Aether Exits Telecom After Wild Ride

Founded in 1996 as a provider of wireless and mobile data applications, Aether Systems Inc. quickly became a star in the high-flying wireless market, seeing its share price rise over $300 mark in early 2000.

Then its prospects soured along with the rest of telecom. On Aug. 17, the NASDAQ-listed firm's shares started trading at only $2.76. The firm has been losing money since 2001, and earlier this month reported a second-quarter loss of just under $50 million.

Bringing its telecom history to a close, this week Aether announced the sale of its Mobile Government Division, its last remaining wireless business operation. The $10 million sale to BIO-key International also includes assumption of $8-10 million of Aether debt, and completes a total transformation of the company's business.

"With definitive agreements now in place to sell our two wireless and mobile data businesses, we intend to move ahead in a deliberate fashion with our new strategy of building and managing a leveraged portfolio of residential mortgage-backed securities," said David S. Oros, Aether's chairman and CEO.

Aether already is operating its new business model. The company announced it was selling its initial positions in mortgage-backed securities to realize a "modest gain." Aether's cash balance of $264 million now is invested in short-term U.S. government and government agency-sponsored securities and money market funds; it plans to redirect these funds into mortgage-backed securities over the course of 2004.Cash was much more plentiful in the firm's heyday as a wireless wonder: in a secondary offering in early 2000, the company sold 5.4 million shares at $205 per share, raising over $1 billion. At that time, it also brought in another $300 million through an offering of convertible debt.