Paul Allen Divests Digeo for $20 Million

SEATTLE: Microsoft magnate Paul Allen is busy shedding assets this month, as his control of bankrupt cable company Charter Communications becomes more tenuous.

Digeo, a Kirkland, Wash., company that makes advanced set-top boxes, is being sold to video networker Arris Group of Suwanee, Ga., for $20 million. Allen’s Vulcan Ventures was the largest investor in 10-year-old Digeo, which raised $110 million in 2002, according to the Puget Sound Business Journal. It was not disclosed how much money Vulcan sunk into the business.

Vulcan is also selling its two dozen or so 700 MHz licenses to AT&T, the St. Louis Business Journal said. The licenses cover Portland and Salem, Wash.; and Portland and Tacoma, Ore. Vulcan’s purchase price was $112 million. The AT&T sale price was undisclosed.

Allen remains the largest shareholder in Charter, the St. Louis cable company that filed for Chapter 11 in March. The company had $21.7 billion in debt that bondholders agreed to cut by $8 billion in a reorganization deal. The arrangement eliminated Allen’s 51 percent stake, and left him with 7 percent of the reorganized company and 35 percent of the voting rights.

Recent reports indicate that Allen’s position is now uncertain after talks with lenders broke down. The U.S. Bankruptcy Court in New York is expected to rule on the reorg Sept. 30.

The Digeo deal puts Arris in the advanced set-top business.Digeo makes digital video recorders with Web-surfing capabilities. Its Moxi Cable DVR, which is in around 500,000 homes, and an HD model won an Emmy Award for its interface. Digeo’s high-end HD set-top retails for $799.

Arris will take on Digeo’s 75 employees in Kirkland, Wash., and the addition of the company’s engineering team will raise Arris’s research-and-development investment by around $3 million per quarter, the company said.

The transaction is expected to close early in the fourth quarter of 2009.

More on Charter:
May 7, 2009: “Bankrupt Charter Reports Rise in Revenue”
Charter Communications reported higher revenues and operating income on fewer subscribers for the quarter ending March 31, 2009. Charter posted 1Q09 revenues of $1.66 billion compared to $1.56 billion a year ago. Operating income was $334 million compared to $205 million. Net loss was $205 million for 1Q09 compared to $359 million for 1Q08.

March 31, 2009
: “Charter Files for Chapter 11”
Charter, (NASDAQ; CHTR), the nation’s fourth largest-cable operator, warned in February it would file for Chapter 11 after reaching an agreement with investors on restructuring debt. The restructure will be led by Gregory Doody, who previously led similar strategies for a California energy company and an Alabama health-care provider.

February 16, 2009: “Charter Intends to File for Bankruptcy
Charter Communications intends to file for pre-arranged Chapter 11 bankruptcy by April 1. The cable operator last week said it reached an agreement with various creditors who will be given stock or warrants in return for forgiving $8 billion of Charter’s $21 billion debt.