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September 2000

UCAR Foundation's pleasant dilemma: how to manage a windfall

After over a decade of swings, UCAR's technology transfer program scored its first home run earlier this year. Now the UCAR Foundation—the liaison that helps move NCAR-derived technology to the marketplace—has to figure out what to do with a multimillion-dollar package of cash and stock options whose value is fluctuating with the market.

The windfall arrived with the sale of WITI Corp. to Lifeminders.com (now Lifeminders, Inc.), based in Herndon, Virginia. WITI Corp. is the largest component of WITI Inc., a company founded in 1989 under the UCAR umbrella and spun off in 1991. WITI Inc. worked on aviation-related projects during most of the 1990s: it was the prime contractor for weather safety systems at the new Hong Kong airport, with RAP as the major subcontractor. At the same time, WITI Corp. quietly forged ahead, working with NCAR scientists on several initiatives to provide customized weather information in forms that could be accessed by pager, wireless phone, and other hot technologies. These products include Alert2Go, wireless weather alerts and messaging used by leading radio stations, and NOWAlert, a similar service for television stations.

The home run came through a plan to provide the 12 million customers of Lifeminders with personalized weather messages. WITI Corp. and RAP worked for several years to convert output from National Weather Service computer models into hourly forecasts targeted by zip code. Weather messages derived from this work are now part of Lifeminders' wide-ranging e-mail services, which help members keep track of matters involving family, entertainment, home, automobiles, and personal finance. RAP staff continue to work on the overall forecast-automation effort through a continuing contract now handled by Lifeminders.

Jeff Reaves. (Photo by Carlye Calvin.)

The sale of WITI Corp. to Lifeminders was finalized in March. It came just in time, says Jeff Reaves, associate vice president for finance and administration. "Up until January, there was serious concern about WITI's long-term viability," says Jeff. The foundation has retained the rights to the parent organization, WITI Inc., although little is now occurring under that name.

The UCAR Foundation is now working to determine how best to manage its portion of the cash and stocks from the WITI Corp. sale. That was the key topic of business at a special foundation retreat on 6–7 July in Colorado Springs. A follow-up meeting is scheduled for the end of October in Boulder. "There was general agreement that we want to set up some kind of opportunity fund" for divisional research, says Jeff. "What form this is going to take is the subject of current discussions. We'll be formulating and circulating these ideas."

Under the terms of the WITI sale, the Lifeminders stock can't be sold until next March, but derivatives and similar products could be arranged after September. "A lot can happen between now and March in terms of stock value," notes Jeff. Lifeminders stock, priced at close to $70 per share in March, had dropped to around $22 by mid-August, in line with the fall of many high-tech stocks this year. "We don't know just what the market value will be in 2001, so it's hard to know what we'll do."

NCAR has already benefited from the deal. In addition to the sale price for WITI Corp., the UCAR Foundation received a lump-sum payment from Lifeminders in lieu of future revenue that would have been earned by WITI Corp. projects. Of that lump sum, about $640,000 will go to RAP over the next three years.

The UCAR Foundation has kept the rights to the portion of WITI outside of WITI Corp. (essentially, the aviation-related component). Several of WITI Corp.'s staff departed its FL4 offices for Herndon in August, although three employees will stay in Boulder through the fall.

Another sale along the lines of WITI isn't likely to happen immediately for the foundation. "I would seriously doubt we'd create another spinoff company like that," says Jeff. A more likely possibility is the creation of joint ventures and strategic alliances.

This future lies in a larger context of change. In 1998, UCAR carried out a major reorganization of its technology transfer efforts. The Technology Commercialization Program was disbanded, and much of the work involved in patenting and licensing technology was decentralized to NCAR divisions and UCAR programs. The foundation's role was "scaled back to allow divisions and programs to make their own deals," says Jeff. "In terms of the [technology] licensing program, I think we'll stick with that." In a follow-up article this fall, Staff Notes Monthly will explore some of the other technology-transfer projects going on throughout the institution.

• BH


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Edited by Bob Henson, bhenson@ucar.edu
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Last revised: Thu Sep 7 14:59:51 MDT 2000