Wall Street - June 15, 2004
Robert A. Guth

The 44-year-old rock star is joining Elevation Partners, a new Silicon Valley fund set up earlier this year by veteran technology investor Roger McNamee and John Riccitiello, who in April left his post as president of videogame maker Electronic Arts Inc. for Elevation.

Fred Anderson, 60, who retired earlier this month as Apple Computer Inc.'s finance chief, also will join Elevation. Mr. Anderson, who is a board member at Apple and online auctioneer eBay Inc., is credited with helping co-founder Steve Jobs steer Apple back from near death in the late 1990s. The appointments bring to six the number of managing directors at the fledgling private-equity firm.

The participation of Bono should sharply raise the profile of Elevation, which people familiar with the fund say initially will raise $1 billion for buyouts and investments in media and entertainment companies, seeking to profit from turmoil in those sectors. Bono has been the front man for U2 since its founding in the mid-1970s, helping to make the rock band one of the most popular in the world. The band's hits include the 2001 Grammy Award winner "Elevation," though a spokesman for the firm says the firm's name is coincidental.

It is unclear how much time Bono will be able to dedicate to his new role. He will remain lead singer of U2, which is at work on an album that is expected to be released before year's end followed by a tour in 2005. Elevation's partners declined to comment on details of its plans or Mr. Bono's responsibilities, citing a quiet period mandated by the Securities and Exchange Commission for private-equity firms involved in fund raising. Regine Moylett, a publicist for Bono and U2 in London, confirmed the singer's plans to join the fund but declined to comment further.

At the very least, Bono brings the fund a network of connections that span entertainment and politics. The musician in recent years has used his celebrity to raise global awareness of debt relief in the developing world and AIDS. He has strong ties to the White House and in 2002 accompanied then-Treasury Secretary Paul O'Neill on a tour of Africa to study the impact of foreign aid. Much of his debt-relief and AIDS work is handled by DATA -- or "debt, AIDS, trade, Africa" -- a not-for-profit organization he co-founded with funding from the Bill and Melinda Gates Foundation, George Soros's Open Society Institute and the Center for Global Development. Elevation's expected focus on the music and entertainment investments comes as the music industry has been suffering a four-year global downturn in sales. While U.S. sales have recovered slightly this year, industry executives believe that woes abound, stemming from online piracy and rampant home CD burning, along with competing home-entertainment technologies like DVDs and videogames.

The depressed business environment has created a high degree of volatility that Elevation and others are hoping to exploit. Already, the industry has seen a spate of mergers and attempted mergers, spinoffs and label closures. In March, a group of private-equity investors led by Edgar Bronfman Jr. bought Warner Music Group from Time Warner Inc. for $2.6 billion and immediately began paring staff and roster size in an attempt to boost the operation's profitability.

Meanwhile, Sony Corp. and Bertelsmann AG are in the midst of an attempted merger of their global music operations, a process that could generate investment opportunities if U.S. or European regulators require the companies to shed any of their operations in order to gain approval. Elevation is expected to look for investment opportunities in media and entertainment companies disrupted by the advent of the Internet and other digital technologies. Music, movies, publishing and other traditional media industries are grappling with how to exploit new distribution means -- including the Internet or cellular phones -- while stemming piracy that such technologies enable.

That is likely why Elevation is tapping Mr. Anderson. He worked with Mr. Jobs to help guide Apple into new businesses that combine entertainment and technology, most notably iTunes, now the world's largest paid online music business. Mr. Anderson also is known for helping end a liquidity crisis at Apple -- the company's cash stood at $3.2 billion as of March -- and has a reputation as a numbers man with a strong grasp of business operations. He also helped Apple negotiate with record labels and technology partners.

At Elevation, Bono could draw from some of his experience at U2 in working through tough issues that are peculiar to the music industry. In the 1980s, the band, with the guidance of its manager Paul McGuiness, cut a deal that gives U2 ownership of its albums' master tapes after its record label Universal recoups the money used to produce an album, an unusual arrangement providing U2 greater control over its music than many other artists. The band doesn't allow its music to be used for advertisements and has been an active seller of music online, including over Apple's iTunes service. Besides "Elevation," U2 is famous for such songs as "Sunday Bloody Sunday," "Where the Streets Have No Name" and "Beautiful Day."

Mr. Anderson and Mr. Riccitiello, who served as Electronic Arts' president for six years and strengthened the company's ties with Hollywood, will be in charge of Elevation's operations, the people familiar with the fund say.

Mr. McNamee is co-founder of technology investment firm Silver Lake Partners. The other two managing directors of Elevation Partners are Mark Bodnick, a Silver Lake director, and Bret Pearlman, who said last month he is leaving private-equity giant Blackstone Group to join Elevation.

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