Japan's Softbank says no cash flow problem amid Internet gloom
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The president of Japanese Internet investor Softbank Corp dismissed reports that the firm has cash flow problems, stressing at the weekend that it does not have a policy of selling investments to generate cash.
Analysts have voiced concern over Softbank's poor ability to generate cash from group operations and its tendency to rely too heavily on stock sales.
Softbank was a market favourite in 1999, but saw its share price plunge by 88 percent in 2000 as investors fled Internet firms. The shares have bounced 78 percent in the first weeks of this year.
"We don't have that much cash needs... Our cash needs that we have to service our debt are about $200-300 million a year," Masayoshi Son told Reuters Television when asked if the company was overly reliant on stock sales to generate cash.
"We have enough cash on hand.
"We have over $14 billion of marketable securities and over $1 billion of cash...so $200 to $300 million a year is a very very small fraction of what we need and what we have," he said.
Son was sanguine when asked about the fall in the share price of Softbank, which has a portfolio of more than 600 investments in Internet-related companies. Its shares are now barely 10 percent of the share-split adjusted peak of 66,000 yen ($562) marked last February.
"Overall, the Internet industry has suffered from the correction of stock markets worldwide and we are not an exception," he said.
Softbank's shares were down 5.21 percent at 6,550 yen by midday on Monday.
"However, our current underlying asset value is very very strong and our relative strengths compared to any other competitors in our industry are becoming much stronger," he said.
He cited three major reasons for optimism.
"First, broadband is coming. Second, Asia is going to make up 50 percent of Internet users in five years and everybody else has shied away. So we are one of the very few going forward on this opportunity," he said.
Just last week, U.S. giant Cisco Systems Inc -- the world's top maker of computer network equipment -- said it would invest $200 million in Softbank, giving the Japanese investor a prestigious partner to strengthen its struggling Internet empire.
The U.S. firm will invest another $1.05 billion over several years in a new private equity fund run by Softbank that will target companies in broadband, optical, wireless and Internet-based technologies across Asia.
Son said last week that Cisco's investment would boost their presence in high-capacity broadband Internet networking, seen as having high growth potential.
In addition, Softbank was seeking to raise $4-5 billion to invest in companies building high-speed Internet networks in Asia, the Asian Wall Street Journal on Monday quoted Son as saying in Davos.
He said his company was in talks with several other investors to boost the fund with Cisco, with the aim of raising an additional $2-4 billion over the next few years.
"We are talking with major players, in a worldwide sense, who have enough capital and a long-term strategic view," the Journal quoted Son as saying.
Son said the fund, to be managed out of Hong Kong and Tokyo, would face little competition because of the retrenchment in the global investment community, the Journal said.
Speaking to Reuters, Son was bullish about the future of the Internet.
"I believe it is a truly revolutionary thing and a short-term correction is a good opportunity for us," he said.
Analysts said the capital injection from Cisco could be read as a vote of confidence in Softbank, although some questioned the value of the fund to Cisco, which has already invested in similar funds in Europe and Israel. |
