by Daniel Southerland
Tuesday, May 4, 1993
Paul Allen, a billionaire investor who was one of the founders of software giant Microsoft Corp., may seek to acquire Vienna-based America Online Inc., according to a filing he made yesterday with the Securities and Exchange Commission.
Allen is already the largest single stockholder in the company, which runs databases computer users call to get news reports, stock quotes, electronic mail and weather reports. He recently raised his stake from 13.5 percent of America Online's shares to nearly 25 percent, just short of triggering a company shareholder rights plan -- known as a poison pill -- designed to discourage a takeover.
In the SEC filing, Allen outlined several methods he is considering to increase his control, including buying more stock, seeking representation on the board or acquiring the firm through a tender offer, an asset acquisition, merger or other business combination.
Jean Villanueva, vice president for marketing at America Online, said yesterday the company was not commenting on Allen's latest moves.
Allen, who is chairman of Asymetrix Corp. in Bellevue, Wash., could not be reached for comment. Asymetrix sells multimedia software.
Allen, 40, co-founded Microsoft with his boyhood friend Bill Gates, now chairman of the Redmond, Wash.-based firm, which dominates the personal computer software industry. Their interests in the firm have made them both rich: Forbes magazine ranks Gates as the richest man in America, with $6.3 billion, and Allen not far behind, with stock worth $2.8 billion.
In 1983, Allen quit his job at Microsoft after it was discovered that he had Hodgkin's disease, a form of cancer. For several years he remained largely out of public view, although his purchase of the Portland Trail Blazers basketball team drew considerable attention.
Allen began buying more America Online shares last month after the company announced that it was cutting some of its monthly user fees, apparently signaling the start of a price war with a much bigger competitor, Prodigy Services Co.
The stock market reacted negatively at first to America Online's price cut. The stock price dropped nearly $5 the day the cut was announced before recovering to close at $22, off 62 1/2 cents.
The stock has risen since then. Yesterday it jumped $4.25 after Allen's SEC filing became public, to close at $30.50.
In the SEC filing, Allen said that he and America Online representatives have talked on and off for about a year about possible business relationships. Allen said in the SEC filing that during these talks America Online suggested he enter a "standstill" agreement whereby he would not acquire more than 20 percent of the company's outstanding stock. Allen said he declined to make such an agreement.
Allen also said in the filing that until now the company has refused to provide him with a copy of the company's shareholder rights plan, which is supposed to make it prohibitively expensive to gain control of the company. America Online declined to comment on this point.
Under this poison-pill plan, America Online will give current shareholders rights to purchase one one-hundredth of a share of a new series of preferred stock if an investor acquires 25 percent or more of the company's stock, according to a company official.
Last week, America Online announced a broad agreement with Sprint Corp. that it said will allow it to keep prices down while increasing subscribers. Company officials said the agreement gave America Online more favorable prices for Sprint's services as its main long-distance carrier. Long-distance costs are the company's single largest expense.
AOL also reported last week that in the nine months that ended March 31 it had net income of $3.41 million, up 38 percent from $2.46 million a year earlier. Revenue in the period rose 44 percent, to $27.608 million from $19.216 million.
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