I got to see Michael on CCTV Channel 2 yesterday. He was participating a show as a guest. The show is about the “entrepreneurs born after 1980s” (Michael was born in 1960s).
I noticed he said something interesting about New Oriental “listed in NYSE”: if I could regret, I wish we haven’t done that. On the surface it seems strange, who does not want to get rich? But I think he meant this: being listed in NYSE is a huge responsibility, if he had known all the pitfalls of “listing in the US” (not just Sabane-Oxly), he would re-consider.
But in reality he couldn’t. Because he is not the sole owner of the company. Both VC (refer to Shao’s blog about VC’s timeline) and his colleagues (many are minority stock holders) wanted to cash out. The company could use the IPO proceeds to expand; note the competition has also heated up too. The “listed in NYSE” will also help them build the brand, globally.
Back to Michael’s reponsibility. As soon as he took money from the Wall Street, he was expected to deliver the financial results to meet the street. He and his team did very well in first two Qs, but they missed the lastest Q. I bet he did not get much good sleep lately, because he needs to make sure next Q will come out OK.
Also listing will make it more difficult to manage his team. As some of them are millionare now, will they work as hard (and hungry) as before the IPO? On the competition landscape, as they are the No. 1 English education provider, now everyone is after New Oriental…
Michael is not alone. His headache is shared by Robin Li Yanhong (CEO of Baidu), who is talking about “international market” now.
(the following is an article From WSJ, please don’t distribute to other sites)
New Oriental CEO Expects to Add Schools in China
By JASON LEOW
July 12, 2007 4:35 a.m.
BEIJING — New Oriental Education and Technology Group Inc., China’s largest language and test-preparation provider by market share, expects to add a further 24 to 31 schools and learning centers by mid-2008, chairman and chief executive officer Michael Yu said in an interview.
The growth reflects an ever-growing demand for English classes across the country. “In China, we study English for a better life. We think of it as essential to our lives,” he says.
The company, which listed on the New York Stock Exchange last September, now operates in 34 Chinese cities. The stock closed at $58.23 on Wednesday, up 288% from its IPO price of $15.
Revenue will continue to come from China’s most-developed, or what are called Tier 1 cities, which have at least one million residents, Mr. Yu says. In smaller cities, the Beijing-based company will focus on teaching English to children, rather than offer a full range of services, including classes for business professionals, like they do in Beijing and Shanghai.
In March, New Oriental opened its newest school in Nanchang, capital of Jiangxi province. “Cities we plan to go into are the capital cities, with at least one million [in] population,” Mr. Yu says. “We don’t expect big revenues coming from Tier 2 and 3 cities. When we go into them, we’ll do kids’ English, because they only have a market for that.”
New Oriental typically builds one school in each city and then expands by setting up smaller satellite “learning centers.” So far, the company has focused on expanding mostly in the largest cities, and there are just six to 10 of such cities left in China that New Oriental hasn’t yet gone into, Mr. Yu says.
That strategy may look like the company is missing opportunities in the lower-tier regions, but the truth is that students flock to Beijing, Shanghai and other big provinces to take their classes no matter where they live, Mr. Yu says. “Parents think our centers [in the large cities] are better and the teachers are more trustworthy,” he says.
Mr. Yu says the company has been looking for suitable acquisition targets, though none has emerged so far. The company, which currently employs some 2,000 teachers, will grow its teaching pool by about 20% a year. On July 24, the company will report full year results for the fiscal year ended May 31.
New Oriental has said it expects total net revenue for the fourth quarter ended May 31 to be between $22.9 million and $23.9 million. For the full year, the company has said it generally expects revenue growth of 20% to 24% a year. Net income for the year ended May 31, 2006 was $6.16 million, a 65% drop from the previous year, due to $8 million of share-based compensation expenses that were incurred.