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PCCW Losses Hit US$886m
Swimming in red ink from costly investments, Pacific Century CyberWorks Ltd said Wednesday it lost US$886 million last year despite sharply higher revenues from a telephone company takeover.
The Internet and telephone group run by tycoon Richard Li also said it took a writeoff that cuts the value of its assets by US$22 billion -- over the acquisition of Cable & Wireless HKT, the biggest phone company in Hong Kong.
But executives insisted they are still moving ahead, following a troubling year that saw the company's share price crash to a tiny fraction of its previous value.
Deputy chairman Francis Yuen told reporters that the bad news announced Wednesday was made up mostly of one-time problems -- and CyberWorks now finds itself ready to embark on a healthier footing.
"From now on, the company will be in a relatively stable position to develop, and I believe there will be stable growth," Yuen told a news conference that Li did not attend.
CyberWorks reported losses even though the phone company takeover lifted revenues to US$936 million, from US$19 million in 1999. A year earlier, CyberWorks had reported a profit of US$44 million.
But CyberWorks executives said in a meeting with analysts that the company remains on track. They said, for example, that they expect to start bringing in revenues late next year from a Hong Kong high-tech development dubbed Cyberport.
Analysts have worried CyberWorks took on too much debt when it bought Cable & Wireless HKT, even though it paid largely in stock.
And they have said it remains to be seen how well Li's business plan -- to use steady telephone revenues for financing risky put potentially lucrative Internet ventures -- can deliver profits.
Analysts leaving Wednesday's meeting had no immediate comment, saying they needed to take a closer look at the CyberWorks results statement.
CyberWorks said its loss was caused largely by writeoffs it took on investments that seem to have permanently lost much of their value, and its mammoth writedown of its own assets -- US$22 billion -- was for goodwill.
Goodwill is an accounting term referring to the intangible value of an asset, such as the reputation of a company, and CyberWorks said that when it bought Cable & Wireless HKT, it paid more than the phone company's book value.
When CyberWorks announced about a year ago it would buy Cable & Wireless HKT from its majority shareholder, Britain's Cable & Wireless PLC, the value was placed at about US$38 billion in shares and cash.
But the deal was worth only US$28.5 billion when it closed in August because CyberWorks stock had plunged, and the shares have kept falling. The group chief financial officer, David Prince, said the Cable & Wireless HKT assets had been worth just about US$6 billion.
The writedown leaves CyberWorks in a position of "negative equity," where -- on paper -- its liabilities exceed its assets by about US$1.8 billion. Executives stressed this is an accounting measure only and does not affect the group's business.
Li, a son of Hong Kong's richest man, the billionaire Li Ka-shing, ran into more troubles when he acknowledged last week that he had never received a degree from Stanford University, as CyberWorks had claimed in some press materials.
The controversy quickly worsened.
Li's initial statement said that the false information about his education background had never appeared in any legal documents, but CyberWorks later said the claim about a Stanford degree had appeared in two listing documents of overseas companies.
Although Li appeared in the meeting with analysts, which was shown to reporters on a television hookup, he did not attend a subsequent news conference.
CyberWorks said Li's presence was not necessary because the company's entire top financial team was there, but the executives found themselves confronted by repeated questions about Li's educational background, which they kept avoiding.
Yuen finally said that the company had given its explanation and "I'm not sure how people will look at us, but people who deal with us judge on our behavior."
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