Paul Allen's High-Tech Company Refocuses -- The Maturing Of Asymetrix

Paul Allen may be the Rodney Dangerfield of billionaires.

When the other Microsoft co-founder, Bill Gates, makes investments in new projects, people assume a flawless plan is at work.

With Paul Allen, however, some people just wonder.

Two of the companies in which he invested, SkyPix and Virtual Vision, entered bankruptcy proceedings; a third, America Online, scrambled to keep him from getting a controlling interest; and his planned Jimi Hendrix museum is getting more costly as its schedule slips.

"Desperately seeking another success," snickered Forbes magazine.

Now his first project - Asymetrix, the company he founded in 1985 - is going through what it calls a "refocusing."

The Bellevue company announced last week that it was selling its entertainment division and its Compel multimedia-presentation product. Asymetrix said several potential buyers are interested, including some now in the entertainment division. No announcement is expected for months.

Eighty-nine of the company's 280 jobs are being eliminated.

Asymetrix has been trying to be a "Microsoft Junior" by going after too many markets, said Frank Catalano, a software-marketing consultant. "They were all across the board with products when they should have built on their core business and extend on that."

Asymetrix is also looking for a permanent president. The acting chief of Asymetrix, 45-year-old Vern Raburn, is also the head of the Paul Allen Group, an umbrella organization that oversees Allen's investments.

Allen founded Asymetrix to make products for the multimedia market - software written for personal computers equipped to run sound, text and graphics. From today's perspective, there is no question that he had foresight. The vast majority of PCs sold for home use come equipped for multimedia. More recently, the company has said it is working on next-generation software for information-superhighway applications, including video, animation and 3-D modeling.

As a private company, Asymetrix does not give out profit figures. The company is widely assumed to have been a money loser.

Critics say that Asymetrix, ironically, may have suffered from having pockets too deep. With Allen's billions, the company lacked the discipline to stick with a strategy and get products out quickly, they say. From this perspective, Asymetrix has pursued product lines that created no synergy. Compel and the entertainment products targeted different customers and channels of distribution, critics say.

To them, the refocusing is a sign that management there has realized it's time to act like a real company.

"What is Asymetrix going to be when it grows up?" Catalano asked. "I think they now know, and I applaud them."

Raburn sees Asymetrix as having matured.

"We're no longer in some instances exploring markets," he said. "It's time to start making money on some of the investments we've made, so there's more of an emphasis on making money than there was at Asymetrix four or five years ago."

Ironically, the company is selling a division whose leader describes it as a success. Joe Rehfeld, general manager of the entertainment division, said his group's screen-saver products have sold well and been well-received by reviewers.

The division, which now employs 35 people, was formed in 1993 when the company was offered the opportunity to develop a screen saver using images from the hit movie "Jurassic Park." Asymetrix has sold 200,000 copies of that title, one of five by the company on the market.

Rehfeld, 37, said that his group got the "Jurassic" product out quickly and that Paul Allen authorized the group to grow by looking for other brand-name content suitable for screen savers. What followed were "Rocky and Bullwinkle," "Pink Panther" and other brand-name products. The division prided itself on taking the screen saver to another level, one where a user could explore a story line.

Rehfeld said starting the entertainment division reflected Allen's style of approving ideas that look good.

"Paul's an opportunistic guy," Rehfeld said.

When the division was formed, questions were raised within Asymetrix about whether selling to both the consumer market and the software-developer market made sense. But those questions were dispelled in part because screen savers were seen as Trojan horses to help promote the overall multimedia market, which would benefit the company. Now that strategy has changed.

Rehfeld and Jim Edmunds, the division's executive producer, are interested in buying their group, but Asymetrix is not saying who the other possible buyers are.

Not in the group is Berkeley, Calif.-based Berkeley Systems, the dominant player in the screen-saver market. "We're happy with our product line," said company President Wes Boyd. He added that he's not surprised Asymetrix is eliminating the division.

"There are a lot of struggling companies who've judged this an easy niche. We expected they'd figure it out after awhile that this isn't easy," Boyd said.

Some outsiders wonder why the entertainment division couldn't be moved into another Paul Allen company, Bellevue-based Starwave, which is developing entertainment content for online services, compact disks and interactive television. Founded in 1992, Starwave has signed deals with actor Clint Eastwood and Jim Henson's Muppets.

Starwave President Mike Slade said the idea wouldn't work because his company and the entertainment division produce different kinds of products. His group spends a long time developing sophisticated high-end products, while the entertainment division develops lower-price, higher-volume products, he said.

As for Allen's track record as an investor, Raburn said people need to understand where the money is going. Allen has invested in at least 12 organizations, including the Portland Trailblazers basketball team, which he owns, and the Ticketmaster ticketing agency, which he controls. Most of the investments are only a few years old and generally aimed at new technologies.

Allen isn't investing like a venture capital firm, expecting a certain return in a given number of years, Raburn said. Rather Allen is looking over the horizon.

"This is not something that's going to happen in a decade," Raburn said. "It's a decade or a decade-and-a-half business."