Allen eats cable crow

Sells 40% of $1.65 bil stake in RCN for $2 mil

Computers and cable systems form a tech-convergence nexus these days, but you have to figure media investor Paul Allen feels more warmly toward the former than the latter.

A co-founder of Microsoft, Allen more recently has been busy shedding much of his PC-fueled fortune through dubious investments in cable companies.

First came his run at Charter Communications, a fiscally troubled systems operator that Allen continues to control through his Vulcan Ventures holding company. Now he’s been humbled into accepting a mere $2 million for a big chunk of his $1 billion-plus investment in cabler RCN Corp.

Allen recently sold 40% of his stake in RCN, his first stock sale since investing $1.65 billion in the money-losing cable-television, telephone and Internet services company four years ago.

Seattle-based Vulcan sold 11.4 million shares of Princeton, N.J.-based RCN’s common stock and 247,009 shares of preferred stock for $2 million, according to a U.S. Securities and Exchange Commission filing.

Ranked the third-richest American last year by Forbes magazine with a net worth of $22 billion, Allen received RCN preferred shares in exchange for his initial investment in February 2000. RCN had $3.42 billion in losses from 1998 to 2002. Through Vulcan, Allen still owns 22.9 million RCN shares, or 14.9%, RCN spokesman Jim Downing said.

Shares of RCN trade at penny-stock levels today after trading as high as $74.88 back in February 2000. The company, which has sold assets for cash, hired Merrill Lynch & Co. in October to advise it on ways to raise funds.

Allen remains RCN’s second-largest shareholder after the sale. Level 3 Communications is RCN’s leading holder with 26.6 million shares, he said.

In addition to St. Louis-based Charter, Allen also controls and owns the Portland Trail Blazers basketball team and the Seattle Seahawks football team.

(Bloomberg News contributed to this report.)

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