Wall Street helped Aether Systems Inc. become a wunderkind of the wireless data industry in 1999. But when its strategy to build a wireless empire collapsed, it turned to the small Arlington investment bank of Friedman, Billings, Ramsey Group Inc. for a solution.

FBR's answer was to turn Aether into a mortgage-backed securities fund that FBR largely runs, a strange ending to Aether's journey through the intensely competitive wireless world, and one that highlights FBR's unusual strategies.

David S. Oros, a mathematician who had spent most of his career developing software for military radars, founded Aether in 1996 to commercialize his ideas about wireless software. He felt that wireless access to data, using cell phones or other devices, would become ubiquitous and profitable.

Aether hired Merrill Lynch, the biggest investment bank in the world, and raised more than $1 billion in its IPO and subsequent stock offering in 1999 and 2000, making hundreds of millions of dollars for its early venture investors.

One of those investors was FBR. FBR's venture fund was an early investor in Riverbed Technologies, a Vienna wireless data software company. Aether bought Riverbed in February 2000 for stock, giving FBR shares in Aether. FBR later sold its Aether shares for a large profit. FBR got a small piece of Aether's investment banking business, but nothing compared with the business that went to Merrill.

Aether went on a buying spree with its investors' money, and its stock peaked at $315 a share right before the March 2000 Nasdaq crash. But none of its business plans really worked out and it had never made money.

In fall 2003, Aether's board decided that the various wireless data companies that Aether had assembled weren't going to make it money and it needed a new strategy. The board began interviewing a number of investment banks about its options, including selling the company, selling its divisions, buying more divisions or just liquidating.

David C. Reymann, Aether's chief financial officer since 1998, said that only FBR was able to come up with a clear plan. Aether hired FBR in February. "They just worked harder than the other banks we worked with," Reymann said.

FBR's plan hinged on two aspects of Aether's balance sheet.

First, Aether had net operating losses that it could carry forward, for tax purposes, into future years to offset any eventual net income, thereby reducing its tax liability when it became profitable. Aether, according to Reymann, has more than $740 million of net operating loss carry-forwards. But to take advantage of this, Aether needed to continue as a going concern; it couldn't go out of business.

Second, Aether still had a lot of cash on its books left over from its stock sales.

Reymann said that FBR co-chief executive Emanuel J. Friedman and Philip J. Facchina, FBR's chief technology investment banker, came up with the idea of selling all of Aether's operating businesses and investing the firms' resulting cash balance in a portfolio of mortgage-backed securities.

FBR's asset management group, which manages a $12 billion portfolio of mortgage-backed securities for its own account, would manage Aether's business for a fee.

Aether would cease to be a technology company.

Aether officials accepted the FBR plan. Last week it agreed to sell the last of its three major operating divisions for $10 million.

FBR earned brokerage fees for helping find buyers for Aether's businesses. It was also paid a $250,000 fee by Aether for implementing its mortgage-backed securities strategy. In addition, Friedman will be paid a fee based on the size of the mortgage-backed securities in Aether's portfolio, plus an incentive fee if the portfolio performs well.

Aether's stock price closed Friday at $2.81, down more than 16 percent from its early May stock price. Aether's new plan was formally announced on June 8.

Reymann said FBR won't manage Aether's portfolio of securities indefinitely, but until the company can hire a staff with experience in the market, FBR will, in effect, be running Aether Systems.