Aether is selling wireless data unit

TCS of Annapolis paying $19 million, gaining customers

Seller's shares fall, buyer's rise

December 20, 2003|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

In a continuing effort to cut expenses and shed unessential businesses, Aether Systems Inc. said yesterday that it agreed to sell its wireless data solutions division for large customers to an Annapolis company for $19 million in cash.

As part of the transaction, TeleCommunication Systems Inc. (TCS), which makes software that allows wireless devices to communicate with each other and the Internet, will add 1,200 customers, 60,000 wireless data users and about 112 Aether employees to its business. The deal is expected to close near the end of this month,

The sale of Aether's Enterprise Mobility Solutions is yet another sign that the struggling Owings Mills wireless data communications services company is downsizing its operations - a far cry from the height of the tech boom, when Aether's stock hit an all-time high of $315 in March 2000 and the company employed more than 1,000 people.

FOR THE RECORD - An article in Saturday's Business section incorrectly reported Aether Systems Inc.'s 2002 revenue. In fact, it was $116.5 million.

Aether's stock closed yesterday at $4.58, down 22 cents. TCS' stock rose 57 cents to $4.96.

"The Aether Enterprise Mobility Solutions division has grown to be a leader in the wireless data market," said David S. Oros, founder and chief executive of Aether. "Combining the division with the strengths of TCS will enable EMS to enhance its leadership position. In addition, we are very pleased to have found a Maryland-based home for the division and the employees who have worked very hard to grow that portion of our business."

Aether will continue to own and operate its business, which develops technology that trucking companies, law enforcement and the military, among others, use to communicate via mobile devices.

In the deal, TCS will get Aether Fusion, which unites messaging, synchronization, and Web technologies for applications on phones and other hand-held devices; Enterprise Applications, which provides package and vehicle tracking, driver and vehicle productivity tools and the ability to capture digital signatures for proof of delivery and billing efficiency; Financial Services Applications, which provides real-time financial market information alerts, foreign currency exchange data and other specialized services on a range of wireless and mobile devices in the United States and Europe; and Mobile Office Applications, which enables e-mail access via wireless hand-held devices.

For the nine months that ended Sept. 30, the division reported revenue of about $40 million.

Industry analysts have long said that Aether needed to cut costs and focus on becoming a smaller company to get back on track.

A report issued this year by GARP Research & Securities Co of Baltimore said, "We see potential for building enormous shareholder wealth should management grab the bull by the horns and downsize operations in line with current revenues. ... Our loss of confidence in management stems from CEO Oros' failure to make good on his pledge nine months ago to control costs in the event that revenue acceleration was less than planned.

"To be fair, management feels that they have indeed made deep cuts, with headcount down over 50 percent from its peak," the GARP report said.

"However, from a cash perspective these personnel reductions have not had enough bottom line impact because nonpayroll expenses have failed to be contained."

Aether reported revenue of $67.2 million last year, but has yet to become profitable because of operating costs.

After the transition, Aether will employ about 300 people.

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