Paul Allen Divests Digeo for $20M

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.