Aether remakes itself, again

As NexCen Brands, it's a sneakers firm

August 23, 2006|By STACEY HIRSH | STACEY HIRSH,SUN REPORTER

It started as wireless technology company, wowing investors during the dot-com heyday. Then it became a mortgage-backed securities business. And then, a boutique investment banking firm.

Yesterday, the company reinvented itself again - this time as a sneaker company.

The company formerly known as Aether Systems Inc., and now dubbed NexCen Brands Inc., announced yesterday that it has agreed to buy the Athlete's Foot for $51.5 million in cash and stock. The company plans to buy, manage and license the brands of the Athlete's Foot, according to a news release. The Athlete's Foot has more than 575 stores in 40 countries, according to the release.

The Athlete's Foot will also receive another $8.5 million next year as part of the deal if it meets certain financial goals for this year, the company said in a filing with the Securities and Exchange Commission.

"The acquisition provides NexCen with flexible proprietary distribution channels through which we can drive sales of additional consumer brands that we intend to acquire in the future," Robert W. D'Loren, Aether's president and chief executive officer, told analysts during a conference call yesterday. "Also it provides NexCen with an extensive global franchising sales network and operational infrastructure which can be leveraged with respect to additional franchise brands we may acquire."

Aether's story began in 1996, when David S. Oros founded the Owings Mills company. Aether developed software that allowed many kinds of users to exchange wireless data. It was a darling of the technology boom, raising more than $2 billion in two public stock offerings in 1999 and 2000.

At one time, Oros was richer on paper than Oprah Winfrey and Martha Stewart.

But the company subsequently bought numerous wireless and related technology startups with no track record of profits. Rounds of layoffs shrank Aether to about 10 employees from a peak of 1,400 in 2001. Its stock fell from a high of $345 a share in March 2000 to a low of $2.25 a share in 2002.

Then, two years ago, as the housing market was exploding, Aether announced that it was leaving the wireless industry and investing in mortgage-backed securities. The company changed its name to Aether Holdings Inc.

More recently, Aether bought New York-based boutique investment banker UCC Capital in June for $10.3 million. The company announced that it was moving its corporate headquarters to New York, and Oros would become board chairman but would no longer run the day-to-day operations.

When Aether acquired UCC Capital, the company said it planned to keep its $95 million portfolio of mortgage-backed securities, though D'Loren acknowledged at the time that it could be tapped in the future for acquisitions. But Aether said in a SEC filing yesterday that it plans to sell off the remaining portion of that business.

UCC Capital has been a strategic adviser to the Athlete's Foot, as well as other companies such as Candie's teen apparel company and the BCBG Max Azria Group fashion house. When Aether acquired UCC Capital, D'Loren told The Sun that the new company would use Aether's capital to acquire businesses in bids to make them more profitable. D'Loren said his plan with franchise companies would be to turn any company-owned stores over to franchisees and concentrate on building the brand.

At the time of the deal, Aether had accumulated about $1.1 billion in losses that could "carry forward" as potential tax deductions. The publicly traded company also has access to the public markets as a means to raise capital. Shares of Aether closed at $6.10 yesterday, up 15 cents.

stacey.hirsh@baltsun.com

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