Aether Systems Finds a Billion Dollars in Losses Is an Asset Worth Protecting

David S. Oros had big designs in 2000 for Aether when it was a communications company. The company is trying to reinvent itself as a mortgage investor.
David S. Oros had big designs in 2000 for Aether when it was a communications company. The company is trying to reinvent itself as a mortgage investor. (By Todd Cross -- The Washington Post)
By Jerry Knight
Monday, July 18, 2005

When David S. Oros, the founder of Aether Systems, came by for lunch with editors and reporters six years ago, he was one of the rock stars of Washington business.

Aether had just pulled off a jaw-dropping initial public offering. Its stock price tripled from $16 to $48 a share on the first day of trading in 1999 and kept climbing until it hit $315 less than six months later.

Asked to explain what his company did, Oros pushed his chair back from his salad, turned to a whiteboard and spent 10 minutes filling it with lists, acronyms, arrows and circles.

By the time Oros was done, everyone in the room was sitting with an empty plate and a look to match -- that befuddled glaze that you'd get listening to R. Buckminster Fuller or Marshall McLuhan. They must be geniuses, you'd figure, because you couldn't understand a word they were saying.

Certainly no one understood that Oros's scratchings were a formula for losing more than $1 billion of investors' money.

There was no clue that his multimedia dream of delivering information over Palm Pilots, cell phones, pagers and whatever other medium came along would end up as little more than a cache of cash from selling off its assets and a treasure chest of tax write-offs.

Giving up on Oros's dream, Aether last year sold the last of its operations and began investing in mortgage-backed securities.

Now the communicationsrevolutionary-turned-mortgage-lender has done another strange transformation -- one that gives Oros, a mathematician who once wrote software for military radar systems, a seemingly secure job running a company that has no operations.

Last week, Aether stockholders approved a paper restructuring of the company. Aether Systems became a subsidiary of a new entity called Aether Holdings. Investors who own Aether Systems stock will receive an identical number of shares of Aether Holdings, which will continue to trade on the Nasdaq Stock Market under the same symbol, AETH.

The key change: The corporate charter for Aether Holdings includes a provision that prohibits any new shareholder from acquiring more than 5 percent of the company's stock without the permission of the board of directors.

The provision is needed, Aether told shareholders, to protect the more than $1 billion worth of accumulated losses, which can be used as tax deductions against future earnings.

"Because we consider these loss carryforwards to be important assets that can provide our company with substantial value in the future, we feel it is important to protect our ability to use them," the company said in a letter urging approval of the plan.

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