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Allen, Paul

ALLEN, PAUL

In 2000, Forbes ranked Paul Allen as the third-wealthiest person in the United States, with an estimated net worth of $36 billion. Allen was born in Seattle, Washington, on January 21, 1953, and attended Lakeside High School there, where he was friends with Bill Gates. Gates and Allen co-founded Microsoft in 1975, after Allen left his job as a programmer at Boston-based Honeywell. Allen served as Micro-soft's head of research and new product development. According to his Web page (www.paulallen.com), Allen helped to engineer many of Microsoft's most successful products, including MS-DOS, Word, Windows, and the Microsoft Mouse.

Allen left Microsoft in 1983 to battle Hodgkin's disease, a battle he apparently won. In 1985 he founded his own software company, Asymetrix (subsequently renamed Click2learn.com), and in 1986 established Vulcan Northwest Inc. and Vulcan Ventures. Today, Vulcan Northwest manages Allen's personal and professional endeavors, including the Paul G. Allen Charitable Foundations, Vulcan Ventures Inc., First & Goal Inc., Experience Music Project, Entertainment Properties Inc., and others. Vulcan Ventures is Allen's investment capital firm, through which he has invested in nearly 150 companies, many of which are involved in high technology, e-commerce, media, and entertainment.

Allen's other interests include sports and music. He plays in a rock band called Grown Men. His interest in the life and music of Jimi Hendrix led him to create the Experience Music Project in Seattle, which opened its doors in 2000. Following his passion for sports, Allen purchased the Portland Trail Blazers professional basketball team in 1988, and in 1997 exercised his option to buy the Seattle Seahawks professional football team. In 2000 he acquired The Sporting News, which had been publishing sports news for 114 years, from the Times Mirror Co.

INVESTMENTS IN MEDIA AND E-COMMERCE

Allen's investments have been guided by his vision of a "wired world," in which people are empowered by their connection to information and allowed to personalize it. According to Allen's Web site, "When you combine [a microprocessor] with a communication channel, you get the possibility of personalized information, a quantum leap in value for the user."

Allen's interest in media and entertainment is reflected in his investments in companies like Ticketmaster, in which he acquired a majority interest in 1993, and Dreamworks SKG, for which he provided $500 million in venture capital in 1995. In 1998 Allen became interested in broadband technology and especially in cable TV companies. Broadband offered an alternative to telephone lines and satellites for the delivery of high-speed Internet services. In 1998 and 1999 he spent an estimated $24.5 billion to acquire companies involved in cable television, wireless modems, Web portals, and more. After acquiring two major cable systems, Marcus Cable of Dallas for $2.8 billion and Charter Communications of St. Louis for $4.5 billion, Allen combined the two and spent an additional $10 billion to acquire 12 more cable companies. When Charter Communications went public in November 1999, its initial public offering (IPO) raised more than $3.2 billion. At the time, Charter Communications was the fourth largest multi-system operator (MSO) in the United States with 6.2 million customers.

In terms of Allen's investment portfolio, his $4.6 billion stake in Charter is second only to his Microsoft holdings. Other major investments include $1.65 billion invested in 2000 in RCN Corp., an over-builder slated to build out high-speed Internet access to 1.3 million homes. As of mid-2000 Allen also had invested $419 million in Internet portal Go2Net for a 30.3-percent interest; $409 million (a 41.6-percent interest) in Metricom, which operates the Richochet mobile data service for wireless Internet access; and $263 million in USA Networks, the parent company of Ticketmaster. In 2000 Allen helped to launch Digeo Broadband Inc., a company that planned to create next-generation content for interactive television and computers.

In 2000, Allen sold 58 million shares of his Microsoft holdings, worth more than $7 billion, and resigned from the company's board of directors. He retained some 200 million shares, worth about $12.5 billion at October 2000 prices. The press speculated that Allen's connections with Microsoft were hindering his investment strategy. His moves left him free to invest in Microsoft's competitors, such as Trans-meta, a new company that included Linux innovator Linus Torvalds on its payroll. Linux is the operating system that poses the most direct threat to Microsoft Windows' market share.

Allen also invests in social and political causes. For example, he has donated $3.4 million to help Washington State conservationists purchase 50,000 acres of forest. Additionally, in 1997 Allen established the Paul G. Allen Forest Protection Foundation.

SLOWDOWN LED TO CUTBACKS, 2000-2001

Following the slowdown of the Internet economy and the dot-com shakeout of 2000, Vulcan Ventures cut back on some of its investments. Among the companies affected were pop.com, the Internet entertainment site set up by Dreamworks SKG, which folded in spite of $50 million in financing from Vulcan.Priceline.com 's grocery affiliate, WebHouse Club, also folded in October 2000 after announcing it was unable to raise enough capital for the coming year to complete its business plan. Still, Allen provided Priceline.com with $64 million in funding in August 2000, just before its stock collapsed. Following due diligence, Allen also decided not to participate in a $300 million private placement for online brokerage Datek Online. Vulcan also withdrew from a $25 million investment in Island, an alternative trading network in which Datek owned a majority interest. On the other hand, Vulcan invested $7.5 million in financial news site TheStreet.com, taking a five-percent interest in the company.

Other failing dot-coms in which Vulcan has invested include software distributor Beyond.com, Stamps.com, Drugstore.com, and ValueAmerica. Early in 2000, Allen closed Interval Research, a think tank and research laboratory in Palo Alto, California, that he had established in 1992. Like other venture capitalists, Vulcan Ventures has tightened its investment criteria in response to the dot-com shakeout and faltering Internet economy of 2000. Notably, Vulcan is looking to invest in established, operating companies rather than pure start-ups. According to Allen's Web site, the strategy of Vulcan Ventures is to, "in-vest in established, operating businesses that are involved in the Wired World technologies. We are not interested in pure start-ups at this time. We do, however, consider new ventures being planned by established companies."

FURTHER READING:

Alsop, Stewart. "What's a New Economy without Research?" Fortune. May 15, 2000.

Baker, M. Sharon. "Allen's Interactive-Television Empire Gears Up." Business Journal-Portland. May 19, 2000.

Donohue, Steve. "Allen Answers ITV Queries." Multichannel News. December 4, 2000.

Jones, Tim. "St. Louis-Based Sports Magazine Finds New Owner." Knight-Ridder/Tribune Business News. February 16, 2000.

Kirkpatrick, David. "Are You Experienced?" Fortune. July 24, 2000.

"Why We're Betting Billions on TV." Fortune. May 15, 2000.

Mermigas, Diane. "Digeo Rollout Brings 'Wired World' Closer." Electronic Media. July 10, 2000.

Moltzen, Edward F. "Eighteen: Paul Allen, the Money Man." Computer Reseller News. November 13, 2000.

"Net Leader Finds Reason to Retreat." Internet World. December 1, 2000.

"Paul Allen Leaves Microsoft Board." Computer Weekly. October 5, 2000.

"The Paul Allen Story." April 30, 2001. Available from www.paulallen.com

Stross, Randall E. "This Keg's On Me, Fellas." U.S. News & World Report. November 13, 2000.

"Top Five." Forbes. October 9, 2000.

SEE ALSO: Broadband Technology; Gates, William (Bill); Microsoft Corp.; Microsoft Windows

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