Microsoft Founder Ups Online Stake : Technology: Paul Allen files papers indicating that he may try to attain control over America Online.
He’s a billionaire computer entrepreneur from Seattle, a founder of Microsoft Corp., and now he’s putting his money into two of the hottest areas in computing: on-line services and multimedia technology.
And his name isn’t Bill Gates.
Paul G. Allen, the other half of the partnership that launched Microsoft, said in a Securities and Exchange Commission filing released Monday that he may seek control of America Online, a fast-growing computer dial-up service in which he already owns a 25% stake.
The news sent America Online shares up $4.25, to $30.50, although it isn’t clear whether Allen will proceed with a takeover bid. Allen said in the filing that he was reviewing his options in light of a “poison pill” takeover defense adopted April 22 by America Online after Allen refused to limit his purchases of the company’s stock.
Neither Allen nor America Online President Stephen Case could be reached for comment.
Although America Online is a small company--first-quarter revenue was $10.5 million--it is considered to have a strong strategic position in the burgeoning field of on-line services. A competitor to Prodigy and CompuServe, America Online provides a wide range of news, information and entertainment to personal computer users who dial in over telephone lines.
Such services are a relatively small industry today, but it’s an industry at the gateway to what many regard as one of the biggest business opportunities of the 1990s: interactive television and related multimedia services. Companies ranging from cable giant Tele-Communications Inc. to AT&T; and Apple Computer are now scrambling to build alliances that will bring hundreds of video channels, sophisticated home shopping services, on-line video games and more into consumers’ living rooms.
“There’s a lot of ferment in on-line services right now, and there are all these new guests at the party with the kind of money that makes the acquisition of America Online an easy deal,” said Steve Sieck, vice president of the New York Research firm Link Resources.
Allen, 40, certainly has the money. Though he left Microsoft in 1983 after being diagnosed with Hodgkin’s disease, his stock in the company is now worth more then $3 billion. And having beaten back the disease, he now appears determined to step out of Gates’ shadow and become a major player in interactive services and multimedia.
Described by people who know him as a shy, even introverted but highly intelligent man, Allen for a time seemed to have abandoned his interest in high technology. When his disease went into remission, he pursued other passions, buying the Portland Trail Blazers basketball team and sponsoring a museum dedicated to one of his heroes, guitar legend and Seattle native Jimi Hendrix.
In 1985, he began his computer comeback with the launch of Asymetrix, a software company that produces tools for creating multimedia computer programs. Then he invested $10 million in Sky Pix, a brave but ill-fated attempt to develop a digital satellite television system for delivering new types of entertainment services to the home.
Last year, Allen raised more than a few eyebrows when he announced that he would spend $100 million over 10 years to sponsor a pure research organization modeled on the legendary Xerox Palo Alto Research Center, better known as PARC. Called Interval Research Inc. and also located in Palo Alto, the organization aims to solve some of the big technology problems associated with handling great masses of data--including video, pictures and text--via cheap and easy-to-use devices.
While Interval will not itself commercialize products, it aims to provide the seeds for spin-off companies that will bring technologies to market. Allen has also formed a company called Starwave, a secretive research concern that is also believed to be working on multimedia communications technologies.
“He has his eye on being the mogul of interactive entertainment technology,” said Denise Caruso, editor of the newsletter Digital Media. “He certainly has his eye on the right area, but we’ve seen a lot of giant players declare their interest, and it will be difficult for smaller players to assert themselves.”
Allen’s record is less than stellar to date. Asymetrix has been at best a modest success, and Sky Pix was a flop. Few computer-industry entrepreneurs, in fact, have succeeded in building more than one important company.
But some say Allen believes that he has something to prove, since Gates, his former Harvard schoolmate, has gotten all the credit for Microsoft’s success. Though the two have apparently patched up any differences--Allen rejoined the Microsoft board in 1990--at least some forms of rivalry remain: Both men are building exotic multimillion-dollar homes down the lake from one another near Seattle.
