WSJ - CyberWorks Reduces Investment In Web Unit After Poor Results
December 5, 2000
Tech Center
By PETER WONACOTT
Staff Reporter of THE WALL STREET JOURNAL
HONG KONG -- Pacific Century CyberWorks Ltd. has scaled back its investment plan for Network of the World, a Web-based television subsidiary that is supposed to spearhead the company's move into the high-speed Internet business.
Top executives say CyberWorks will spend about US$1 billion over the next five years building up content for the network, known as NOW, and rolling out other consumer-related services in Asia. That contrasts with an original forecast of US$1.5 billion for NOW alone, a figure that dwarfed what other competitors have devoted to digital television experiments.
Executives denied the cut in spending is linked to disappointment with NOW, which has struggled to attract viewers, and they reaffirmed their commitment to the project and the people running it.
The move, however, comes after company executives met with fund managers in Europe and the U.S., some of whom are skeptical about the amounts being pumped into an unproven business. Earlier this month, the company dismissed a Hong Kong newspaper report that the NOW unit was headed for a major overhaul, including deep staff cuts. Executives said they have shared modified plans for NOW with some institutional investors, and will discuss those plans with the media in the next two weeks.
Personnel Question
One of the most closely watched signs of NOW's fate is the status of its creative godfather, Michael Johnson, a longtime associate of CyberWorks founder Richard Li who was rumored to have been pushed out in a shake-up. Executives said Mr. Johnson will continue to develop NOW's content, particularly in Asia, but will play less of a role running the business. Mr. Johnson is on leave through December and couldn't be reached for comment, according to a CyberWorks employee.
Partly due to market uncertainty over NOW, CyberWorks' Hong Kong-listed stock has been hammered of late, falling to 4.85 Hong Kong dollars (62 U.S. cents) on Thursday before bouncing back 11% on Friday. The stock slipped five Hong Kong cents Monday to HK$5.35. CyberWorks shares reached a high of HK$28.50 in February just before the company's successful bid to acquire Hong Kong telephone company Cable & Wireless HKT Ltd.
"Yes, we're backing off what we invest in NOW," said Alex Arena, deputy chairman of the company's executive committee, in an interview. "Why wouldn't we? Our competitors are falling all over the place; we don't have to invest so aggressively to stay up front."
Executives denied that NOW is a huge financial drain. "It's a fraction of what people think we're spending," said Jeff Bowden, an executive vice president at CyberWorks and the senior executive in charge of NOW. Mr. Li said CyberWorks has invested a total of US$176 million since NOW was launched in 1997.
Building Up the Network
Mr. Arena said the global sell-off of technology stocks means CyberWorks can pick up companies cheaply, or strike alliances, that would support NOW's buildup.
CyberWorks is setting up NOW studios in Hong Kong and Taiwan to produce local content. "We'd like to see them develop more Chinese content," said a spokeswoman for Hong Kong Cable Television Ltd., which stopped broadcasting NOW at the end of October after a three-month trial period.
Another CyberWorks subsidiary is rolling out NOW in Japan. CyberWorks also has plans to move the service into China. Currently, NOW broadcasts from London, combining news, sports, music and weather in an interactive format. It can be watched either via satellite or through a broadband high-speed Internet connection. Mr. Li wants NOW to help spread the use of broadband connections to support its telecommunications and Internet-related businesses.
Write to Peter Wonacott at peter.wonacott@awsj.com1
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