Aether Systems Inc. rose to the top of the news last week after it was identified as Metrocall Inc.’s mysterious third investor and joint venture partner-joining PSINet Inc. and Hicks, Muse, Tate & Furst-as well as for announcing a plan to acquire Riverbed Technologies Inc. and separate alliances with Proxicom Inc. and Reuters.
The deals are just the latest in a string of partnerships, acquisitions and joint ventures Aether has established in the last year to place itself at the center of the ongoing convergence between the wireless industry and the Internet.
According to the Metrocall agreement, Aether will invest about $17 million in Metrocall-acquiring about 7.8 million shares of common stock for a 9.9-percent ownership stake in the company. The deal also has Aether participating in the joint venture which Metrocall has named Inciscent, not Incision as previously reported.
Each investor in the Inciscent venture will purchase a percentage of series A convertible preferred stock representing their ownership stake in the unit, totaling an aggregate value of $30 million. Metrocall will own exactly half of Inciscent; Aether Systems Inc. 33 percent; PSINet Inc. and Hicks, Muse, Tate & Furst Inc. 6.33 percent each; DB Capital Partners 2.67 percent and other investors 1.67 percent.
Aether’s Tom Matthews, senior vice president of business and corporate development, will lead the new venture under the title executive officer.
The Reuters deal has Aether establishing a new, independently managed company to provide wireless financial data in Europe, combining Aether’s wireless data services and systems with content from Reuters. Aether will own 60 percent of the new company and will contribute $100 million in cash. In addition, David Oros, Aether chairman and chief executive officer, will serve as chairman and acting CEO for the new company. Reuters will own the remaining 40 percent and will contribute $22 million in cash, the company said.
The Riverbed Technologies acquisition is structured as a stock transaction valued at $800 million, allowing Aether to gain access to the company’s ScoutWare suite of enterprise management software. ScoutWare applications include synchronization, mobile information technology management, wireless enterprise extension to the Internet and other Web-enabling technologies.
Aether also formed an alliance with Proxicom Inc., an Internet consulting and e-business development company, to provide joint mobile e-business strategy, applications, development and operations for Fortune 1000 companies. The agreement calls for both companies to share support and access to the other’s technology and resources.
These deals speak to Aether’s ever-expanding influence in the wireless industry. Aether, named after a hypothetical medium for transmitting light and heat that fills all unoccupied space, is looking to position itself as the missing link needed to converge Internet information with wireless networks.
Its Aether Intelligent Messaging platform is central to this effort. The AIM platform is wireless system integration software that acts as middleware linking an enterprise network with wireless networks, including gateway protocols, messaging routers and application end server development.
To succeed as a company, though, analysts have said Aether must establish a diverse and well-rounded portfolio of services. The company has targeted several industries and enters each through partnerships with or acquisitions of companies firmly established in each space.
Aether started off focusing on the online financial services industry. It partnered with Reuters for the MarketClip financial information service and with Discover Brokerage for TradeRunner, a wireless trading service.
Shortly after, it bought Mobeo Inc., giving it access to financial information overseas.
In June 1999, it formed OmniSky with 3Com to access the Palm Computing market. With the intent to branch into the mobile sales and field force markets, Aether acquired LocusOne Communications Inc., a wireless supply chain fulfillment solution provider, and partnered with CyberBills to focus on developing solutions for electronic payments on wireless devices.
With the Metrocall deal, Aether gains access to the small office/home office and health care markets. With Reuters, it expands its European news content.
Inciscent-a combination of the words Incisive, meaning direct and decisive in manner of presentation, and Incandescent, as in glowing or luminous-aims to be network and device agnostic and that’s where Aether plays a role.
PSINet is providing the Internet backbone and Internet hosting services, Metrocall is providing the initial wireless connectivity, and Hicks Muse is providing money. Aether is providing the application services through the AIM software platform.
“Inciscent is important to Aether because it’s agnostic to systems and devices,” said Aether’s Oros. “You will see us go where we think we get the best penetration. (But) you won’t see us partner with another company like Metrocall. This is our play in this market.”
Outside of the joint venture, Aether also gains access to Metrocall’s vast medical industry customer base. Oros said the medical and healthcare industry is one difficult to penetrate. Metrocall’s relationships with 8,000 hospitals and 800 medical contacts filled Aether’s needs.
“We’re dealing with an installed base of medical workers with wireless data devices,” Oros said. “This allows us to quickly go to that captured market and move them to two-way.”
Other than gaining access to new markets, Aether also uses its acquisition and alliance strategy to gain access to new technologies. The Riverbed acquisition adds the popular ScoutWare software suite to Aether’s AIM platform.
“Riverbed’s software has been accepted as a standard in mobile computing, which fits well with our expertise in wireless data applications,” Oros said. “Additionally, Riverbed provides access to new partners and clients, which will expand Aether’s distribution channels.”
ScoutWare is platform-independent software used by such customers as Sony Corp., the U.S. Postal Service and Department of Defense and MCI/WorldCom, as well as adopted by Palm Computing Inc., Oracle Corp. and Extensity Inc.
Aether recently announced its intention to file a registration statement with the Securities and Exchange Commission for an offering of additional common stock and subordinated convertible debt notes, as early as this week. The impending registration has placed the company in a quiet period, so it is unable to discuss what other vertical industries it is targeting or its tactics for doing so in the future.
However, Aether released its fourth quarter earnings results late last week as well. It reported a net loss of $25.5 million, or 94 cents a share, compared to a loss of $1.5 million, or 7 cents a share, for the fourth quarter of 1998.
Revenues for the quarter were $4 million, compared to $359,000 the year-ago period.
