Hynix Semiconductor Inc Chief Executive Park Chong-sup told analysts twice last year he didn't expect earnings to be hurt further as the No. 2 memory-chipmaker wrote down some of its failed investments.
He was wrong. In February, Hynix reported a loss of 2.4 trillion won (US$1.8 billion) in 2000, after writing down 2.6 trillion won for an unfinished plant in Scotland and asset sales.
Analysts, who on average had expected a loss of 287 billion won, were left with egg on their faces.
It may be puzzling, then, that people covering Hynix still believe the 53-year-old, who holds a doctorate in business administration, is the right man for the job. They say his policy of selling assets, boosting independence from the Hyundai Group and focusing on the chip business needs more than his year in office to bear fruit.
"I still have conviction about Dr Park. I don't think he was really lying," said Hahn Soongho, an analyst at HSBC Securities in Seoul who rates Hynix "hold." "He came into office in April and asked all of his employees to report everything and that process just took too long and was a mess.:
The head of Hynix, formerly Hyundai Electronics Industries Co, will get another chance to convince analysts when he releases first quarter earnings and holds a conference call to discuss them today.
He'll have plenty of questions to answer. The spot price for Hynix's main product is down by more than 75 percent since last July, making it more difficult for Park to come up with funds to repay the three-quarters of its total debt due for repayment this year.
Hynix is expected to have a loss of 508 billion won (US$382 million) for 2001, according to a poll of 18 analysts by IBES, indicating the company may have lost 127 billion won in the three months ended in March. Analysts don't make forecasts on South Korean companies by the quarter.
Since taking charge of the company, Park has done the unthinkable at what was once South Korea's largest business group. Hynix has been embroiled in legal battles, twice trying to avoid bailing out Hyundai affiliates. Park also plans to sever all ties with Hyundai by the end of the first half a commitment reflected in its recent change of name.
Throughout a year of challenging shareholders' meetings, press conferences and analyst calls, Park has remained calm. He always starts replies to tough questions -- and even calls for his resignation -- with his trademark: "Thank you for your question." While he has earned praise from analysts for giving detailed information on his company's finances and debt problems -- which have forced Hynix to rely on a government refinancing program to keep it out of default -- Park still has work to do.
"He was given two quarters to undo 10 years of mismanagement," said Del Ricks, an analyst for W.I. Carr Securities in Taipei. "He came in with the right idea and started implementing the right policies but then the bottom fell of out the chip market."
The price of the company's 64-megabit dynamic random access memory chip is now at or below the cost of production for Hynix and other DRAM makers.
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