- The Washington Times - Monday, May 13, 2002

Takeover rumors sent shares of wireless and mobile data company Aether Systems Inc. up as much as 39 percent last week right after the stock hit a 52-week low because of poor first-quarter earnings.
The rumor that computer giant IBM Corp. would buy Aether, of Owings Mills, Md., began on an investing Web site and spread around trading firms quickly. In response, the stock jumped to $4.29 Thursday on Nasdaq, up 25 percent from the day before.
But because neither company has commented on the rumors, the stock has already slid a little, closing at $3.97 Friday.
A spokesman for Aether declined to comment Friday; officials from IMB did not return calls.
Earlier this week shares of Aether traded at around $3, as the company reported that its first-quarter net loss shrank 95 percent to $55.63 million ($1.32 per share) from $1.2 billion ($29.67) a year prior.
Sales dropped by 23 percent to $23.67 million from $30.66 million during that time.
Scott Sutherland, analyst with Wedbush Morgan Securities, said the rumored price IBM offered $9.50 a share is way too steep to be true. But he also pointed out that Aether has been seeking a buyer for about a year, and that IBM has made overtures in the wireless/mobile market.
"I think a company like Aether, with a fairly decent customer base and cash investments per share, is worth about $11 [per share], but if you include debt it's just under $5," Mr. Sutherland says.
Nine months ago shares of Aether traded close to $20. They had traded even higher a couple of years ago because before the technology bubble burst the company had been a market favorite.
During the late 1990s Aether used its fame to raise nearly $2 billion in cash. Since then the company has burnt through most of it and is left with about $500 million. It also carries a debt of about $275 million, analysts estimate.
Aether provides wireless data services and systems enabling people to use mobile devices for real-time communication. The company designs, develops and sells these products and services to government and commercial clients.
About 20 to 25 percent of its business is with government transportation agencies, fire and police departments and airports. The rest of Aether's business is commercial, with the fastest-growing sector being the trucking industry, for which the company has designed a truck-tracking device.
"There's a lack of focus with Aether they try to do a little bit of everything," Mr. Sutherland says. "What that does is make your costs high and it takes away your focus from building the leading product in each category."
Aether's management has come under a lot of heat because of the company's high expenses, so they have worked on reducing costs. Analysts say expenses are coming down, but are still relatively high and the company should continue to work on improving its cost-cutting strategy.
"Right now we're just getting to a level of comfort that [Aether] is going to be a survivor and that it's seeing some encouraging signs of growth," says Tim Quillin, analyst with Stephens Inc.
Both analysts and the majority of others who track Aether Systems rate the company's shares a hold.


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