It’s never a good thing when a company hires an outside firm to help it figure out what to do next, and there’s no exception to be made for the one-time darling of wireless data service providers, Aether Systems. The company has hired Friedman, Billings, Ramsey to help. According to the Washington Post Aether burned through over US$63M in 2003, and as we noted earlier this month, lost $5 for every $5.50 it posted in revenue last year. According to the Post:
“Aether is faced with some very important decisions in terms of how best to serve our shareholders and leverage our existing assets,” David Oros, the company’s founder, chairman and chief executive, said in a statement that referenced “substantial accumulated net operating losses” among the reasons for seeking FBR’s advice. He declined an interview through a spokesman.
Industry analysts are uncharacteristically bearish on Aether’s prospects:
- Yankee Group: “They haven’t established themselves as a leader. I don’t know who would want to buy Aether at this point.” [From the Post article]
JP Morgan: “Aether’s outlook remains bleak, unfortunately. Aether continues to wrestle with strategic alternatives…though with few alternatives available, and a level of cash burn that remains a source of growing concern.” [Post]
IDC: “Aether is the classic riches to rags story. They created this entity that had nowhere to go but down. Part of the problem they had was that all the products and all the acquisitions they had took a lot of time to integrate. They tried to do too much.” [Baltimore Sun]
Aether’s problems stem from pressure it created when the company raised over $1B in two public offerings; all of a sudden they had to do something with that cash. Their answer was to acquire what seemed, at the time, to be anybody who had anything remotely associated with wireless data. Most of those deals turned out to be worse than duds: not only was there little if any synergy among the new members of the family, but the integration costs, financial and otherwise, were appalling.
But one of Aether’s acquisitions was Cerulean, which pioneered wireless public safety applications in this country; that software has evolved into the basis for Aether’s government division, and remains one of the few bright spots in the company’s portfolio. It’s doubtful that police and other public safety customers can support Aether’s current 300-person staff, but it certainly could be a cornerstone.
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