A Reverse Midas Touch

Paul Allen throws great parties. At least once a year, the cofounder of Microsoft and fourth wealthiest citizen on the planet--with a fortune that Forbes estimates at $21 billion--invites friends, family and luminaries of entertainment and technology to one of his several multimillion-dollar yachts. While cruising to destinations like Bali and Baja, guests are treated to Allen holding his own on guitar with famous musicians he's invited, like Peter Gabriel. One song that Allen wrote himself, called "Time Bomb," features this refrain: "Everything I do may seem wrong, but my heart, my heart beats strong."

Given his recent track record, Allen may be singing about his business decisions. The man who helped build Microsoft, then bailed from Bill Gates's side in the early '80s (and kept his Microsoft stock) is showing a remarkable reverse Midas touch: many of his companies are doing horribly. Charter Communications, a cable company based in St. Louis, sits at the center of Allen's vision for a wired world, with broadband carrying interactive entertainment into our living rooms. In the past year Charter's stock has plunged 90 percent under the weight of a $20 billion debt load, taking Allen's $7 billion investment down to $420 million. (The company is reportedly talking to private equity firms about a sale to avoid bankruptcy. A spokesman would not comment.) Federal prosecutors are also investigating Charter for accounting improprieties. Add to that failures of dot-coms like Mercata and Metricom, and a swooning stock at another broadband asset, RCN, and here's the bottom line: since the height of the tech boom, Allen has lost an incredible $20 billion on paper.

A beleaguered billionaire can always take comfort in his sports teams, right? Not these days. Allen's Seattle Seahawks limped off the field after missing the playoffs again. And the Portland Trail Blazers' most impressive record is not on the court but in court--players have been cited for smoking pot, domestic abuse and fighting during games. Last week the NBA suspended forward Rasheed Wallace for allegedly threatening a referee. Local fans have dubbed the team the "Jail Blazers" and accuse Allen of pampering his unruly stars.

Press-shy Allen wouldn't comment. But his handlers at his investment firm, Vulcan Ventures, defend him as a visionary who bets on ambitious technologies that are certain to pay off eventually. Fellow NBA owner and tech billionaire Mark Cuban, owner of the Dallas Mavericks, is a big supporter. In October, Cuban plunked down $27 million for 5 percent of Charter, and says the company is perfectly positioned to ride the wave of consumer demand for digital services like video on demand. He also suggests the local press in Portland should lay off Allen for the Trail Blazers' misbehavior: "Paul doesn't have the control of his guys any more than I could have stopped Dennis Rodman from wearing a dress."

But Allen certainly controls his business reputation, an asset that's quickly losing value. In "The Accidental Zillionaire," a cutting new biography, author Laura Rich charges that Allen ignores the companies he invests in for long periods of time, then suddenly sets deadlines for developing far-out technologies. "He's not a good manager because his priorities don't begin with business, they begin with his devotion to his dreams about technology," says Rich. BusinessWeek recently put Allen on its list of worst managers.

Despite the criticism, Allen keeps pushing ahead toward a wired-world future. Eighteen months ago Allen spied an unusually small display screen at Vulcan's Seattle research lab. The billionaire suddenly envisioned the world's smallest, fully functioning computer, and with characteristic impulsiveness, ordered his engineers to drop everything and develop it. Vulcan recently showed off the so-called Mini-PC, which runs the full version of Windows. Vulcan hopes to license the design to a computer manufacturer instead of building it itself. But analyst Michael Gartenberg of Jupiter Research is skeptical about the Mini-PC, noting similar products from Toshiba and Sony have "failed miserably." With another $20 billion in the bank, Allen can certainly afford to be wrong on bets like Charter and the Mini-PC. At the very least, he can write a song about them.