PCCW's Li Raises Hopes In HK With Talk Of New CEO
By ERIC VAN ZANT
Of DOW JONES NEWSWIRES
HONG KONG -- Pacific Century Cyberworks (PCW) Chairman Richard Li may be displeased, but not surprised to hear that news he may soon cede some control of his company's operations has been greeted with optimism.
Investors have hammered his companies' shares in the past year or so, academics have undermined his educational standing, and now, a number of market watchers are hopeful he can import outside talent to help put things back in order. The humiliation just piles up.
Li has confirmed that in a year or so he may consider recruiting a managing director or chief executive to help in day-to-day operations. That would suggest a corporate structure similar to that of Hutchison Whampoa Ltd. (H.HUW), where Chairman Li Ka-shing - Richard Li's father - runs the company, but Managing Director Canning Fok handles day-to-day matters.
Cyberworks shares are up just a touch in the wake of the news, sparked by early media reports, later denied, that Li might soon step down as PCCW chief executive. PCCW ended the morning session up 1.85% at HK$2.75.
Deutsche Bank regional equities strategist Chris Tinker said recruiting more people at the senior level is potentially good for the stock. Some suggestions have it the company, with the help of a headhunter, is trolling the U.S. telecommunications world for people.
"If they weren't looking to build out the quality of their board, then investors should be disappointed," he said. "This is no longer a dotcom, this is a mainstream telecommunications company." PCCW completed the purchase Hong Kong's biggest telephone company in August 2000.
Nonetheless, some investors remain wary. Francis Lun, managing director with Fulbright Securities said it's not yet time to buy PCCW. He said the telecoms' business fundamentals are still a problem and money earned in the coming years will be used to pay off debt.
Others point out that Cyberwork's shares are mostly tracking Wednesday's gains on the Nasdaq and actually are underperforming the broader market. The Hang Seng Index closed for the midday break at 13621, or up 2.13%.
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One fund manager who has PCCW among his holdings suggested the stock's performance today was disappointing, noting the underperformance of the HSI.
"Right now, according to our analysis, it's not yet a very strong buy," he added.
Li's chairmanship of the company has been a troubled one. Investors already weary from what appeared an inexorable decline in share value, were dismayed to learn this year that Li had inflated his academic credentials. Li admitted he had not completed a computer engineering degree at Stanford, a claim made on the company Web site.
Now, it remains to be seen whether he can import the skills needed to placate disgruntled investors and bring buyers back. He will have to overcome a reputation as a difficult person to work with.
Early reaction to news that he'll seek his savior in the U.S. has been met with criticism. One industry executive said it's a good move for PCCW not to have Li in charge of day-to-day operations because he lacks experience in the industry and the company would be better served with an experienced manager.
But he added that a U.S. telecommunications executive doesn't seem like such a good choice given that U.S. telecoms don't have a reputation for leadership in the industry.
These latest concerns come at a time when the company is working hard to stop persistent talk that PCCW needs to sell off key assets to raise the funds it needs to service its debts.
It has firmly denied speculation that it plans to sell its stake in Hong Kong's Cyberport project, a technology development the government hopes will attract key players in the information-technology field. It has also rejected speculation it would pull out of joint ventures like the ones it has with Australia's Telstra Corp.
The company said it has a solid net cash position at over US$1.0 billion to see it through.
-By Eric Van Zant, Dow Jones Newswires; 852-2802-7002; eric.vanzant@dowjones.com
(Kirsti Hastings, Liz Rudall and Sonia Tsang also contributed to this article.)
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