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Technology Stocks : PCW - Pacific Century CyberWorks Limited -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (1868)	8/22/2001 12:49:41 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 2248

San Jose Mercury News, Calif., Dan Gillmor Column San Jose Mercury News - California - KRTBN; Aug 22, 2001 BY DAN GILLMOR AOL Time Warner dropped another shoe Tuesday, announcing the layoff of another 1,700 employees, most of whom will depart the company's online operation. It was yet another indication of the slowdown in the technology and media industries. It was also a reminder of what a remarkable coup AOL's leaders pulled off when they swallowed Time Warner. Today, such a deal would be more thinkable if the acquirer and acquired were reversed. Not so long ago, Old Economy stalwarts were absolutely terrified of all those New Economy upstarts. They had reason. At the time, during the height of the technology stock bubble, Wall Street's infinitely herd-like barons were valuing all things with the slightest Internet connection like platinum. Everything else was garbage. So the America Onlines and their ilk did the sensible thing. They'd already used their inflated stock as currency to buy up related technology companies, rounding out business lines and buttressing technological gaps. Now they saw the rare opportunity to use their valuations in a more audacious way -- to buy into the Old Economy. It was the smart move. There weren't many that could pull it off. But the ones that did are now companies with that most essential of assets -- cash flow in an economy where cash rules. AOL's buyout of Time Warner wasn't even the most brazen. That honor surely goes to Pacific Century Cyberworks' buyout of HKT, by far Hong Kong's largest telecom company, a deal that surely set the record for using inflated stock to buy something substantial. Cyberworks did have some real businesses, such as real estate holdings. But it was best-known for its Internet and technology ambitions, with a young and charismatic leader -- Richard Li, son of Hong Kong's richest tycoon -- who was more adulated than scrutinized by investors. Since the buyout it's been mostly downhill for Pacific Century and Li. The company's stock has tanked and the adulation has, to put it mildly, faded. AOL was less brazen. It did have serious revenues and earnings to offer, though investors had to trust its ability to continued with unbridled growth to justify the valuation when the deal was announced in early 2000. But had anyone broached the same combination of companies after the bursting of the Net bubble, surely it would have been Time Warner -- a company with a long history of reliable revenues and earnings -- buying the online outfit. Perhaps Qwest, the telecom upstart that bought US West, the "Baby Bell" telecommunications company based in Denver, also fits into this mold. It wasn't exactly an Internet company, but it was definitely an upstart with more ambition than muscle. Now the tables have turned, thoroughly. The companies that pre-dated the bubble are taking advantage of its deflation. They're taking to heart the old investing adage, that the best time to buy is when the blood is running in the streets. That's certainly the case with the carcass of Egghead.com, the online software and electronics retailer that announced last week a bankruptcy filing and sale of assets to Fry's Electronics, which hasn't bothered to sell on the Web. There were almost too many ironies in this deal to count, but consider that Onsale, an early Web auctioneer, had bought Egghead, which started life as a chain of physical stores. There doesn't seem to be any huge demand by old-line businesses for the remains of the New Economy failures. Perhaps they're waiting for values to drop even further. No one should be surprised if that happens, because some valuations still seem awfully high. But there are lots of Old Economy companies that only dipped their toes into the technological future, if they did that much. They'd be foolish to think the Net is somehow going away, that they have all the time in the world to adapt. They don't. Bubbles come and go. But the Net is here for good. --Dan Gillmor's column appears each Sunday, Wednesday and Saturday. Visit Dan's online column, eJournal (www.siliconvalley.com/dangillmor). E-mail dgillmor@sjmercury.com; phone (408) 920-5016; fax (408) 920-5917. World Reporter All Material Subject to Copyright globalarchive.ft.com