Avram's Past

Hong Kong and Me: How I became the highest compensated advisor in the world (for a little while)


Hong Kong 1963-Courtesy of Tim Brown

Here I am in Hong Kong some 49 years after I first arrived here.  I wrote about that experience recently here.   In looking for photos to use with this post, I found  some that were taken in 1963 by a family that actually traveled on the President Cleveland,the ship on which I worked.  I was able to make contact with Tim Brown who published the photos.  He was eleven years old when he sailed on that ship at the same time I served on it.

President Cleveland in Hong Kong 1963-Courtsey of Time Brown

The next time I came to Hong Kong was about 30 years later, 1992.    I was working for Intel at the time.  Of course by 1992, a lot had changed.  I remember there was still an electronics industry in Hong Kong then.  And it was still a place to buy cheap goods. But in the late 90s, my relationship with Hong Kong changed dramatically.  As readers of this blog will know, my major activity (and  professional accomplishment) was driving the development of residential broadband utilizing my position as   Vice President of Business Development for Intel Corp.  This was accomplished in the US and in many other  parts of the world  by working with the cable industry to utilize their infrastructure  to provide two way high speed communications to homes.  At the same time, we worked with phone companies through out the world to use their infrastructure  to provide broadband (DSL).  While the combination of cable and telephone infrastructure reached much of the developed world, it could not reach most of the developing world.  That is when I became interested in Satellite communications.  An example of this is a joint venture which I put together between Intel and SES Astra  (Europe’s largest Satellite Operator) to provide broadband to be delivered to PC’s via Satellite.

Avram signs his deal with Richard Li

Sometime in late 1996 I was asked by my friend, the late John Evans,   to meet Richard Li, the son of Li Ka-Shing, one of the riches and most powerful men in the world.   When I meet Richard he was about 30 years old and already a billionaire in his own right having created Star TV in 1990 and selling it to  Rupert Murdoch in 1993.  Richard had a strong interest in technology although he did not really  know much about it.  It turned out that he was considering  acquiring a startup called WebTV and wanted my advice.  WebTV was founded by Steve Perlman, a serial entrepreneur that I have known for about 20 years. It made sense in a way for Richard but at that time, I was convinced it would not succeed in the market.  It was too early for Interactive TV and it still has not really happen.  Soon after, and lucky for Steve, WebTV was bought by Microsoft for about 400 million dollars.  Steve is now the founder and CEO of OnLive.

A few months after that, I was contacted by Michael Johnson and George Chan both of whom played key roles  in the creation and operation of StarTV.   Michael was the “idea guy” and George was the “get it done guy”.  Both still worked for Richard Li  and they were figuring out what their next moves might be after Richard’s non-compete lapsed.  One idea was to bring the Internet to China.  This was the mid 90s and there was very little Internet penetration in China.  Strange to think that less then 20 years later, there would be more Internet users in china than any other country in the world.    Michael wanted to take advantage of the cable TV systems that were installed  in cities  throughout China.  The idea was to use satieties to download content into servers that would be located in these cities.  The cable TV structure would be used to  connect homes to the server.  The device at home would be similar to WebTV. The company providing do the service would  do the actual programing. The cable operator would get paid for the use of their infrastructure.   It was kind of a hybrid of TV and interactivity.  We were going to support some amount of upstream (to the Satellite) bandwidth so that email could be sent an received.  I know it probably sounds like a dumb idea but please think about the mid 90s and China.  Richard’s company, Pacific Century CyberWorks and Intel formed a joint venture called  Pacific Convergence Group (PCC).   We set up a development organization in California.  Michael Johnson came over to lead the effort.

Avram and Michael Johnson

About a year later, I resigned from Intel (April 1999) to start up The Avram Miller Company which was pretty much a way to brand me.  That name had come to me after attending the Allen& Co Sun Valley Conference for seven years.  There was always a list of the companies present. One of those  companies was The Walt Disney Company.  Herb Allen kindly invited me to attend the conference in July 1999 even though I was no longer with Intel.  I loved the listing of companies.  The Avram Miller Company was right above The Walt Disney Company.

Just before I left Intel, I told my plans to leave to  a select number of CEO’s in the companies I was working closely with.  I had lead Intel’s investment in CMGI in December 1997 and was a board observer.  When I informed the then CEO of CMGI, Dave Wetherell that I was leaving Intel, he asked me to join his board as an independent  director which I did.  When I told Richard I was leaving Intel, I mentioned I would be joining the CMGI board.   He then asked me to join his board as well.  Frankly, I was not too keen on joining his board.  While I had developed a close relationship with Dave Wetherell, I did not feel very close to Richard and was concerned that I would not have a lot of impact. This turned out to be correct.   But I was also intrigued with the idea of have my own global reach. Richard asked me what it would take financially to get me to join.  I was pretty “hot” in those days.   So I was asking for a lot.  So I said, I wanted 0.5% of the company in options and 500k dollars.  And that is what we agreed to.  I actually asked for the cash because I had no idea how things worked on the Hong Kong stock exchange and was not sure if I would actually ever be able to get my options.

So this is what happens  next:   Richard, acquired this public company and renames it as the Pacific Century Cyberworks (PCCW).  Intel invest $50 million into PCCW and eventually folds PCC into that company as well. Intel then folds in the joint venture.  I am not yet on the board.  I am advising Richard and we do a number of things including setting up a venture capital group within PCCW. I introduce Dave Wetherell to Richard Li and they decided to have each company invest in the other and enter into a number of strategic relationships.  By that time, I  also joined the board of World Online (based in the Netherlands) , which was one of Europe’s leading Internet Service Providers.  I liked having the Asian, European and USA reach.  It was a critical part of the strategy for my own company.

For a number of reasons, my appointment to the board was delayed.  One of the key reasons is that the Hong Kong Stock Exchange requires that my compensation be appraised by an independent  company to determine if it is was fair and reasonable.  In the meantime,  PCCW stock is going crazy.  The strike price for my options where set at about $2.40 (Hong Kong Dollar).  But the company is ridding the Internet bubble of the 1999.  Soon, the stock is trading up in the 20s.  I believe that at one time PCCW might have been the most valuable Internet stock in the world.

PCCW stock chart during the time I was involved

My stock options were valued at 90 million dollars.  One of the major HR companies did the Appraisal and sure enough, they agreed that it was fair and reasonable compensation.  I wish I could find their report.  Of course, by the time all this work was done and my option package  was finally approved at a stock holders meeting, the bubble burst and my options were underwater. I never realized a dime from them.

I continued on the board for a number of years.  A long the way, PCCW acquired the phone company of Hong Kong  (Cable and Wireless HKT) for 28 billion dollars. The Company was able to buy that asset with Internet Dollars.  So there I was 36 years after sailing into Hong Kong as an 18 year merchant seaman, serving as a board member the Hong Kong Phone company, meeting with the top officials of Hong Kong including the Chief Executive.

PCCW continues to function and is the leading provider of broadband in Hong Kong.  Richard Li is still chairman of PCCW.  He tried to take it private recently but was prevented by Hong Kong Stock Exchange.  George Chan is he managing director.  Michael Johnson left PCCW many years ago and lives in South Africa. As for me, well those days are over.  And I am stopping in Hong Kong my wife Deborah on our way back from Thailand.  I can still afford a limo from the Airport and an amazing hotel room with a beautiful view of an amazing city that has played such an interesting role in my life.

www.upperhouse.com

View from Upper House Hotel Room

7 thoughts on “Hong Kong and Me: How I became the highest compensated advisor in the world (for a little while)

  1. Avram…imagine..all these years, us lot who slogged at the PCCW Venture Capital have been moaning and groaning that we were never paid our “Carried Interest” by Richard for the US$6.5 billion fund we managed, which had investments in over 100 Internet companies and valued at one point over 50 billion in dollars.

    Throughout, some of us thought, it was only you, Michael Johnson and George Chan who made out like bandits 😉 with your options, whilst we lot including Malcolm Casselle, Johnson Chen and yours truly are still waiting with bated breath for our share of the carry!

    As far as the options itself in PCCW, well that went underwater, except for the first tranche that vested, but alas, the income tax man charged more in taxes than what the vested shares were worth few months after vesting!

    It seems, no one in the inside team ever made any mega money out of PCCW, despite it been the company that was at one time the most valuable entity in the world, and perhaps Richard Li’s legacy will go down in history as the man who only made himself rich and not his team that made him!

    I wonder, if WIRED or any other industry trade had ever done a story about how many millionaires, or billionaires the dot com industry made out of the employees who had stock options in the companies that they worked for, and I bet the comparison with PCCW will be like the current poverty gap in the world!

    😉

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  2. Whoever wants to know the story about co-founding PCCW, the short answer is yes. Just call me and I will tell you the whole story. And co-founder hardly says enough. The amount of sweat, travel, and making it up as we went along was unparalleled. I built the prototype of NOW (Network of the World) using video compression algorithms to put full motion video on a store bought Sony Vaio (no one had ever done that before), built the financial model and under Michael’s brilliant tutelage convinced the board of Intel that we knew what we were doing to get them to invest. My desk was right there next to that orchid where Avram is posing with Richard in the Citibank Building in Hong Kong and again right outside the frame where Avram is standing with Michael in TWI/IMG’s headquarters in Chiswick (outside London).

    I hope you are well Mr Dharmakirti! Will anyone every remember how you used your own money over Christmas to buy the Satyam stock pre-IPO in order to flip it to our fund and it was the only deal that was in the black before the bubble burst?

    Oh and great post, Avram!

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  3. Hey Malcolm…just for the record..it was Rediff.com and not Satyam that was the deal which was in the black before the bubble burst. Also, the reason why I ended up having to pay for the acquisition of Rediff.com out of my own funds before transferring it to PCCW was the Y2K issue which led many companies including PCCW to impose a fund transfer moratorium until the computer systems were not at risk. With Rediff.com founder Ajit Balakrishnan imposing a non negotiable December 28, 1999 deadline to close the pre-IPO round, and also a last minute Indian Government Sector cap foreign ownership restriction imperative that forced us to do the deal using an Indian entity, we had to somehow get the deal done using my own funds and a very creative structure, and a HSBC debenture note to ensure that the shares were bought in trust for PCCW. With Goldman Sachs Partners, Citicorp, Warburg Pincus, Carlyle and some very influential Indian NRI’s all hotly chasing the US$10 million equity parcel of Rediff.com that was scheduled to get listed in New York in the first quarter of 2000, the post money valuation of US$110 million for the Rediff.com pre-IPO stock was considered a guaranteed money maker, as the stock opened up 300%. The deal was not a “flip” and PCCW made all the money, but I who funded it, ended up not making anything out of that deal plus others, as PCCW never paid us our “Carry”. Even back in the day, when Star TV was sold to Murdoch, the only money making revenue center was the online toll paid Star TV Fax Guide that I had created, which threw up some $50 million in annual revenues that Hutchvision earned from Hong Kong Telecom from all the toll paid inbound fax calls from Asia. Quite ironic that when Intel was considering its continuation of funding of PCC (Pacific Convergence Corporation), the CFO of Intel was convinced of our ability to deliver based on a market research study of the Indian market that I had funded, also personally, from my pocket, in 1998. I do hope Richard realizes all of the foregoing plus the other initiatives that were done on his behalf, including the US$100 million that was raised in 1990 from 50 advertisers to launch Star TV, by issuing the world’s first advertiser warrant note. His father matched that dollar raise, and Richard ended up making 730 million dollars in profit two years later by flipping Star TV to Murdoch. I designed that logo and the brand name for Star TV, including the launch campaign and the market entry strategy for India. Quite astonishing how Richard forgot what we did for him when it mattered.

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  4. I am enforcing a large judgment against Michael Heath Johnson. I’m interested in any information you may have on what he is doing now and where he’s living and working. Thank you!

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