[Industry Standard] Hong Kong's Boy Wonder.(People) Sept 25, 2000
Author/s: Joanne Lee-Young
Richard Li's family name and off-the-chart ambition have turned him into Asia's second-most-powerful Internet player. But the recent collapse of the CMGI deal has cast doubt over his plans for global domination.
The marketing consultant from Los Angeles wipes his sweaty forehead with his sleeve, joking that he could sure use a stiff drink, as Richard Li grills him mercilessly. In a meeting room in London, Hong Kong's brightest cyberstar quizzes the consultant about the services he's pitching, disputes his figures and shoots down his views on everything from online advertising to the future of set-top boxes. Between attacks, Li relaxes into boredom, sighing Out loud and then walking out of the room to take a call, leaving the consultant in midsentence. Before it's over, the consultant apologizes for suggesting that he knows more than one of Li's lieutenants. Li is unmoved. "You should be [sorry]," he scolds.
Li often conducts business in this aggressive and frenetic style, say several business people who have dealt with him. It seems to be working. Li -- chairman and CEO of $35 billion broadband company Pacific Century CyberWorks -- has emerged as one of Asia's leading Internet players, second only to Softbank's Masayoshi Son.
At 33, Hong Kong's billionaire boy wonder is the product of one of the region's wealthiest and most politically influential families. Young and swashbuckling, Li has attained almost princely status in Hong Kong. The press has dubbed him "superboy," his father, Li Ka-shing, "superman." The paparazzi follow the "golden bachelor" wherever he goes, reporting on the details his life: who he's dating, his huge tips at restaurants and what kind of car he recently bought.
Li's empire-building has been even flashier. In March he surprised the world by proposing that his company take over Cable & Wireless HKT, Hong Kong's dominant telco. The $28.7 billion cash-and-stock deal, one of the largest corporate mergers ever in Asia, closed last month. In full-page ads run in the Asian edition of the Wall Street Journal, Credit Suisse First Boston, who advised CyberWorks, trumpeted Li's audacious move, calling it "the deal that changed everything. Including the pace of change." Indeed, Hong Kong has rarely if ever seen such boldness before.
Li celebrated his achievement with associates over dinner at Roland's Terrace, an Italian restaurant in Hong Kong he partly owns. Basking in his triumph, he grandly pronounced, "today there's probably only one comparable [company to CyberWorks]. They [will be] larger than we are when [their merger] is completed, and that is Time Warner and America Online."
But only a few weeks later, Li's kingdom of more than 50 loosely connected deals began to fray. Internet giant CMCI, one of Li's highest-profile partners, said in early September that it is backing out of an agreement made in March with CyberWorks and Hicks, Muse, Tate & Furst to develop an international fund. CMGI and CyberWorks had also agreed to form a joint holding company that would bring CMCI's companies to Asia. But Engage, a major CMCI company, recently came to Asia on its own, without input from CyberWorks. Now, for the first time, observers are casting doubt on Li's ability to follow through with deals.
From the beginning, Li's company has been driven by his manic personality, door-opening family name and flair for dealmaking. In April 1999, his company (until then called Pacific Century Group) with investments in property, insurance and technology, took over a small, public telecom equipment company, Tricom Holdings. Li gained Tricom's stock listing, renamed his company Pacific Century CyberWorks, and began pursuing his grand plan to crisscross Asia with fat pipes and deliver entertainment throughout the continent.
By December, Hong Kong's Net frenzy and Cyber-Works' deals with big players like CMGI, Hicks, Muse, Tate & Furst and Intel boosted the company's share price at one point by some 1,200 percent. This explosion in value helped Li buy stakes in more than 50 companies, ranging from SoftNet Systems to Digiscent,com. [See chart, at right.] Li's high-flying Cyber-Works stock, which had gone from 4 cents to about $2.80 per share at the time he bid on Cable & Wireless HKT, was enough to galvanize bankers and secure loans within a few days. He even managed to outbid Singapore's established government-owned telephone company, which had been courting the Hong Kong telco for months.
"Li is a modern-day dealmaker," says Tim Dattels, head of investment banking for Goldman Sachs Asia in Hong Kong. "There were only two or three months in history that this deal could have been done, and he knew what to do."
It's apparent from its offices, located in a business district of Hong Kong, that CyberWorks is a company in flux. The French antique prints on the walls, uniformed butlers and tall doors bound in leather suggest power that is firmly entrenched. But just one floor down, new-economy features highlight the company's state of change: Vending machines and chairs shaped like giant eggs furnish the brightly painted space.
Beyond signing deals, CyberWorks has been producing content in London for its flagship Network of the World, or NOW, an interactive television service. CyberWorks plans to distribute the service over broadband cable networks it will buy and build. Most immediately, CyberWorks is focused on making its union with the Hong Kong telco work. In one deal, Li went from running a company of 1,200 employees located mostly on a few floors in one building to a company of 15,000 scattered all over town.
Li will divide his vastly expanded company into three parts: long-distance and fixed telephone operations; mobile and Internet protocol services; and interactive entertainment and information services it will provide and distribute, like NOW. "If we do a good job in either [of the second two parts] we would be able to double our [market capitalization]. That's not a prediction, but a target," says Li, without saying when such a target might be met.
In addition, the increased cash flow from the buyout -- giving Li $3.6 billion in annual revenue -- will help him fund some of his snazzier pet projects, like NOW. "NOW is very important. It's a Pan-Asian asset, but it's also a global one. And it makes CyberWorks different from any other telco," says Jay Chang, Internet analyst at Credit Suisse First Boston in Hong Kong.
But interactive television is experimental, and NOW is off to a shaky start with missed deadlines and an underwhelming debut. It aims to provide tailor-made entertainment including downloadable music, online wrestling matches and live footage of typhoons. "The main challenge for CyberWorks is for NOW to succeed," says Greg Feldberg, Internet analyst at Indosuez W.I. Carr in Hong Kong. "It is a very daunting task, because no one has done interactive television yet and they are starting from scratch. They need to get an audience."
At a recent press conference, CyberWorks declined to reveal NOW's user numbers. Michael Johnson, the creative head at NOW studios in London, prefers to focus on the track record of CyberWorks' top executives, some of whom worked with Li on his first startup project, Star TV, a Pan-Asian satellite network. "We have demonstrated the ability to do what many companies have talked about. We have actually managed to build a studio. Star was an exploration and an adventure in its own way and ... certainly [NOW's] convergence [of content for the Internet and for TV] is," says Johnson.
Li was born in Hong Kong, the second son of Li Ka-shing. Unlike his older brother, the heir with less to prove, Li is cut from his father's entrepreneurial cloth. More than 20 years ago, Li Ka-shing wrested control of the established Hutchison Whampoa trading house from its British owner and became the first Chinese person to own a company that was a long-standing symbol of colonial rule. Today, Hutchison is a worldwide empire that spans 24 countries. His improbable rags-to-riches story -- from plastic-flower salesman to Hong Kong's premier tycoon -- with a fortune accumulated through timely investments in everything from property and retail to telecommunications and ports, is the stuff of local folklore.
In a place where an obsession for making money transformed a sleepy trading harbor into a modern city of shiny skyscrapers, he is a hero. Li Ka-shing's clout is such that high-ranking politicians have rushed to his aid at his slightest fussing. In late 1998, a chorus of protesters wanted him to allow purchasers of some of his developments to walk away from their commitments because property values had dropped severely. When Li Ka-shing complained about the political environment and threatened to pull out of a $1.3 billion property deal in Hong Kong, the city's chief executive stepped in to defend him.
At the age of 15, Richard Li left his privileged but strict upbringing in Hong Kong for Menlo Park, Calif., to attend Menlo School, living by himself across the street in an exclusive eight-story apartment building. He struggled to improve his English -- even now it is often awkward -- and didn't mix well with the other kids, according to the dean of the school at the time, Fred Halverson. One thing the young Li did learn well was economics, which Halverson taught him. Li later earned a degree in computer engineering at Stanford University and moved to Canada, where he worked as an investment banker for an aggressive Toronto firm, Gordon Capital, which he later bought. He returned to Hong Kong in 1990 to begin building his empire in earnest with the help of his father.
Hutchison Whampoa, run by Li Ka-shing, dished out the $125 million that Li needed to get Star TV off the ground in 1990. He returned a hefty profit to his father's company, and had a pile of cash left over to start Pacific Century Group when he sold Star TV for almost a billion dollars to Rupert Murdoch in 1993. In the younger Li's subsequent telecom and property dabblings before the launch of CyberWorks, Hutchison again came to the rescue by either absorbing assets or infusing cash to steady his less successful ventures.
Li's first major Net play, Cyberworks, put the young entrepreneur on the map and turned him into a member of Hong Kong's glitterati. Now the press won't leave him alone. One of Hong Kong's most popular newspapers besieged a university campus and exhaustively traced the wanderings of his then-girlfriend -- a former marketing executive at CyberWorks. Other publications have taken helicopter shots of the seaside residence he's building and even wrote about a $1,300 restaurant tip he once left. "It's very simple. [I] can't go out and have friends and go to restaurants, especially not [with] a woman, or else it would end up on some gossipy magazine," he says. "At the end of the day, if it doesn't hurt me, it hurts the other person, which is worse. It's pretty terrible."
Li may resent the press's encroachment on his life, but he also knows how to work the media machine when he wants its attention. Li has several ready-to-print quips he dishes out to reporters. In a one-on-one interview with The Industry Standard in his new office, Li commented that the space is "far too big. It's embarrassing. Andy Grove had an office the size of this table when he started." Surprisingly, the next day, the very same quote appeared in the Financial Times.
Li also has allegedly tried to control the media in more secretive ways. Last May, an independent analyst in Hong Kong, David Webb, broke a story at Webbsite.com in which he reported that Kroll Associates hired a private investigator to look into why Webb was writing critical stories about a CyberWorks venture with the government.
Webb had discovered that without issuing a call for bids, as is normal practice, the government handed CyberWorks a project to turn a plot of seaside land into a high-tech hub. As competitors and opposition politicians screamed favoritism, Webb learned that more than 75 percent of the area to be named Cyberport would be residential. Basically, Cyberport amounted to a typical development project -- rather than a special high-tech one -- and Webb called for the government to award it through open tender. Soon after, the private eye, posing as a trade journalist, met with Webb and questioned his motives and sources. Kroll later owned up to hiring the undercover investigator, but denied that the company had been investigating Webb; it confirmed only that there was a "wider project" that it couldn't comment on.
Li kept the Cyberport government project, worth $1.6 billion. Though he denies that CyberWorks hired Kroll, Li said recently, "[Webb] was a very strong critic of the Cyberport, and there [were] people who believe that he [was] working for [the] other [property] companies to discredit us."
In business circles in Hong Kong, Li's hardball business tactics are the stuff of quiet gossip. Few dare to publicly criticize him, knowing that in doing so they are running up against the family dynasty. But in March, a high-ranking Softbank executive, Yoshitaka Kitao, made an off-the-cuff remark to Hong Kong reporters, saying be would never work with Li because he is too greedy and not interested in building a company. "My style is totally different from Richard Li's. In my view, he is just doing it to make money for himself." The blast from Masayoshi Son's senior aide caught CyberWorks off guard, since it has several ventures with Softbank. Son offered apologies immediately, and CyberWorks told reporters that it would ignore the comment.
More recently, James Murdoch, the youngest son of Rupert Murdoch, who beads Star TV, criticized Li's strategy for sending NOW's English content to markets like India, Japan and China, accusing Li of not understanding that it's necessary to provide content in local languages. "I fail to understand how one can define a free-to-air, English-language rehash of circa-1980 MTV as a global multimedia broadband interactive TV service," said Murdoch. Cyber Works declined to comment on Murdoch's invective, but analysts jumped in to say that NOW is starting to produce content in Asian studios.
Li's brash style has also drawn criticism from associates who will only discuss it privately. "I think if he had more time, and if the business pressures were not so ruthless and unrelenting, he would spend quite a lot of time talking to people and listening to people. This is to him the greatest luxury of all, but it's not a luxury that he can afford because his pace is so brisk," says Augustine Chui, one of CyberWorks' advisers in Hong Kong. Chui has known the Li family for almost a decade. Chui's description of Li's older brother, Victor, says much about Richard Li himself. "Victor is deep, more prudent, inward-looking, not as easily perturbed."
Driving back to the city from NOW's studios outside London, heading to the theater, Li talks about his management style and how it's going to change with the larger company. "Before, the person who bridged the gap [between the top managers] was me, so what I did was say, 'shut up, listen, you do it.' But now I can't do that. I won't have the time to do it," says Li. "I think what I am very proud of is the people. They are not yes-men -- there is conflict and we don't stop it right there. The discussions continue." He adds that every-one has mellowed a bit. "Michael [Johnson of NOW] is very different from in the Star days, when if you didn't agree with his content he would break glasses and stuff like that."
It's hard to believe Li will be less aggressive, considering the challenges ahead. Beyond the difficulty of attracting users to NOW and handling the merger with Cable & Wireless HKT, he now has a small crisis on his hands.
The recent announcement that CMGI would cancel plans to develop an international fund with CyberWorks was a big blow. Nor will CMGI necessarily work with CyberWorks (as previously agreed) when it brings its companies, such as Engage, to Hong Kong. Engage recently acquired a small Asian startup, Space Asia Media, and renamed it Engage Asia, successfully establishing a foothold for its online marketing activities without input from CyberWorks.
"Engage was one of the top two companies that [CyberWorks] was talking about bringing to Asia when it announced the partnership eight months ago. Now it makes you wonder what the relationship will ultimately beg," says Indosuez W.I. Carr's Feldberg.
CMGI maintains that canceling plans for the international venture fund that would have been a three-way joint venture with Hicks, Muse, Tate & Furst and CyberWorks is part of a larger effort to restructure the company. "There has been no change in interest or intent. Rather, as we were streamlining, it became clear that rather than building an infrastructure for an international fund from scratch, for efficiency's sake we would continue to informally invest with the two companies instead," says Deidre Moore, a spokes-woman at CMGI in Andover, Mass.
Adding to CyberWorks' deal woes, one of Taiwan's largest Internet and cable companies, GigaMedia, has decided not to invest in a CyberWorks joint venture to produce and distribute Chinese language content, which had been announced with great fanfare in May. Instead, the companies will continue to explore other forms of cooperation, says a CyberWorks' representative.
Feldberg says the problem may be that CyberWorks can't pull off everything it wants to. "In the past, you couldn't get someone to pay for access unless there was content. And you couldn't get someone to pay for content unless there was access," he says. "CyberWorks said that the company was going to take care of both sides of this. It was the answer to prayers, but it might not be so easy to deliver now."
Pacific Century CyberWorks at a Glance
Headquarters: Hong Kong
Founded: April 1999
Chairman and CEO: Richard Li
1999 Revenues: $19.5 million
1999 Losses: $44.4 million
Employees: 15,000
What it does: Aims to be the biggest broadband company in the world by buying and building companies that will produce and distribute entertainment.
IPO: None. It took over a listed company to get on the Hong Kong Stock Exchange
52-week stock history: High: $3.36; Low: 65 cents; Now: $1.62
-------------------------------------------------------------------------------
COPYRIGHT 2000 Standard Media International
in association with The Gale Group and LookSmart. COPYRIGHT 2000 Gale Group
------------------------------------------------------------------ |
