SCMP Saturday, July 29, 2000
Tom.com sacks 80 employees
BEN KWOK and JENNY CHUNG
Tom.com, the company which typified the Internet stocks frenzy, sacked more than a quarter of its Hong Kong workforce yesterday, in the latest sign of the problems facing the struggling sector.
The loss of 80 jobs followed cuts of more than 200 employees by other Internet-related companies in the past two months. Just five months ago, more than 300,000 people queued at banks to apply for shares in Tom.com, the Internet arm of the Li Ka-shing empire.
''It is a painful, but necessary action,'' Tom.com chief executive Sing Wang said. ''I think there is an understanding among the staff that Internet business is a risky business, and there are always changes in the business.''
Tom.com fired the employees from its content, production and technology departments. The company will now have about 420 staff divided equally between Hong Kong and the mainland.
In addition to cutting staff, Tom.com said it would focus more on its mainland business. Mr Wang said the company had not ruled out another ''realignment''. Observers said the job losses at Tom.com were a result of over-expansion rather than the poor stock market sentiment that had made financing projects difficult.
When Tom.com was incorporated in December last year, it started with a small team and aimed at providing a multi-lingual portal covering travel, entertainment and heritage. It listed on the hi-tech Growth Enterprise Market at the height of the frenzy over Internet stocks in February.
Its issue was 669 times oversubscribed on hopes Mr Li would be able to repeat the success he has had in the European telecommunications market, where his companies have made more than $100 billion.
Tom.com debuted on the market at $7.75, more than four times its offer price. Yesterday, it closed at $5.75, much less of a fall than the stocks of other Internet companies.
The company, 32.3 per cent controlled by Hutchison Whampoa and 16.2 per cent by Cheung Kong, used its offer-proceeds of $876 million to build content and hire staff with a view to finding a winning business model.
However, it had been spending an average of $40 million a month since listing, and the collapse of the global Internet market, which began in April, meant action was needed. The company said it lost $45.37 million for the three months ending in March. Mr Wang's predecessor, Carl Chang, left the company two weeks ago.
''Portal operators have begun to face the truth,'' said Ronald Chan, head of Internet research at Dresdner Kleinwort Benson Securities. ''I would not be surprised to see others follow suit.'' Mr Chan said most Internet companies were finding it difficult to finance their projects, and the only way to survive was for them to stop spending so much cash.
On Thursday, telecoms and Internet service provider City Telecom announced it was cutting 175 fixed-line connection technicians, 80 per cent of whom had been hired within he past months. ''We came to realise we could save more by outsourcing the project,'' said chairman Ricky Wong Wai-kay. The lay-offs in Internet-related companies started on June 21 when SCMP.com, a wholly-owned subsidiary of South China Morning Post (Holdings), announced cuts of 18 jobs. On July 12, 98 people were sacked at Nextmedia.com and Appledaily. com, companies controlled by Jimmy Lai Chee-ying.
Philip Wong Kun-to, director of entertainment Web sites operator Stareastnet.com, said his firm had gone through a ''manpower consolidation'' exercise early this month. He said fewer than 30 people about 30 per cent of its staff were affected and about 10 were laid off. ''To say we have no lay-offs would be a lie,'' he said. ''But because we have both online and offline content production operations, the impact on our overall operation is limited.''
Content provider 36.com, which listed yesterday, said it had no plans to trim staff. The stock closed at a day-low of 29 cents, almost 20 per cent below its initial public offering price.
Mr Wang said of his company's difficulties: ''I don't think this indicates the bubble has burst in Hong Kong's Internet market ... this is just a normal process that hi-tech development must go through.''
News of the Tom.com lay-offs came as Internet worries continued to hit global stock markets. Shares of Amazon.com, the world's biggest Internet retailer, fell 14 per cent on Thursday after its turnover for the second quarter rose only one per cent, short of market forecasts, pulling down the Nasdaq.