TheStandard.com - PCCW's Losses Are Worse Than Expected
By Joanne Lee-Young
For months, research teams at some of the largest investment banks have refrained from making recommendations on Hong Kong's plunging Pacific Century CyberWorks, citing a lack of information and guidance from the company. On Wednesday, analysts and reporters packed in to hear the telecommunications and Internet firm deliver even worse-than-expected results.
In its first full-year results since buying Hong Kong Telecom last August, the company posted a net loss of $886 million on revenues of $935 million for the year ended Dec. 31, 2000. It wrote off $627 million in unrealized losses on venture investments in Internet-related companies. It also wrote off $22 million in goodwill arising from the Hong Kong Telecom purchase, leaving it with a total shareholder deficit of $1.8 billion. Its main source of revenue, overall telecom services, fell 7 percent.
The losses exceeded several analysts' predictions. Others emphasized that aside from getting these numbers, they still needed to meet individually with management during the next few days. That's something they haven't had a chance to do in nearly six months. Analysts say they want a clearer picture of the company's core telecom business and its joint ventures.
In the meantime, the results come as shareholders remain livid over the false claim that Richard Li graduated from Stanford University with a degree in computer engineering. Li, the son of one of Asia's richest tycoons, heads PCCW, a company that was once Asia's most promising Internet play. This week, the story got uglier when it emerged that misleading information about his credentials appeared not only in the company's publicity material and in the press, but also in legal documents filed to stock exchanges.
In documents for the Nasdaq-listed Indian portal Rediff.com and Singapore-listed Mediaring.com, companies in which CyberWorks invested, Li is billed as a graduate of Stanford in computer and electrical engineering. CyberWorks was forced to come out with yet another clarifying statement.
Local newspapers continue to run headlines like "Richard Li deceives the public, damages integrity." Radio shows have been buzzing with irate callers, and outspoken legislators have weighed in. Li met with analysts on Wednesday, but he stayed away from the packed press conference. Pushed to explain how the company will restore its credibility with shareholders, Francis Yuen, the deputy chairman, would say only that the company's partners didn't seem swayed by the public-relations debacle. "They look at the way this management behaves, and they look at the professionalism we have displayed. The people who are dealing with us judge us well," he said.
Shareholders, however, have been aghast. CyberWorks has fallen from a peak of $3.68 last February to 44 cents at Wednesday's close. Even the backing of Li's father, the respected tycoon Li Ka-shing, has done little to help. The senior Li tried to support CyberWorks symbolically by buying shares when the price was at 58 cents. Last week, amid the media barrage, he told reporters, "My son is not a liar."
CyberWorks had suffered long before the Stanford gaffe. At the beginning of this year, bombs damaged phone booths owned by CyberWorks. This month, a publishing company sold nearly 20,000 copies of a 97-page comic book that depicts Li as "Superboy," the sulky son of a powerful businessman known to investors as "Superman." In one clip, the once-revered Li is directed to the horror section of the library for a book on how to make an Internet fortune.
One angry shareholder is hoping to tap into these feelings of malcontent. On Monday, a Web site went up to drum up support for a legal action against CyberWorks. Writing from North America via a Yahoo e-mail account, Qing Zhou told a reporter, "I made a wrong choice and recommended this PCCW to lots of friends and relatives, and they either bought [the stock in] HK or its ADR [shares] in U.S. Just [among] my friends, [we have blown] over $1 million in PCCW. I feel I owe my friends a big one, so I did this site to collect enough disgruntled PCCW losers and [will] present it to a number of legal firms for a class-action lawsuit."
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