China Dot-Coms See Fortunes Crumble
Joe Sweeney is just happy to be out of the spotlight focused on dot-com company earnings--or rather the lack of them.
The founding member and former vice president of Hong Kong-based Asia Online Ltd., Sweeney is now on the other side. As a research director at Gartner Group Asia, he rates the performance of several high-profile Chinese Internet companies.
Recent news that Sohu.com’s Senior Vice President Joe Chen was leaving reminded Sweeney how hard his own dot-com days were. Chen’s decision is the latest in a parade of high-profile defections from Internet companies, underscoring the difficulty of finding anyone to manage a business with long hours and low prospects for profitability.
The exodus of top executives from Web sites in China will make it even harder to complete business plans as investors flee. Many executives say they are giving up or scaling back because long hours failed to produce the expected reward--particularly after a plunge in share prices of up to 95% devastated the value of their stock options.
“The stress was killing me,” Sweeney said. “Some of them might be moving for the same reason that I did: just absolute exhaustion. It’s hard, hard work.”
Last year, Asia Online withdrew a plan to raise as much as $100 million in a U.S. initial public offering because of “changed circumstances in the securities markets.” The company also laid off 56 employees, or 6.2% of staff in its Hong Kong office, late last year to scale back operations.
Executives Leaving Positions
In January, Sina.com said its CFO Victor Lee resigned because he wanted to stay in California after the company decided to move its financial headquarters to Hong Kong from there. Helen He of Netease.com Inc. said her departure was for health-related reasons.
Last month Savio Chow, the managing director of Yahoo! Inc. in Asia, announced his retirement. That’s after the manager of the company’s European operations, Fabiola Arredondo, and Yahoo Korea Chief Executive Jim Youm both resigned to pursue other business interests and to spend time with their families.
“Whether they have lost faith in the Internet world, you have to ask them,” said Joseph Ho, an analyst at Dresdner Kleinwort Wasserstein. “But their stock options have gone down a lot, therefore they have a lot less to consider if they want to leave.”
Internet companies including Yahoo and Priceline.com Inc. reported financial difficulties just a year after their stocks were among the most actively traded on the Nasdaq. Shares of Chinese-language Web-site companies Chinadotcom Corp., Sohu.com Inc. and Sina.com, also listed on the Nasdaq, now lag indexes that they outperformed last year.
Shares of China’s top three Internet portals--Sina.com, Sohu.com and Netease--have fallen by as much as 95% from their 2000 highs. The Web sites are competing for online advertising revenue estimated to range from $35 million to $80 million this year, down from earlier projections as high as $120 million. The drop in projected revenue may hurt chances to be bought by a bigger company.
“I think people are waking up to that now,” Sweeney said. “It remains a market where it is struggling to find alternative sources of revenue.”
Chinadotcom also witnessed the departure of its co-founder and president of international operations, Ian Henry, last year. Henry recently founded Alive Network, a traveling and lifestyle television channel based in Hong Kong.
