Paul Allen’s Seahawks Beat Microsoft as an Investment

Photographer: Christian Petersen/Getty Images

Seattle Seahawks owner Paul Allen holds up the George Halas Trophy after the Seahawks defeated the San Francisco 49ers 23-17 during the 2014 NFC Championship in Seattle, on Jan. 19, 2014. Close

Seattle Seahawks owner Paul Allen holds up the George Halas Trophy after the Seahawks... Read More

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Photographer: Christian Petersen/Getty Images

Seattle Seahawks owner Paul Allen holds up the George Halas Trophy after the Seahawks defeated the San Francisco 49ers 23-17 during the 2014 NFC Championship in Seattle, on Jan. 19, 2014.

Even if the Seattle Seahawks lose to the Denver Broncos in Sunday’s Super Bowl, the team has rewarded owner Paul Allen -- by beating his old company, Microsoft Corp. (MSFT), as an investment.

Allen bought the pro football team as a favor to his native city in 1997, when his heart was in basketball and his investing firepower was focused on a heady concept he called the “wired world.” The too-early bet on the convergence of television and the Internet flopped, losing him more than $8 billion.

Now, with Microsoft searching for direction, Allen’s investments have recovered from that rocky stretch thanks in part to the football team he once said he purchased out of “civic duty.” The Seahawks, buoyed by TV broadcast fees, are worth about six times what Allen paid. In the same period, Microsoft shares have a little more than doubled as the Redmond, Washington-based company struggled to make its software relevant to mobile phones and tablets.

The team’s success has rewarded Allen, 61, in other ways, showering the programmer and librarian’s son with affection in a city mad for the Seahawks. Pike Place Market florists sell roses dyed in team colors of blue and green. The “12th Man” flags honoring the city’s famously loud fans adorn lawns, offices and the Space Needle. The crowd cheered Allen at a Jan. 19 playoff game when he raised one of the pennants.

“This 12th Man thing is everywhere,” Bill Gates, the Seattle high school friend who co-founded Microsoft with Allen in 1975, said after appearing on Bloomberg TV in New York last week. “The whole city is pretty energized.”

Microsoft Stake

Of course, by measures other than the simple change in value, Microsoft performs better. While a sports franchise isn’t a liquid investment, Allen has been able to whittle his 28 percent Microsoft stake to less than 2 percent, collecting more than $20 billion along the way. He still holds about 100 million shares, which have earned him $800 million in dividends after taxes in the past decade, according to the Bloomberg Billionaires Index.

Sometimes called Microsoft’s “other” founder, Allen published a 2011 memoir, “Idea Man,” detailing his productive and at times contentious relationship with Gates. Money hasn’t been everything to him, post-Microsoft. After a brush with Hodgkin’s disease led him to leave in 1983, he started using his wealth for “a life of adventure and discovery,” as a website promoting the book put it.

Electric Guitar

He travels on his helipad-equipped yacht to Antarctica, plays electric guitar in all-star bands with famous friends including Dan Aykroyd and collects Impressionist art. The Seahawks aren’t his only pro team; he acquired what he called his “first love,” the Portland Trail Blazers basketball franchise, in 1988.

When his failed investments in cable and technology businesses helped shrink a $36 billion fortune by more than half, Allen a decade ago brought in a new team of professional money managers who diversified into such areas as real estate, insurance and energy.

For one of the technology visionaries of the 20th century, low-tech investments led a turnaround.

Vulcan Inc., Allen’s Seattle investment firm, has remade a onetime warehouse district north of downtown into a destination neighborhood of shops, restaurants and offices anchored by Amazon.com Inc. The online retailer agreed to pay Vulcan $1.16 billion for an 11-building campus in the South Lake Union neighborhood in 2012.

Bakken Investment

In 2011, Allen, through Vulcan, was the only individual investor in a KKR & Co.-led syndicate that paid $7.2 billion for most of Samson Investment Co., an oil and natural gas producer with interests in more than 7,600 wells, including North Dakota’s Bakken region.

That same year, Vulcan scored a $1 billion gain on an investment in Plains All American Pipeline LP, a Houston-based pipeline operator. Vulcan also has an investment in Driven Brands Inc., a Charlotte, North Carolina company that includes the Maaco collision-repair chain, Meineke Car Care Centers and Econo Lube N’ Tune & Brakes.

Allen declined to comment for this article.

The billionaire also uses his fortune to back research in fields that fascinate him. In September he founded the Allen Institute for Artificial Intelligence, which will try to develop machines that can field user questions and discuss them in natural language -- something like Captain Kirk’s computer in the “Star Trek” TV show. He’s already committed $500 million to another Seattle lab called the Allen Institute for Brain Science, where researchers are trying to determine which genes are most important for the workings of the brain.

Net Worth

“There’s a real passion for understanding how intelligence works, from the biological perspective as well as the computer perspective,” said Matt McIlwain, managing director at Madrona Venture Group, a Seattle firm that has invested alongside Vulcan.

Allen’s net worth, which was $12.4 billion in 2003, has recovered to $15.7 billion, ranking him among the world’s 60 wealthiest, according to the Bloomberg ranking.

He didn’t set out to buy the Seahawks, considered by odds makers a slight underdog to the Broncos in the Feb. 2 Super Bowl. Local politicians approached Allen to buy the team when it threatened to move to California. He paid $194 million for the franchise and contributed another $130 million toward construction of a new stadium in Seattle. The team is now worth $1.25 billion, according to data compiled by Bloomberg.

Asset a ‘Jewel’

“It’s a jewel of an asset,” said Steve Patterson, athletic director at the University of Texas and previously a sports business consultant to National Football League owners, including Allen. Patterson was also general manager of the Trail Blazers from 2003 to 2007. While Seattle is only the 13th-largest media market, the Seahawks draw fan support from Portland and other Pacific Northwest cities, making it more like No. 4, Patterson said. They’ve even drawn the loyalty of fans across the border in Vancouver.

For all of Allen’s Seahawks success, pro football isn’t a sure-fire bet, especially because of growing awareness of the dangers of concussions, said New York sports media consultant Chris Bevilacqua. A federal judge this month denied approval of the NFL’s $914 million settlement of a lawsuit brought by more than 5,000 former players, saying it may be insufficient to cover all future concussion claims.

“There are risks and rewards across the marketplace, and that’s one of the risks,” Bevilacqua said.

The connection hasn’t escaped Allen, whose family foundation said in November that it’s spending $2.4 million for researchers at his brain lab and the University of Washington to study how blows to the head can damage the brain.

To contact the reporters on this story: Peter Robison in Seattle at robison@bloomberg.net; Brendan Coffey in Boston at bcoffey10@bloomberg.net

To contact the editor responsible for this story: Peter Newcomb at pnewcomb2@bloomberg.net

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