In his largest investment to date, billionaire high-tech entrepreneur Paul Allen has bought all the limited partnerships of Marcus Cable Corp. for US$2.8 billion, and will follow the deal with further investments in the cable industry, Allen said yesterday.
Allen becomes a full partner in Marcus Cable and will take an active role in the development of the Dallas, Texas, company, which offers high-speed Internet access and cable television programming to about 1.2 million U.S. customers.
Allen's investment represents about 11 times the company's annualized cash flow at closing, officials said. The deal was signed April 3 and is effective immediately. Other financial details were not disclosed.
The company joins a portfolio of entertainment and technology companies Allen has compiled since leaving Microsoft Corp., which he co-founded with Bill Gates, in 1983. The investments are intended to advance and capitalize on a "Wired World" vision Allen has been touting for several years, in which consumers and businesses share information and services over broadband data networks.
"By partnering with Marcus Cable, I'll finally have some wires in my wired world," Allen said at a brief press event announcing the deal, where he was joined by Marcus Cable's president, chairman and CEO, Jeffrey Marcus.
Allen described the cable industry as being uniquely positioned to deliver a next generation of advanced data services to consumers, including high-speed Internet access, interactive television, online shopping and video-on-demand.
Along with Jeffrey Marcus, Allen said he will work to expand the cable company's existing businesses as well as introduce new services, including online shopping, video-on demand and interactive television. He declined to offer specifics of his plans for future investments in the industry.
Observers viewed the IT mogul's endorsement of the cable industry as a validation of its potential to become one of the chief vehicles for high-speed Internet-based services. The system takes advantage of unused bandwidth in fiber coaxial cables used to deliver television programs, and delivers content to televisions via a set-top box, or to a PC via a cable modem.
The cable industry leapt into the high tech limelight about a year ago when Microsoft sunk $1 million in cable TV provider Comcast Corp., securing a place for itself as the technology develops. Since then a number of closely watched deals between high-tech firms and cable companies has taken place, involving Microsoft, Tele-Communications Inc., Sun Microsystems Inc., @Home Networks, NextLevel Systems Inc. and others.
Jeffrey Marcus will remain the general partner and chairman of Marcus Cable, Allen said. "Paul Allen's investment affirms and acknowledges that cable provides the premier broadband access medium into the home," Marcus said.
Marcus Cable is currently beta testing a cable-based video-on-demand service in the U.S., which allows users to preview and then watch movies from a library of 1200 films, Jeffrey Marcus said. The service will go into commercial deployment later this year or early next year, he said.
Allen said other future services might include online shopping and interactive television, in which users can use the Internet to download information and make purchases that relate to programs they are watching on TV.
Marcus Cable presently serves about 1.2 million customers in three broadly defined areas of the U.S. centered around Texas, California and Wisconsin.