Microsoft's Other Pioneer Jumps Into Multimedia

The computer screen lights up. A company logo spins into place. You hear upbeat electronic keyboard music. Suddenly, four faces appear on the screen in living color. If you click your mouse on the bearded guy to the left, Microsoft Corp. co-founder Paul G. Allen starts to speak about the future of computing. "With the merger of TV, telephones, and personal computers," he tells you, "we're entering an exciting new era of human communications."

Allen is a click away in this interactive video promoting his software company, Asymetrix Corp. But tracking down the real Paul Allen is considerably more difficult. In the nine years since Hodgkin's disease forced him to leave the daily management of Microsoft to his illustrious co-founder, William H. Gates III, Allen has been a phantom. Not that he has disappeared entirely. After all, he does own the National Basketball Assn.'s Portland Trail Blazers, and he is catching flak from his neighbors for building a $30 million estate on the shores of Seattle's tony Mercer Island. But for a 39-year-old whose net worth shot from zero to $3.5 billion in little more than a decade, Allen is hardly well known. And compared with the ubiquitous Gates, he might as well be Howard Hughes.

COLLEGE DROPOUT. But that may be changing. In the past two years, Allen has quietly cashed in $300 million of his Microsoft stock to capitalize on what he sees as the next wave in personal computing: the melding of sound, video, and data into new "multimedia" forms of information delivery. With his disease in remission and billions at his disposal, he has launched or invested in a slew of startups (table). And to help plow the new frontier, he has pledged $100 million over 10 years to fund a new research and development lab in Palo Alto, Calif., called Interval Research Co.

Whether all the activity will pull Allen to center stage remains to be seen. But in a rare interview, the quiet, bearlike entrepreneur couldn't hide his enthusiasm for what he views as a "sea change" in the computer industry. "I've really upped my intensity in the last year, because I see this momentum starting to build," he says. "What I really find exciting is creating new products or ideas and the opportunity to tie technology together."

If history is any guide, Allen certainly bears listening to. The last time he had such an inkling about the industry, it planted the seed for Microsoft, now the world's largest software company. In 1974, Allen spotted a copy of Popular Electronics featuring an article on the "world's first microcomputer kit"--a box designed to run Intel Corp.'s revolutionary 8080 microprocessor. As Gates tells it, Allen suddenly saw a future filled with personal computers, and the two set out to write software for them. "Paul saw the microprocessor as a breakthrough miracle and showed it to me," says Gates. "He's a thinker."

Allen and Gates met at the Lakeside School, a prestigious private high school in Seattle. Although Allen is two years older than his friend, the two spent long hours working on computers and trying to find ways to sell their services. After graduation, Allen attended Washington State University to study computer science, but halfway through his sophomore year, he dropped out to take a job at TRW Inc. in Vancouver, Wash.

By 1974, Gates had enrolled at Harvard University and found a job for his pal at Honeywell Inc. in Boston. About six months later, Allen saw the Popular Electronics article, and for eight weeks the two friends worked day and night at the Harvard computer center to write a version of the BASIC computer language that would fit the new machine.

Before long, Gates left Harvard, and the two set up Microsoft to license their new program. By 1980, IBM had hired Microsoft to provide the operating system for its new PC. The result was MS-DOS, which became the industry standard and fueled Microsoft's growth to $2.7 billion in revenues last year.

Allen, who still sits on the board and holds a 12% stake worth $3.3 billion, left Microsoft as a principal in 1983. He had been diagnosed in 1982 with Hodgkin's disease--a form of cancer that attacks the lymph nodes--and underwent extensive radiation and chemotherapy. He battled the disease into remission but eventually decided he wanted out. In some respects, Allen wasn't exactly executive material, anyway. "He doesn't relish managing huge groups of people," says Gates. "He's capable of it, but he doesn't relish it."

For Allen, the attraction has always been making things happen with technology, not business. And his abiding interests in sports and music kept him occupied as he sought new opportunities in computers. In fact, Allen says that if he hadn't stumbled upon Microsoft, he might have tried to be a professional guitarist. He plays electric guitar in a rock band with friends and is an avid fan of Jimi Hendrix, another Puget Sound native. A big collector of Hendrix memorabilia, Allen plans to build a Jimi Hendrix museum in Seattle. Not surprisingly, it will feature interactive computer technology designed to bring Hendrix and his performances to life.

The Trail Blazers, too, are an enjoyable obsession. Allen flies his private Challenger jet from Seattle to Portland for most home games and is spending $171 million on a new stadium for the team. But for all the energy he puts into his nontechnical interests, Allen is a software guy at heart. He never strayed far from computers or from thinking about the future of technology.

Last year, Allen took off several months to travel and recharge his batteries. He read voraciously and thought deeply about where technology was moving. He concluded that high-speed communications channels are revolutionizing the delivery of information to homes and businesses. Fiber optics, cable TV, direct-broadcast satellite, and local-area networks are helping create a "wired world," says Allen, where most people will have access to rivers of digital information. TV, audio, and computer technology will merge, creating huge opportunities for those who can figure out how to feed information through the new pathways. "At some point," he says, "everybody in the industrialized world will have access to computers, and they'll all be wired together."

So far, Allen's strategy is multifaceted. Three companies are exploring software-related opportunities in the near, medium, and long term, and he has invested in other companies that provide entertainment, stock quotes, and classifed ads by satellite or phone. "All this activity has to do with communications networks and digital information delivery," explains Steve Wood, a colleague since the early Microsoft days. "Paul is always looking for the next great leap."

Asymetrix, Allen's most mature startup, was actually launched in 1985. But its first successful product didn't appear until last year. Multimedia ToolBook provides software building blocks that help developers write programs for Microsoft Windows that integrate video and sound. A big hit, it accounts for more than half of the privately held company's estimated $20 million in 1992 revenues. This year, Asymetrix launched two new products--MediaBlitz! and Multimedia Make Your Point. Allen hopes to launch a half-dozen more next year.

Another big Allen project is SkyPix Corp., which was formed by others to provide up to 80 pay-per-view TV channels by direct-broadcast satellite. Allen invested $10 million in 1991 to get at technology that compresses video and data so more of it can be delivered by satellite. SkyPix, however, hit a wall when it became known that its chairman, Frederick Greenberg, was being investigated by a federal grand jury for past business practices. That spooked investors, and by this past September, SkyPix had landed in Chapter 11.

SATELLITE DELIVERY. In January, a bankruptcy judge in Seattle will decide between two competing reorganization plans: one submitted by Allen, the other by Greenberg. Allen's plan proposes to pump $150 million into the company to commercialize its satellite technology. Possessing such a delivery system is key to Allen's strategy. In May, he set up a separate company, called Starwave Corp., to develop information products to be fed into homes and offices via satellite and cable. Run by Steve Wood, Starwave hopes to launch a product by 1995.

Starwave could commercialize technologies developed at Interval Research, Allen's new think tank. Interval is modeled after Xerox Corp.'s famed Palo Alto Research Center (PARC), which pioneered such technologies as the computer mouse, laser printers, and the graphical interface later used in Apple Computer Inc.'s Macintosh. To run the new lab, Allen hired David E. Liddle, a former PARC researcher and IBM exec. Focused squarely on the long term, Interval's charter is to figure out ways to manage the flood of information that will be unleashed by revolutionary new amalgamations of telecommunications, TV, and computers.

Some friends still worry about Allen, who continues to suffer from frequent colds. Can he play top executive over such a diverse set of interests? Liddle, who considers Allen a true visionary, isn't concerned: "He's remarkable. He's not a guy who was in the right place at the right time and got bloody rich. He's just really smart." To put it another way, when Paul Allen says multimedia is the wave of the future, you can bet he's more than just a talking head.

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