promise to unite handheld computers, cell phones and organizers.

July 16, 2000|By Mark Guidera | Mark Guidera,SUN STAFF

George M. Davis was gathering with family for Fourth of July festivities last year when his long-time friend and co-worker David S. Oros called to key him in on a plan he'd been mulling for weeks.

He wanted to take the young wireless communications company he'd started, Aether Systems Inc., public. And, Oros wanted it done with due haste - before Christmas.

A few weeks later, Wall Street financiers assembled by the hard-charging Oros were aghast. "They all shook their heads and said it just couldn't be done," recalls Davis, now president of Aether. "But Dave said, `It has to or we will miss a huge opportunity.'"

Less than four months later, the then little-known Owings Mills start-up went public, raising $70 million. It was no king's ransom but a healthy enough bankroll for Oros to quickly begin building the company's data network center and other infrastructures.

He wanted desperately to gain an early advantage in a business he perceived would soon prove red hot: linking big corporate, or "enterprise," computer networks to legions of workers toting handheld computers, cell phones and digital organizers. The model he looked to was another explosive, new industry: Internet service providers that strike outsourcing deals with big corporations to manage and link their networks with far-flung workers and customers' computers.

Today, less than two years later, the company Oros launched has emerged as one of the most closely watched in the booming wireless industry. Its fortunes have skyrocketed, testimony to Wall Street's soaring expectations for an industry barely out of the crib.

Its shares, though volatile, have enriched early investors. Shares, which hit the street at $16 in the IPO, zoomed to an all-time high of $345 this past March just before the company conducted a secondary offering that raised $1.4 billion - a staggering sum for a company virtually unheard of 12 months earlier. "Air of the gods" indeed, as Aether's Greek name translates.

Shares since have tumbled back, trading below $200 in recent weeks. Still, the fledging company, which isn't projected by analysts to post a profit for several more years, has a $7 billion market capitalization and has grabbed big-name customers and partners including Charles Schwab & Co., Visa and Microsoft Corp.

At the heart of Aether's success is its proprietary Aether Instant Messaging (AIM) software that overcomes the fragmentation that has beset the wireless industry. AIM makes it possible for normally incompatible handheld devices - pagers, cell phones, digital organizers - that use different digital languages and transmit their signals over different wireless networks to communicate.

The software in effect translates the various digital signals into a common tongue that can be transmitted over any wireless network and received and understood by any "smart" handheld electronic gizmo.

"This kind of technology will make wireless communications much more useful to the end user," said Seth Kirkham, co-manager of the Investec Guiness Flight World Wireless Fund, a London-based mutual fund with a stake in Aether.

Timing mixed with talent

Even industry analysts used to seeing technology start-ups' valuations soar on market hype say Aether is a standout.

"It has been a dramatic story," said Riyad Said, a wireless industry analyst with Friedman, Billings, Ramsey in Arlington, Va.

The venture's success also can be attributed in part, noted Said, to Oros' and his financial officers' timing. Soon after the company's $1.4 billion offering in March, the public financing window for young technology companies slammed shut.

"They now have a war chest of more than $1 billion. That's funding that can carry them for a long time," he said. "It's given them the ability to pursue acquisitions and partnerships that have really put them in a leadership position in an industry, which by almost any count figures to be very significant over the next decade."

Oros said the urgency for a quick secondary offering came from a close study of the stock market by himself and David Reymann, Aether's chief financial officer.

"We noticed that the Nasdaq had really hit a pretty high level in about January and we were in a pure momentum market that wouldn't last much longer," he recalled. "We had to act fast. It was a chance to get a big valuation, and in doing so create a barrier for others entering the space."

High risk? You bet. Oros and the company's management team thrive on it. "I guess you could say this is a company built on calculated risk," he said.

A ruddy-faced bear of a man who laughs often at his own statements, Oros says one of the key risks he took was when he decided in 1996 that Aether would stop accepting wireless communication consulting contracts - its initial business focus and only source of cash flow at the time.

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