AWSJ: Intel Cuts Stake In NOW Venture With Hong Kong's PCCW
Updated: Tuesday, April 24, 2001 04:54 PM ET
Staff Reporter
HONG KONG -- Intel Corp. has scaled back its stake in Network of the World, the troubled interactive television service it has been co-developing with Pacific Century CyberWorks Ltd.
The reduction, which occurred on March 2 but wasn't announced by either company, means that heavily indebted PCCW will have to bear a greater share of any further investment in the service.
The ambitious venture, also known as NOW, was created by the two companies, with PCCW holding 60% and Intel the remainder. When announced in 1999 it was touted as a unique world-wide service that combined elements of TV and the Web, delivered over high-capacity data links into the home. PCCW Chairman Richard Li declared it was the "heart of our long-term business strategy."
But the venture has already drained HK$1.69 billion (US, news, msgs$216.7 million) from PCCW's coffers, resulting in criticism from analysts that the project is unfeasible in the new harsh environment for technology ventures. In addition, PCCW's management has turned its attention to the telecommunications business after acquiring Hong Kong's dominant phone company, Cable & Wireless HKT Ltd., last year.
PCCW has pledged to come up with a new business plan for the venture by the end of June.
PCCW disclosed in its annual report Tuesday that Intel exercised part of an option that allows it to exchange its stake in NOW for shares in PCCW. The transaction reduced the U.S chip maker's interest to around 35% from 40% and gave it 138 million PCCW shares, which it is free to sell.
Neither PCCW nor Intel was able to say Tuesday whether Intel had sold those PCCW shares. A PCCW representative said she wasn't aware of the sale but stressed that the companies still have a good working relationship.
An analyst with a European brokerage firm said Intel's move was unhelpful for PCCW but "it makes a lot of sense for Intel."
"They (Intel) want to hold investments that are more liquid," the analyst said.
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