Once a tech highflier, Aether lands in mortgage securities

Faltering Md. dot-com to become an investor

July 22, 2004|By Tricia Bishop and Stacey Hirsh | Tricia Bishop and Stacey Hirsh,SUN STAFF

Aether Systems Inc., an Owings Mills company whose rise and fall embodied the dot-com investment craze, threw in the towel on technology yesterday, announcing its plan to sell the remainder of its wireless communications business and invest instead in a wholly different field: mortgage-backed securities.

"We were spending more than we were bringing in," said David C. Reymann, Aether's chief financial officer. "This is a strategic decision to get out of the existing businesses ... to basically eliminate the burn."

Four years ago, when the company's stock soared past $300 a share, Aether founder David S. Oros was worth more on paper than Oprah Winfrey and Martha Stewart. Area leaders hoped Aether's rapid rise would make Baltimore the "Silicon Valley of wireless."

But missed opportunities, too many acquisitions too fast, and the plunge in technology investment overall hurt the company. After having once employed about 1,400 people, its staff could be cut to 10 when the conversion from technology developer to mortgage investor is complete, Reymann said. Since going public in 1999, Aether has reported a combined net loss of more than $2.4 billion.

The company developed software to enable the exchange of wireless data for many types of users. Brokers and investors who wanted the latest stock news beamed instantly to their hand-held computers were heavy customers during the tech stock day-trading boom. But Aether has whittled its client base to law enforcement and government agencies and trucking companies.

$25 million deal

Platinum Equity LLC, based in Los Angeles, has agreed to buy the Aether division that develops communications for truckers and police for $25 million in cash. The deal must be approved by Aether stockholders. Aether said it is in discussions with several companies to sell its government wireless business.

"We think there's a lot of potential in this business," said Mark Barnhill, a Platinum Equity spokesman. "We're really expecting this company to operate business as usual for us. Our goal is to have the least disruption possible."

Barnhill said it was too early to talk about specifics, but that he did not anticipate a major change in operations for Aether's transportation employees.

Platinum Equity will offer jobs to Aether's roughly 125 transportation division employees, Reymann said. He said the company will try to work out a similar arrangement with the buyer of its government business, which employs about 100.

In December, Aether agreed to sell its 112-person wireless solutions division - which developed mobile technology for financial services and businesses - to TeleCommunications Systems Inc. of Annapolis.

"We feel like the employees now have a home," Reymann said, saying the mood at the office yesterday was "anxious, but positive."

Instead of technology, Aether plans to use $75 million as leverage to borrow cash and buy residential mortgages in bulk, earning interest from appreciation.

"I don't know of companies that have gone from being a wireless company to being a mortgage company, but many companies change their initial focus. Those who don't react aren't around," Reymann said. "To continue down the same path just because it happened to be the path you picked originally is not exercising [fiscal] responsibility."

In a statement released yesterday, Oros, Aether's founder and chief executive, said: "Our company's focus will become building and managing a leveraged portfolio of mortgage-backed securities. We believe the new business strategy, while requiring a major transition in our company, will allow us to become profitable much more quickly."

The company said Oros was traveling and not available for further comment.

In the early 1990s, Oros was president of the wireless data division at Westinghouse Electric Corp. - another company that famously left one business, manufacturing, for another, broadcasting. As Oros recalled several years ago, he maneuvered his career there to remain in wireless, which he expected would see a major thrust in the computer age.

Rise and fall

Three years after Oros created Aether, the company issued 6 million shares of public stock on Oct. 21, 1999. Its shares more than tripled that day - from $16 to over $48 on the Nasdaq market - making Aether's value exceed $1.2 billion overnight. The company raised $1.4 billion in a second stock offering five months later.

Aether soared - and behaved like many of the up-and-coming tech companies of that era. It acquired a breathtaking seven companies in a single year, along with a private jet. New employees received stock options for $200 a share or more, though they often became worthless paper as the stock swooned.

On March 30, 2000, Aether - and eBay - were among the most expensive corporate stocks in the country, as Aether's market capitalization climbed past $7 billion.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.