PCCW slashes 340 Net staffers

Led by 34-year-old tycoon Richard Li, PCCW announced that it will fire 340 employees as a part of the restructuring of its Internet services arm

By CNN's Kristie Lu Stout and wire reports

HONG KONG, China (CNN) -- PCCW said Wednesday it will slash 340 jobs in its Internet operations.

The morning announcement came just hours before the company is to unveil its revamped Internet services strategy.

The news of job cuts sent the company's shares surging up 6.67 percent to hit HK $2.40 in afternoon trading on Wednesday.

PCCW's stock price has dropped 85 percent in the last year, a loss fueled by souring market sentiment and confusion about the company's strategy.

Though the Wednesday evening announcement is to articulate the telco's Internet services agenda, analysts say it may not be enough to restore faith in the battered firm.

No long-term impact

"We're seeing some buying in PCCW today on hope the company will restructure its Internet business to provide a new revenue source," Y.K. Chan of CEF Securities told Reuters.

"But I don't think this will have a long-lasting impact on the stock price and it will become stagnant again."

Analysts say firing 340 staffers from a total workforce of 15,000 is hardly a significant cost-cutting measure for the former Internet and telecom high-flyer.

"It's not much," one Hong Kong-based analyst told CNN. "The cost savings are definitely less than HK $100 million ($12.8 million) a year."

Company watchers say the updated Internet strategy will detail how PCCW plans to trim costs by focusing on fees for service and aggregation of content, rather than the creation of expensive original content.

The future of NOW

The changes are most likely to affect the struggling Network of the World (NOW) Internet and television service.

Once the centerpiece of the company's dreams of worldwide broadband domination, NOW has found difficulty in attracting audiences and generating revenue.

The company recently closed its NOW unit in Taiwan. In December, PCCW fired 20 of 30 NOW staff in its London production base.

PCCW also earlier said it would cap spending on its consumer Internet initiatives at $200 million -- a figure many industry watchers say will be hacked down further.

On Tuesday, PCCW announced that under U.S. accounting standards its year 2000 loss reached $1.87 billion, more than twice the figure reported in Hong Kong last March.

The difference is due to how the company was allowed to report the massive goodwill it took when it acquired Cable & Wireless HTK last year for $28.5 billion.

In the U.S., PCCW must amortize the goodwill again earnings, and thus take a hit against profits on its U.S. books.

Reuters contributed to this report.