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Aether gains 23% on word of acquisition; Owings Mills company buys software maker Riverbed Technologies; $800 million stock deal; Move seen as attempt to widen customer base beyond financial realm; Wireless services


Shares of Aether Systems Inc. shot up 23 percent yesterday after the Owings Mills wireless data company announced a major acquisition and released an earnings report showing continued losses but large gains in revenue.

Aether's shares gained $41.0625 to close at $220.

Aether said it has bought Riverbed Technologies Inc. of Vienna, Va., in a stock deal initially valued at $800 million. The purchase marks the latest step in Aether's attempt to broaden its product offerings. Until recently, Aether had focused on the financial market, selling software that allows users to follow their stocks minute by minute on Palm Pilots and other hand-held devices.

Privately owned Riverbed has carved out a niche providing software that allows the various devices of the digital age -- Palm Pilots, "smart" phones, pagers -- to send information to one another.

Now Aether will try to use that technology to broaden its customer base.

"They're continuing to expand beyond financial services and growing into new markets," said Mark Zohar of Forrester Research Inc. in Cambridge, Mass.

The wireless industry's hope is that more and more Americans will begin using advanced hand-held phones and computers to communicate, follow the news and do business.

"We expect the [market] for what we do well and for what Aether does well to improve exponentially," said Riverbed President and Chief Executive Officer Wayne Jackson.

The acquisition has been approved by shareholders, and will now go before federal regulators. It is expected to close by March 15.

Aether, which was founded in 1996 and has 135 employees, has been aswirl with activity lately. On Jan. 26, the company agreed to buy another Virginia company, LocusOne Communications Inc., a move that gives Aether access to the growing market for inventory-tracking software.

"We're extending the D.C. technology corridor out to Owings Mills," said Aether Chairman and Chief Executive Officer David Oros. "It's something we're very proud of."

Last week, Aether's stock notched $20-plus daily gains as major investment analysts came out with favorable ratings. On Tuesday, the company announced a British joint venture with Reuters Group PLC to enter the European wireless market.

The announcement of the Riverbed deal came on the heels of Aether's fourth-quarter earnings report, which showed huge increases in revenue -- and red ink.

Aether is behaving like many other high-growth technology companies, spending feverishly on such things as research, marketing and acquisitions in order to keep sales figures high and shareholders happy.

For the quarter, which ended Dec. 31, Aether had $4 million in revenue, 11 times the $359,000 posted for the corresponding period of the previous year. On the year, the company took in $6.3 million in revenue, quadrupling 1998's $1.5 million.

Aether incurred a net quarterly loss, including special charges, of $23.5 million, or 94 cents per share. In the last three months of 1998, the net loss was $1.4 million, or 7 cents per share. For the whole of 1999, the net loss was $30.7 million.

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