This article came out April 15th in the Boston Globe....interesting comments....Japan's Softbank vs CMGI...
-mike-
Wire for CMGI Apr 17, 1999 11:13 EST Back to headlines
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The Boston Globe Boston Capital Column
Apr. 15 (The Boston Globe/KRTBN)--Investors fear the end of the Internet
stock bubble could be around the corner. Federal Reserve chairman Alan
Greenspan warns of a lottery mentality driving Web stockholders.
Masayoshi Son doesn't lose a wink of sleep over any of it.
Son, the world's largest and perhaps most influential Internet investor,
has earned a staggering paper fortune with early and bold investments
in companies such as Yahoo Inc., E-Trade Group Inc., and Geocities Inc.
That portfolio of about 100 stocks, worth more than $20 billion, amounts
to roughly 7.5 percent of the entire Internet's stock value, by his calculation.
The chief executive of Japan's Softbank Corp. believes the aggregate value
of all Internet stocks will be dramatically higher a decade from now and
whatever happens to Web shares in the near term is mostly inconsequential.
"To me it's simple mathematics, and I don't understand why people don't
get it," Son told Boston Capital after an appearance this week at Babson
College, where he was inducted into its Academy of Distinguished Entrepreneurs.
"They all wonder what is going to happen to stock prices three months
from now and get nervous about it. I'm not nervous. I say go, go, go because
it's going to grow 10 times or 30 times," he said.
His strategy to take advantage of the rising tide and not get pulled down
by too many losers: target broad Web categories and pay up to invest in
the leaders.
What about the tempered caution urged by the likes of Greenspan?
"I think he doesn't understand the new revolution that's happening,"
said Son.
Before you dismiss his words as unbridled boosterism, remember that people
thought Son was off his rocker when he made his first Internet investments.
He began to scour the Web five years ago with plans to spend millions
on new companies, borrowing heavily to make the deals. One of his earliest
Web investments, sinking $100 million into Yahoo, is now worth more than
$10 billion. Softbank can claim plenty of other successful Web investments,
but its early gamble on Yahoo put the company on the cyber map.
They haven't all been winners. Some companies went under and others have
achieved high profile but not as much business success, like PointCast.
Son would say the disappointments make his case: You don't need wall-to-wall
winners when the Internet itself is growing at an astronomical pace.
Son, 41, came from a poor family of Korean descent, and was raised in
Japan. He went to California at age 16 to go to school and eventually
landed at Berkeley. During his college years, Son invented a
multilingual pocket translator and sold the idea to Sharp for $1 million.
He returned to Japan and formed Softbank, which began as a distributor
of computer software.
Softbank went public in 1994 and made a round of acquisitions, buying
computer trade show giant Comdex for $800 million and publisher Ziff-Davis
for $2.1 billion. It paid $1.4 billion for an 80 percent stake in memory
board maker Kingston Technology.
Critics said Softbank was spending wildly and paying too much,
comments that were not softened by Son's early Internet stakes. But the
more recent, spectacular gains of the Web investments have muted the
complaints.
Son's initial Internet tactic targeted companies that could grab as much
of the Web's "eyeball traffic" as possible. Yahoo and another big investment
in GeoCities helped accomplish that.
Next, Son began to invest in Internet companies focused on financial transactions.
Last year, Softbank sunk $400 million into on-line brokerage E-Trade Group,
an investment that has soared to about $3.5 billion in value today. He
bought into E-Loan and another Web business that quotes insurance rates.
Now, Softbank is focused on building investments in electronic
commerce companies that sell products of all kinds over the Web. One of
Son's investments: Buy.com, a self-described Internet superstore expected
to go public in the months ahead.
"It is my dream to have the number one group of e-commerce companies,"
he said. "We have to make a lot of transactions to achieve that position.
It's still at an early stage and we are very hopeful."
Softbank often works as a kind of cyber hub for its portfolio
companies. Cyber surfers can connect easily to E-Trade and E-Loan via
Yahoo. E-Trade joined with Softbank to form a similar Web brokerage business
in Japan. Yahoo did the same thing earlier, jointly launching Yahoo Japan
with Softbank.
Last month, Softbank and Yahoo Japan joined with Microsoft Corp. to create
a Japanese version of CarPoint, an automobile information cite in the
United States owned by Microsoft.
Take a look at the far-flung Web portfolio and it's hard to miss the similarities
between Softbank and CMGI Inc. of Andover, best known for its interest
in Internet search site Lycos.
CMGI manages a smaller portfolio, but its own stock value is only modestly
lower than that of Softbank, a fact that does not elude Son.
"Any shareholder who thinks CMGI [stock] is a great investment had better
look at another company that has at least three times more value, " he
said. "Do you think Lycos is bigger than Yahoo? Do you think any other
company they have is more exciting than what we have?"
This much is certain about Softbank's Web portfolio: It's going to get
bigger. An Internet stock correction may well get in the way, but Son
will see it only as a bump in the road.
"People can still criticize us, say that the Internet is still a bubble
that could burst anytime," he said. "I think people who
criticize like that don't have an understanding of the big picture."
By Steven Syre and Charles Stein
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