Hong Kong's CyberWorks' Stock Sinks
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22:08EDT
By DIRK BEVERIDGE
AP Business Writer
10/19/00
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HONG KONG (AP) -- High-flying Pacific Century CyberWorks Ltd. looked like a sure winner to lots of investors when it agreed to buy Hong Kong's top telecommunications company, Cable & Wireless HKT, last spring.
But the bold $38 billion merger, aimed at using telephone revenues to finance Internet ventures across Asia, has come down to earth. CyberWorks' stock price is tanking -- and analysts now say the company's recipe for joining an Internet start-up with a traditional telecom company is unclear and unproven.
The comedown of one of Asia's biggest mergers ever is a stunning blow to tycoon Richard Li, scion of Hong Kong's most prominent business family, who started CyberWorks just last year. It also underscores the harsh new investment reality facing ambitious high-tech start-ups.
CyberWorks' stock price has tumbled to less than one-fourth of its levels early this year, when it was bidding for Cable & Wireless HKT. CyberWorks lost another 1.6 percent Thursday, closing at about 80 cents. The shares have dropped every day this week despite a recent agreement that lets CyberWorks slash its debt by $3.5 billion.
The turnaround was dramatic.
When CyberWorks closed its deal to buy Cable & Wireless last August, Li said he expected a doubling in value of his company, with Internet interests throughout Asia ranging from high-speed Net services for businesses to hosting Web pages to a venture capital arm.
A key offering is Network of the World, a service that lets customers view English-language television newsclips over high-speed Internet lines. The company plans to expand into Chinese with a studio built in mainland China, Japanese content from a studio to be built in Japan, and Hindi content from a studio to be built in India.
Analysts now say that the company's strategy for its collection of Internet businesses is unfocused and too ambitious. They worry about debt CyberWorks took on in buying Cable & Wireless HKT. Many believe the phone company's former parent, Cable & Wireless PLC of Britain, will unload its 14.5 percent stake in CyberWorks as soon as possible.
Doing little to assuage worries is a deal last Friday with Telstra Corp., the Australian phone giant, that lets CyberWorks reduce its debt from $9 billion to $5.5 billion.
"I don't think there's any strategy,'' said Steven Schwankert, managing editor for Asia at internet.com, an online news provider.
"They say 'We're doing this' and 'We're doing that,' but where is it?''
CyberWorks declined through a spokeswoman Thursday to comment on the stock plunge or the criticism.
It's too soon to say whether the company has bottomed out. When the stock-and-cash deal closed in August, it was worth $10 billion less than first estimated, at about $28.5 billion. CyberWorks plans to take on more debt to fulfill its ambitions.
CyberWorks is developing a high-tech center -- dubbed Cyberport -- on the south side of Hong Kong island in a deal it got without any competitive bidding, drawing accusations of favoritism.
CyberWorks has finished constructing roads and bridges, but it has yet to put up office buildings and apartments that were supposed to start opening late next year.
CyberWorks spokeswoman Joan Wagner could not specify the total investment but she said CyberWorks plans to borrow no more than $770 million for Cyberport.
Matthew McGarvey, senior Internet analyst at IDC China in Beijing, said CyberWorks, also known as PCCW, seems to be evolving into "a gargantuan amalgamation of businesses'' with unclear direction.
"I think PCCW would be wise if they took some time explaining what their business plan was and letting the public know,'' McGarvey said. "I don't think anyone has a clue.''
Traders also worry that Britain's Cable & Wireless PLC, which ended up with billions of CyberWorks shares when it sold its majority stake in the Hong Kong phone company, will dump the stock as soon as it can under terms of the merger.
Cable & Wireless sold a big batch last month but won't discuss future plans. |
