Richard Li, a notebook computer on his knee, shows what became of his dream to sell televised programs to millions in Asia on the Internet. As he taps the pad, a model struts across the screen to a disco beat.
"It's still a video-driven product," the 36-year-old chief executive of PCCW Ltd. said of his Now.com.hk, an Asian-focused multimedia Web site. "Maybe the market size and geographical ambition changed, but the vision very much carried on."
It was quite a change. Two years ago, Li bought Hong Kong's biggest phone company for US$28 billion. Then Internet stocks collapsed. All that's left of the dream is Now.com.hk, which sells games, cartoons and news to 140,000 users in Hong Kong. PCCW's market value is US$4.1 billion.
The son of Li Ka-shing, Asia's richest businessman, is trying to cut PCCW's net debt, which at US$4.2 billion almost equals the market value. Li's family ties will be put to the test as he tries to reverse PCCW's 95 percent stock plunge and show management skills in bad times as well as good.
"I don't see a clear-cut strategy going forward in the next five years," said Mark Monson, who manages US$2.8 billion globally at Gottardo Asset Management Ltd. and sold PCCW shares in 2000. "I don't think he's stupid. He does have ideas that need to be refocused."
The bond market suggests some investors approve.
The difference in yields between PCCW's 7.75 percent bonds due in 2011 and similar-maturity US Treasuries has narrowed by 78 basis points to 2.77 percentage points since October. That's a greater decline than for comparable bonds of rival Singapore Telecommunications Ltd, though PCCW's yields are higher. The bonds rose after PCCW announced a fourth major round of job cuts and repaid some debt ahead of schedule.
For Li, the PCCW purchase gave him what he wanted: a business that produces US$500 million cash a year for future investments.
"Spending money is fun," but earning money "is even more fun," he said. "I would not have been able to have another machine that can generate that kind of cash."
PCCW has freed up cash. In two years, it cut salaries and trimmed its workforce by more than a fifth. It paid some debt early after selling mobile-phone operations in Hong Kong and Singapore. This year, it expects to draw revenue from Cyberport, a Hong Kong office and residential property project aimed at housing technology companies.
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