Metricom stock soared 50.8 percent at the market's close, ending the day at 10-3/4, up 3-5/8 over Friday. Trading was 30 times the average three-month volume with 3.45 million shares changing hands.
Allen, together with Vulcan Ventures, filed with the Securities and Exchange Commission for the purchase of 2.58 million shares of Metricom common stock from an existing shareholder, which would increase his holdings to about 33 percent of the outstanding shares.
The transaction awaits approval from Metricom's board.
While the company will not actually receive any money from Allen's purchase, the company expects his increased stake to assist its ability to attract investors, making fundraising efforts a bit easier.
"We look at [this investment] as very positive. It is an endorsement from Paul that we are on the right track," said Robert Dilworth, Metricom CEO and chairman of the board. "Any kind of a deep-pockets partner is appreciated when you are trying to start a whole new business, and it is significant if he has moved from a 14 to 33 percent stake."
In its most recent quarterly report, Metricom reported a widening net loss of $16 million, or $1.17 a share, compared with a loss of $8.5 million, or 63 cents a share, for the same quarter a year earlier. Meanwhile, revenues grew to $4.7 million, up from $2.6 million last year.
For the September quarter, Wall Street is expecting a loss of $1.06 a share, according to First Call.
Allen has had the option to sit on Metricom's board of directors since his initial investment in 1993, but he has not always filled his seat. He did, however, have a representative occupy the seat for a period of time, said Dilworth, noting that Allen has played an active part in the company's direction.
Allen's original investment in Metricom was in October 1993, and he has made two subsequent investments. Those investments were made in January 1994 and March 1994, and brought his holdings to about 14 percent.
"[Allen] sets himself apart from just being a money investor," said Dilworth, adding that Allen's Silicon Valley think tank, which focuses on where markets and technology are headed, has been helpful in deciding where Metricom should expand.
Money has been one of the obstacles preventing Metricom from rolling out its wireless service nationwide, an analyst said, and this investment should help move the service into a few more cities.
"The company's biggest problem has been roll-out, and they need a deep-pocket investor," said David Cooperstein, an analyst with Forrester. Metricom currently has limited access throughout the country with service in the San Francisco Bay Area, Seattle, and Washington D.C. Just recently it signed a deal to provide its service in New York City as well.
"So if someone is traveling from Seattle to D.C. they'll be fine, but if they are going from Seattle to just about anywhere else, they are in trouble," said Cooperstein.
But the company does not see its limited markets as an obstacle. Comparing itself to companies that offer paging and cellular service, Metricom said over 90 percent of paging and cellular customers are within a single region, so there is only a small portion of users that need nationwide access. However, the company currently is expanding in order to offer access in all major airports.
"The number of people that fly around the country is pretty small. Most people are portable, but within a region," said Dilworth.
Nonetheless, Cooperstein noted that the company has the desire to offer services nationally. One way the company has been expanding is by working with utility companies. Metricom attaches its devices to utility poles.
Metricom's competition includes some major telecommunications companies, such as AT&T (T), Bell Atlantic (BEL), and GTE (GTE). But their services are more expensive because they charge per-minute or per-packet rates, or per information downloaded, said Cooperstein. Metricom charges a flat fee, "so you don't feel like you are spending a fortune," Cooperstein said. "It doesn't give you the mobility of nationwide access, but those others are more expensive."
Metricom offers unlimited use for $29.95 and is expanding its services to offer access rates equivalent to a 128-kbps ISDN line.
(Allen is an investor in CNET: The Computer Network)