Aether Systems Inc. is celebrating its one-year anniversary as a public company, capping a busy year of acquisitions, investments and partnerships that have positioned the firm at the center of the wireless-Internet convergence.
And after a year in the public spotlight, Aether’s goals have only increased in scope. Although many companies have emerged in the last year saying they compete with Aether, in all fairness, most only compete with a section of what Aether does. Few have the breadth of service and industry verticals.
“Our true competitors going forward are the IBMs,” George Davis, president of Aether, told RCR Wireless News. “That’s the model we’re driving to. We want to be compared with them.”
Aether began with this broad vision. Even before its IPO, the company was busy striking a plethora of deals, partnerships and acquisitions to fill out this big picture. Public funding just quickened the pace, but has taken its toll. Aether reported a $107.2 million net loss, or $2.80 a share, for the third quarter, compared with a $2.8 million loss for the same period last year. However, revenues increased 11 times to $16.2 million, compared with $1.5 million last year.
Most of the loss was attributed to Aether’s extremely aggressive acquisition and investment activity over the course of the year. Although market volatility has slashed Aether’s stock price from a all-time high of $315 in March to $98 at press time, Davis remains content.
“One year later, we’re trading at about $100 a share, originally priced at $16,” he said. “I think if you compare us to others in the space, we’ve maintained our valuation consistently.”
While Aether has positioned itself successfully, Aether’s challenge going into the next year is to make sense of it all to present a clear picture to customers and investors.
Aether is named after a hypothetical medium for transmitting light and heat that fills all unoccupied space. Its goal in the wireless space is similar-to be the missing link needed to bring Internet and corporate data to wireless networks and devices. Central to this effort is its wireless platform, which it hopes will serve as an industry standard as the link between wireless devices, wireless networks and the content source.
Its various acquisitions have given Aether a grab-bag of wireless capabilities from which customers may choose when building a wireless solution. Aether can provide either part of the solution or the entire system, depending on the customer’s needs, as well as host the entire application at its network operating center.
This includes the Aether Intelligent Messaging platform, a wireless system integration solution that acts as middleware, linking an enterprise network with wireless networks. It includes gateway protocols, messaging routers and application end server development.
Aether then added to this with its first major acquisition, that of Riverbed Technologies, which brought the ScoutWare portfolio of synchronization technology. Together, the two form the keystone of Aether’s platform.
“Without a doubt, our biggest and most important merger or deal was the acquisition of Riverbed,” Davis said. “It immediately positioned us as a being a complete software company as well as a wireless company.”
Although the AIM platform provided the basic wireless transmission services for Aether’s platform, Riverbed’s ScoutWare brought much-needed synchronization technology for Aether to provide a complete end-to-end solution.
On top of this platform sit the many application providers targeting specific vertical industries which Aether has acquired since the IPO and integrated into the platform. So now, Aether can host a customer’s application or sell its own applications if the customer needs it. These include medical, public safety, financial, transportation, government and others.
Most recently, Aether bought Cerulean Technologies Inc., giving it entry to the mobile government space through Cerulean’s PacketCluster Patrol application for the public-safety market. It also acquired Motient Corp.’s transportation unit to enter the long-haul and less-than-truckload industries. Earlier, it bought Mobeo, acquiring its wireless financial services.
Taking an “as-makes-sense” approach, Aether also involves itself in various joint ventures, such as the Inciscent venture with Metrocall, PSINet and Hicks Muse Tate & Furst to access the small-office/home-office market.
When neither investments nor joint ventures are attractive, Aether simply partners with firms, such as Data Critical to address the medical industry and VeriStar for m-commerce applications.
Aside from adding compelling applications targeted to a certain desired vertical market, these types of deals also give Aether significant distribution inroads to those markets. Essentially, each partner becomes a different face representing the core wireless platform to each market.
“We leverage the power of out the platform across the verticals, but they see it the same on their devices,” Davis said. “You’ve got to understand the realities of each market. You’ve got to know the value proposition for each market.”
Despite the advantages these diverse deals represent, they also present the company’s greatest challenge going forward.
“Our greatest challenge has been managing the hyper-growth. We’ve acquired nine companies in the last 11 months,” Davis said. “Think about what we’ve done. We went from a 60-person company to more than 900. … It’s been really challenging bringing in so many new faces, but we found a way to do it. It forced us into very specific and focused processes.”
Davis said the company has structured itself into two groups. One manages the core wireless platform. The other is divided into different divisions, each focusing on a different vertical segment-financial, medical, government, etc.-and both selling and managing the applications targeted at them.
“We provide a complete outsourced solution to enterprises by hosting and providing customer care,” Davis said. “We focus on each market with business expertise to make sure each vertical gets what they need.”
But rapid growth also presents external challenges, such as solidifying its rather schizophrenic interests into a unified, easy-to-understand message.
“Our model is working as we wanted it to. How we explain that to the marketplace needs to be more simplified,” Davis admitted. “My focus is making sure my customer is not confused, and they’re not. The investment community has the challenge of trying to understand our model, but we are trying to find a way to better describe what Aether does.”
The company is launching a seminar series, going to more trade shows and will begin branded advertising in large publications, for instance.
“In the current market climate, investor confidence is a major issue for a lot of technology companies,” said Warren Wilson of Summit Strategies. “It puts additional pressure on a company to be as sharp in its message to investors as to consumers.”
This challenge will increase as Aether expands. Early on, the company was easy to describe. It started out offering customized high-level services for wirelessly enabled PDAs, first for the financial industry and then to other verticals. With the formation of AirLoom with AlterEgo, Aether has added lower-level wireless extension services for phone browser technologies, positioned as a early-entry product for new customers but designed to eventually move new customers to more custom services.
Looking forward, expect Aether to make a big play in the m-commerce sector as well with a commerce engine for carriers, which they can brand.
“We’re building the premiere personal commerce platform,” Davis said, citing partners like First Data, CheckFree, CyberBills, Yodlee, Visa and many others. He expects it to launch t
he first quarter of next year.
But despite these challenges, most feel Aether’s strategy of placing itself at the e
ye of the wireless-Internet convergence whirlwind is the right play, despite the fact that the storm sometimes blurs the image it is trying to present.
“Aether’s making a very smart move by getting ahead of a trend we think is going to be very important,” Wilson said. “If you have a multi-faceted strategy and vision, you have to execute it across all those facets and they are probably better equipped than most to handle that.”
Davis said Aether will continue to paint its picture until it is complete. The result just may be a wireless data masterpiece.
“From a strategic perspective, we’ve leveraged being a first mover, but you’re only a first mover once,” he said. “We want to carve out an area in this whole space where we can really dominate.”
