04/21/97 PAUL ALLEN, EVERYWHERE MAN

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PAUL ALLEN, EVERYWHERE MAN

How many hats can one busy billionaire wear? Microsoft co-founder Paul G. Allen may be going for a record. He has founded or invested in dozens of technology, new-media, and entertainment companies. Over the years, his holdings have grown to include stakes in DreamWorks SKG, Ticketmaster, c/net, and others. He's a nearly ubiquitous presence in the world of digital ''content.''
So ubiquitous, in fact, that the 44-year-old finds himself in situations that could lead to thorny questions about where his allegiances lie. Can Allen fulfill his fiduciary duties to Microsoft Corp.--where he's a director and the second-largest shareholder--while not slighting his other companies?
WEBCAST NEWS. Two recent deals point up the risk. On Apr. 3, Walt Disney Co. announced that it was acquiring a stake in Allen's Starwave Corp., a producer of CD-ROMs and Web sites. Starwave, where Allen remains the largest single shareholder, is developing a 24-hour news site with Disney's ABC called ABCNEWS.com. Microsoft competitors Netscape Communications Corp. and America Online Inc. are also partners in ABCNEWS.com. The site will compete with MSNBC, which is owned by NBC and Microsoft. Industry sources estimate that Disney paid $100 million for 30% of Starwave.
Then, on Apr. 6, Microsoft announced it was paying $425 million to acquire WebTV Networks Inc., which has a system for letting consumers cruise the Internet via their TV sets. Allen, who paid about $10 million for a 9% stake in WebTV, will receive $38 million in the deal. Neither Allen's spokeswoman nor a Microsoft spokesman would say whether or not Allen voted with other Microsoft directors on the deal.
In Silicon Valley, blurry loyalties are commonplace. Venture capitalist Arthur Rock served simultaneously on the boards of Apple Computer Inc. and Intel Corp. And to his credit, Allen appears to have no ''secret agenda,'' says Stanford University law professor Joseph Grundfest. ''As far as I can tell, no one has pointed to a situation where anyone was disadvantaged by Allen's [overlapping] involvement.''
Still, the potential for conflicts is growing. ''There's a possible antitrust problem here,'' says corporate-governance expert Nell Minow of the Lens Fund. ''If both companies are in the same business, there's no way a human being can give each of them the best of his energy and focus. [Allen's roles] create an appearance problem that an investor really shouldn't have to worry about.''
HANDS OFF. Allen's spokeswoman says he ''is very cognizant'' of the possibility of conflicts and ''takes steps to mitigate that on a personal level.'' She points out that Allen is not involved in the day-to-day operations of Microsoft or Starwave.
Microsoft Chairman William H. Gates III has no qualms about his pal's extracurricular activities. ''The fact that Paul's out making investments in these things makes him a better [Microsoft] director,'' Gates says. In fact, Allen's far-ranging business interests helped him grasp the significance of the Internet before Gates did. Still, Allen's networking is hardly a model for corporate governance.
By Elizabeth Lesly in New York

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