Richard Li's reputation falls by one degree
By MARK LANDLER
Friday 30 March 2001
First came the disappearing degree. Now come the disappearing profits.
Last week, Richard Li, the brash tycoon who founded Pacific Century CyberWorks, acknowledged that he had not graduated from Stanford University, as the company had said in news releases and legal filings.
On Wednesday, Pacific Century reported a gargantuan loss in its first full-year earnings since acquiring Hong Kong's telephone company, Cable and Wireless HKT, last August.
After taking nearly $US1 billion ($A2 billion) in charges for merger-related costs and devalued Internet investments, it lost $US886 million.
"For 2001, our financial objective is very simply debt reduction," said Mr Li, in a funereal presentation to analysts that spoke volumes about how the world has changed for the 34-year-old entrepreneur.
Once the king of the new economy in Asia, Mr Li is collapsing under the weight of his $US38 billion acquisition of HKT. The phone company generates 97 per cent of the sales of CyberWorks, but it has been haemorrhaging customers since Hong Kong opened its market to rivals.
And Mr Li is getting a crash course in accounting: CyberWorks said it had taken a charge of $US22 billion on its balance sheet to write down the goodwill - the gap between the book value and purchase price - of HKT.
That leaves Mr Li, one of Hong Kong's richest men, presiding over a company with negative shareholder equity of $US925 million. Shares of CyberWorks have fallen 85 per cent since their peak a year ago and now trade at 44 US cents. Given that the results were worse than analysts had expected, they could fall further.
"This is now basically an old-economy utility, comparable to British Telecommunications or an American Baby Bell," said David Webb, the editor of Webb-site.com, an Internet service that tracks Hong Kong companies. "Any growth on the new-economy side is going to be slowed by old-economy issues."
Richard Ferguson, a telecommunications analyst with Nomura Securities in Hong Kong, said: "The only way PCCW can achieve its objective is via an equity spiral or through some of the braver banks."
Mr Li and his lieutenants labored to sketch a futuristic vision for CyberWorks, talking about business e-solutions and Internet data centres. But analysts were more interested in its decimated portfolio of Internet investments, while journalists questioned its credibility.
Last week, the International Herald Tribune reported that Mr Li had not graduated from Stanford with a degree in computer engineering, as his official biography stated. The error was published in dozens of publications, including The New York Times, which reported, based on an interview with a company spokesman, that Mr Li had graduated in 1987.
CyberWorks confirmed that its news releases and other materials were inaccurate, but noted it had not made the claim in legal filings.
Then Mr Li backed off from that assertion, too, after journalists found references to the Stanford degree in documents filed by two technology companies of which he is a director: Rediff.com, an Indian company listed on the Nasdaq, and Mediaring.com, a Singapore-listed venture.
The revelation has received a mixed reaction. Some investors profess not to care, saying Mr Li's most important credential is being the son of Li Ka-shing, a well-known Hong Kong tycoon. Other analysts said the incident would sow more doubts about a company that had already disappointed shareholders.
Mr Webb said the erroneous information was part of a pattern at CyberWorks, noting that executives had given misleading information about the terms of its bank loans.
"The company has a history of allowing quotes from its public-relations people to run ahead of reality," he said.
CyberWorks executives declined to discuss the dispute over Mr Li's credentials on Wednesday. Deputy chairman Francis Yuen insisted it had not dented the company's credibility with its partners. "They're very impressed with our behavior. People who deal with us are going to judge us by our behavior."
Making sense of CyberWorks is hard enough. Its earnings report is a stew of one-time charges, provisions and writedowns. But it is clear Mr Li's dream of a broadband entertainment and information service has been all but shelved. CyberWorks will present a new plan for the service, known as Network of the World, in three months.
"We've learned that advertiser-only-dependent Internet services have an uncertain future," said Jeffrey Bowden, who oversees the company's strategy. "You can't build a business on that."
NEW YORK TIMES
This story was found at: theage.com.au |
