Front page of today's Wall St Journal:
May 29, 2000
Softbank Plans to Continue Investing
In the Net Despite Fall in Tech Stocks
By PHRED DVORAK and BILL SPINDLE
Staff Reporters of THE WALL STREET JOURNAL
TOKYO -- Few companies have been hit by the global decline in Internet stocks like Softbank Corp., whose shares have plunged even faster than the value of the company's expansive portfolio of investments in Internet companies around the globe. But Softbank officials say the latest turbulence hasn't derailed the company's plans to continue investing aggressively in the Internet economy.
On Friday, Softbank said it needed 218 billion yen ($2.03 billion) worth of gains from stock sales to make up for losses on the disposal of two past investments and remain profitable in the year ended March. The company reported an 8.4 billion yen net profit for its group of companies, down 77% from a year earlier, on sales of 423 billion yen. The losses came from the sale of Kingston Technology Co. and the liquidation of Ziff-Davis Inc. -- two firms Softbank purchased in the mid-1990s.
Softbank Struggles for Footing in Unsteady Tech Stock Terrain (May 17)
Softbank Warns of Pretax Loss, Blaming Currency Fluctuations (April 6)
Softbank President Masayoshi Son told reporters Softbank still has many profitable investments in leading Internet companies, such as Internet portal Yahoo! Inc. and net-broker E*Trade Group Inc., and sufficient cash on hand to pay back its debts. "We have very deep pockets," he said.
Still, the company's share price -- a barometer for investor enthusiasm for the company and its strategy of collecting Internet businesses -- has fallen by 67% over the past three months. On Friday, the shares rose 12%, or 2,000 yen, to 18,100 yen.
The decline in Softbank shares partly reflects the plunge in the value of Softbank's global portfolio of some 400 Internet companies. That portfolio has about halved in value, to around $16 billion, since early February, estimated Ben Wedmore, an analyst at HSBC Securities in Tokyo.
The share-price decline also underscores concern over Mr. Son's ability to coordinate and add value to such a sprawling collection of companies. On Friday, Mr. Son said he plans to continue investing aggressively, estimating he could invest in hundreds more companies in the next several years. "As the number of companies grows, it gets really hard to control them," said Luigi Limentani, an analyst at Nikko Salomon Smith Barney.
Mr. Son said Softbank plans to list key business units publicly to raise money for the parent company and force units of his holding company to stay focused. He said Softbank will list its finance unit and e-commerce divisions, although he declined to say when. The company also recently received the go-ahead to list Morningstar Japan Corp., in which Softbank owns a 50% stake, on the soon-to-be-launched Nasdaq Japan stock exchange.
Softbank's share plunge has also raised questions about the company's ability to complete the biggest deal it has in the works, the purchase of a big failed bank from the Japanese government. The government in February chose an investment group led by Softbank as the leading candidate to take over Nippon Credit Bank Ltd., which collapsed in 1998. On Friday, Mr. Son said negotiations with the government were progressing and Softbank remains interested in completing the deal. The government has said it will decide by Wednesday whether to give a final go-ahead to the deal. |
