By Terence O'Hara
Monday, July 17, 2006; D01

Patrick C. Condo is chief executive of a small, never-profitable software company in Vienna. He doesn't qualify as one of the uber-moguls who travel to Sun Valley, Idaho, each year for a retreat of media titans put on by Herbert A. Allen Jr. and his New York investment bank.

Yet Condo was there as usual last week hobnobbing with the likes of Barry Diller , Jeffrey Katzenberg , Les Moonves , Michael D. Eisner and Rupert Murdoch . He's invited not because of his corporate pedigree but because of his patron.

Allen, who has brokered some of the media industry's biggest deals in the past 25 years, has been the major investor in Condo's Convera Corp . for more than two decades. He has helped raise more than $130 million, by my count, for Convera since 1983. Allen, his family and his Allen & Co. control about half of Convera's publicly traded shares, for themselves and Allen's clients. Should there ever be a lifetime achievement award for patience in investing, Allen would be a shoo-in for the sheer durability of his commitment to Convera, a company that seems forever on the verge of a next new thing.

Allen is "like a dog with a bone who won't let go," said a Convera investor who, like most people with inside knowledge of Convera, spoke on condition of anonymity rather than risk angering the press-shy Allen.

Since Convera was a cash-strapped start-up in Albuquerque with an interesting pattern-recognition tool using an early form of artificial intelligence, Allen & Co. has been there with the cash.

In essence, Convera is a venture-backed firm with public stock. That gives investors with the stomach for substantial risk a chance to ride with the legendary Allen in a bet on a tech investment.

Now, for the second time in six years, Convera is on the cusp of what Condo and his firm's true believers say is a potentially big breakthrough that could make gobs of money. Or not.

In February, Allen & Co. raised $36.7 million for Convera in a private placement of stock. And the value-investing guru Bill Miller at Legg Mason came on board last year. His Legg Mason Opportunity Trust snapped up 5.5 million shares last July for $4.50 a pop, making the Legg Mason mutual fund the second-largest shareholder, after Allen.

But investors can find ample grounds for caution in Convera's history.

Since 1991, the company has lost more than $1 billion. Most of the loss came in 2001 when it was forced to write off more than $900 million in an ahead-of-its-time venture with Intel Corp . to make archived video content available on the Web. That project, one of the most overblown and short-lived hype cycles in local technology history, virtually collapsed within six months of being announced -- but not before Convera's share price went from $30 to more than $65, ballooning the company's market value to more than $1 billion before it came crashing back to earth. As of Friday, Convera was worth about $300 million. Its peak revenue year was 2000, when it had $51 million. Last year, it had $21 million.

Condo, speaking from Sun Valley on Thursday, didn't try to spin the company's history. "The business model around which we had built [the Intel venture] failed," he said. "The whole world pretty much collapsed on us."

In the six years since that debacle, Condo, who has been with the company since the early 1990s, and the Allens have repositioned the company around its core search-engine technology. In the past three years, Convera has spent tens of millions of dollars creating a new search engine that Condo claims is a viable alternative to Google for businesses.

Convera's main product for more than 10 years has been its "enterprise search" engine, which searches a company's own files for relevant data. After Sept. 11, 2001, it became the search engine of choice for intelligence and law enforcement agencies seeking to connect the dots in their files to track terrorist activity. Most of the three-letter agencies in the U.S. government, as well as many foreign intelligence agencies, use Convera's licensed software to search their haphazardly linked electronic files. That's a good business, but it produces relatively little revenue. Convera's first-quarter revenue this year was down from a year earlier.

So, Condo said, at the end of 2002 he and his management team persuaded Allen to bet the farm once again, this time on a product named Excalibur.

Excalibur is a search engine, much like Google . However, it uses semantics-based technology, often customized to the type of user, that produces results ranked by relevance. Google's results are ranked by popularity. Convera's search engine is coupled with its own database of more than 4 billion indexed Web pages.

For an FBI agent (the agency is a customer), Excalibur can combine searches of the Web and the FBI's files, without sharing those files with outsiders. Similarly, "vertical" online Web sites, such as those catering to cancer specialists, institutional investment managers or patent lawyers, can use Excalibur to conduct relevance-ranked searches of their specialized data in addition to searching the Web.

For specialized Web sites that offer their own search engines -- Cnet , HighBeam Research and Vivisimo are among the first commercial customers -- Excalibur provides an end run around Google. Cnet, for example, gets much of its revenue from advertising. If it can use Excalibur to build a better search engine for tech-savvy shoppers, those shoppers would have better results with Cnet searching for specific software reviews than they would using Google, thus driving more traffic and targeted advertising to Cnet.

When they do, Convera gets a cut of the advertising dollars. That, in a nutshell, is Excalibur's business plan.

"It's definitely a very compelling idea," said Sapna Satagopan , an analyst for Jupiter Research. "Many types of media sites would find this extremely useful."

The wild card, of course, is Google. Satagopan said Google has made some "small steps" into the enterprise-search realm where Convera plays. If Google introduces a product similar to Excalibur, the Silicon Valley company and its billions of dollars in cash would be a potent competitor. "The big question is will they have to compete directly with Google?" Satagopan said. "And if they do, how will they justify their search engine as better?"

Condo counters that Convera's government customers are long-standing clients. "We know those customers and their needs better than anyone," he said. Also, many of the commercial customers Convera is targeting for Excalibur are in effect rivals of Google for advertising dollars.

"Our built-in advantage is these companies are competing with Google, "and we're the arms supplier to them," Condo said.

Another weapon in Convera's arsenal is its well-connected board of directors. Allen & Co. representatives on the board are Allen, his son Herbert A. Allen III , former Coca-Cola Co. president Donald R. Keough and Stephen D. Greenberg (son of baseball great Hank Greenberg). Other board members are film producer and director Sydney Pollack , investor and former Orioles owner Eli S. Jacobs and private equity veteran Carl J. Rickertsen.

"Our board meetings are fascinating," Condo said.

Condo was reluctant to talk about Allen & Co., but near the end of a phone interview he offered this:

"The Allen piece of this is a tremendous story about how one investor had faith and confidence and vision, in the technology and in our business and management team. The management team has stayed together through everything. There's people who have been here 15, 16, 17 years. We brought forward a technology and are really turning this into a success down the road. It's a testament to the kind of investor Allen & Co. is. It's a dynamic I have never seen, anywhere, in a company this size."

Keough is the Allen & Co. executive most familiar with Convera, having been on the board since 1996. He couldn't be reached for an interview, but he left a voice mail message between meetings in Sun Valley. "It's a very exciting time in the history of Convera," he said. "The Excalibur offering is being well received around the world and in the United States. . . . Pat [Condo] and his team are ready to be on a roll."

The market is less sanguine about Convera's prospects. In the weeks after Excalibur's launch last November, shares in Convera shot up above $16 but gradually retreated. Convera closed Friday at $5.51 a share.

Convera has the cash -- about $65 million after the February stock sale -- to buy time while it builds Excalibur sales. Condo said investors should begin to see the effect of Excalibur on Convera's revenue in the second half of this year.

For Allen & Co. and its clients, another few months won't seem long at all for an investment that dates to President Ronald Reagan's first term. And everything is riding on Excalibur.

"You ask how big of a bet we've made on Excalibur," Condo said. "Well, we've pretty much bet the company. It is the company."

Terence O'Hara's e-mail address isoharat@washpost.com.