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Sina.Com: Is This Any Way To Dress Up For An Ipo?


International Business: China

Sina.com: Is This Any Way to Dress Up for an IPO?

The Chinese language portal welcomed Silicon Valley execs. Now they're out

Taiwanese entrepreneur Daniel Chiang used to enjoy boasting that Sina.com, the hot Chinese-language portal he helped create, was different from the other Internet companies in Greater China. While most Chinese entrepreneurs are loath to surrender control of their companies to outsiders, Chiang and Chinese co-founder Wang Zhidong in March installed experienced Silicon Valley professionals in most top executive posts. "You have to play by the U.S. rules of the game," Chiang said in July, explaining why he stepped aside as chief executive officer.

That open attitude enabled Sina to line up $25 million from foreign investors, including Goldman, Sachs & Co. and Singapore's Economic Development Board. Boasting 1 million registered users, it also became the odds-on favorite to be the leading Internet content provider for the Chinese-speaking world.

But now it appears Sina wasn't as ready for the U.S. high-tech fast lane as Chiang had hoped. Most of its vaunted American execs have left in the past month, victims of a thorough management purge led by Wang and Chiang, sources say. The outcasts include CEO Jim Sha--a veteran of Netscape Communications and Oracle--as well as Sina's chief financial and chief technical officers. Gone from its board are two respected outside directors: Pehong Chen, CEO of Redwood City (Calif.) e-commerce pioneer BroadVision Inc., and Jerry Colonna, founder of venture-capital firm Flatiron Partners and a director for TheStreet.com. Wang and Chiang have even fired investment banker Goldman Sachs, which was preparing to list Sina on Nasdaq or in Hong Kong by yearend. "This is an absolute and utter meltdown of a company," says a banker familiar with Sina. It's unclear whether all the turmoil is affecting operations. But with Net stocks struggling in the U.S., it could hurt efforts to lure new investors.

Behind the rift, sources say, was a clash in personality and management judgment that shows the difficulty of marrying the business cultures of Silicon Valley and Wall Street with those of China and Taiwan. Sina was formed last year by the merger of Beijing-based software firm Stone Rich Sight Information Technology Service Co., run by Wang, with Sinanet, a portal popular in Taiwan. Sinanet was founded in 1995 and managed by Chiang, 41, a former executive of Taiwanese antivirus software firm Trend Micro Inc. But tense relations between Taipei and Beijing meant the merger wouldn't be easy.NEW HITCH. By putting its headquarters in Silicon Valley, Sina aimed to secure a politically neutral base. It also hoped to attract the talent needed to be a hit with investors. "Both Chiang and Wang were convinced that bringing in professional management would be the best thing, and push them toward an IPO," says Bo Feng, a Shanghai-based banker and early Sina investor. So they hired Sha and other Valley veterans.

But problems arose quickly. The Asian founders and U.S. managers and advisors soon split into opposing factions. "Their visions and ways of doing things weren't the same," says Feng. Chiang and Wang pushed for a focus on China, where business was growing faster than first expected. The Americans wanted to focus on other markets. Before long, the factions were "constantly disagreeing and fighting," says a source close to the company.

Another major point of dispute was the timing of Sina's plan to go public. Sources say Wang felt a sense of urgency after China.com Corp., the Hong Kong-based portal that was the first to go public in the U.S., successfully listed on Nasdaq in July. That whetted the appetites of many Asian Internet companies--including Sina. The Americans urged Sina to wait until management, a solid business plan, and detailed financial forecasts were all in place.

The conflict began coming to a head in late August. Sha, 49, was forced out as CEO, and Wang replaced him. CFO Riley Willcox, who had spent 15 years as a financial officer for Valley companies, was demoted. Soon after, sources say, he quit after Wang insisted over his objections on asking the board to go public quickly. When that board meeting was held on Sept. 11 at the Menlo Park (Calif.) offices of Venture Law Group, Sina's counsel, the proposal prompted BroadVision's Chen and Flatiron's Colonna to quit as directors. Wang had enough control of the board to approve his plan. Besides, says the banking source, "Wang decided he wanted control of his company back." Chiang and Wang declined to comment for this story, as did Sha and Willcox.

Sina won't say when it plans to go public. One hitch is that it again has no CFO: Willcox's replacement, Mark Fagan, quit after a few weeks. Morgan Stanley Dean Witter is the new lead underwriter, though Goldman remains a Sina investor. "We have the utmost respect for Sina.com and its vision for the Internet," says Goldman spokesman Peter Rose. Morgan Stanley won't comment.

Sina also won't discuss where the company goes next. If it presses ahead with an IPO, however, investors will want plenty of financial details--and an explanation of what became of its prized U.S. team. As investors turn more skeptical of Net plays in general, it's a lesson in cross-cultural management that other Asian companies should study.By Bruce Einhorn in Hong Kong, with Linda Himelstein in San Mateo


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