Good reading re Softbank.
NEWSMAKERS: AGE OF E-MPIRE
12/31/1999
AsiaWeek
Copyright (C) 1999; Source: World Reporter (TM) - Asia Intelligence Wire
Son Masayoshi's bold Internet strategy is to invest first and ask questions later. So far, he's right on target
Of the spells cast by the gurus of high-tech to promote their causes, hardest to resist may be that of Son Masayoshi, Japan's master of the World Wide Web. While most dare not try to guess the direction of the Internet industry in 300 days, the founder of Softbank claims his strategic horizon stretches 300 years. That's the time frame he considers relevant when trying to understand how the digital revolution will unfold, and how Softbank will unfold with it to become an e-commerce leviathan of Romanesque proportions.
Even at this early stage, the outlines of the empire of Mr. Son are clear. The 42-year-old's investments, joint ventures, partnerships and strategic alliances are worth more than an estimated $40 billion. They extend to more than 120 Internet and computer companies in the U.S., Europe and Asia. Following his formula of hair-trigger investing in small start-ups before they reach industry radar screens, he has acquired valuable interests in companies that have grown into well-known Net brands. A $400-million bet in online broker E*trade last year was worth $2.4 billion in July. His $355 million total stake in Yahoo!, an investment that dates back to 1995, was worth $8.4 billion. A $52-million share in GeoCities rocketed to $900 million. And by 2004, Son says Softbank 's reach will extend to some 800 Web companies.
After a busy 1999, that goal looks not so far-fetched. This year, "Masa" Son shifted into hyperdrive and adjusted his Internet focus from the U.S. to his homeland (the diminutive Son is Korean by heritage - he chose his Korean surname rather than use the Japanese Yasumoto adopted by his immigrant parents, who ran a small-town pachinko parlor on the island of Kyushu). Son judged that Asia as it recovered from recession was poised to discover the Internet and the information economy. Correct so far. Dot-com mania has engulfed even latecomer Japan, where Softbank already controls 80% of portal traffic thanks to a 51% stake of Yahoo! Japan.
Throughout the year, hardly a week went by that newspapers didn't devote ink to another new Softbank venture. Deals included Web forays into music, books, toys, health care information and car parts. His most ambitious effort: to capitalize on Japan's financial reforms by entering online stock trading and financial services. Softbank has Japanese partnerships with U.S.-based Nasdaq and E*trade, vehicles he wants to use to make it easier for small, cash-starved but entrepreneurial Japanese companies to go public.
Son's investment powerhouse is also part of a consortium bidding to buy Nippon Credit Bank, a push into online banking that smacks of payback. As a Korean growing up in Japan, he learned to succeed as an outsider, a life-skill that served him well when he moved to the U.S. as a teenager to go to school. Later in life, his battles with stodgy and powerful bankers over Softbank 's debt load and investment strategies became almost legendary. Now he vows to use the Internet to short-circuit the region's inefficient and insider-oriented business practices.
But instead of being treated like a pariah, Son is proving to be an inspiration to Asian Internet start-ups that would compete against entrenched U.S. counterparts and rebel against the hidebound Asian Way. Several new companies, such as Pacific Century CyberWorks of Hong Kong, appear to be using Softbank 's investment style as a template for their own activities. It is a proven strategy. Son was betting millions when many nouveau cybermoguls were mastering Donkey Kong. While an economics major at the University of California at Berkeley, Son made his first $1 million importing arcade games from Japan. Softbank was formed in 1981 when Son was 23; the company's big break was gaining distribution rights for Microsoft products. Softbank today controls 70% of Japan's software channels.
If there is a weak link in the chain of companies - Son calls it an Internet zaibatsu, a nod to Japan's sprawling industrial conglomerates - it is that Softbank risks Roman-style disintegration through overextension and an inability to manage its far-flung holdings. A heavy debt load makes the group vulnerable to a sharp downturn in net stock valuations. Softbank 's market capitalization, now about $73 billion, soared above Sony's this year (the stock on Dec. 20 was worth 10 times what is was on Jan. 4). Son's 42% stake in Softbank is worth more than $30 billion. But the group lost $33.6 million in the six months prior to Sept. 30, largely due to declines in revenue from U.S. holdings. The losses, according to the company, are due to an ongoing Internet-centric reorganization and are temporary. Softbank sold chipmaker Kingston Technology and is trying to unload Ziff-Davis, a publisher of computer books and magazines.
Limits are not something Son acknowledges. Earlier this month, Softbank said it was setting up new funds to invest in China, seen as the world's largest Internet market in years to come. "My philosophy is that the digital revolution will make mankind happier and more productive, and that won't change over the next 300 years," he told Forbes magazine. It's nice to know somebody believes this Internet stuff will last.
- By Jim Erickson |
