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Technology Stocks : Softbank Group Corp -- Ignore unavailable to you. Want to Upgrade?

To: swisstrader who wrote (2797)	12/23/1999 5:43:00 AM
From: swisstrader	Respond to of 6018

S. Harmon on SFTBF from this a.m...report is a month old, but doesn't hurt to refresh... To: swisstrader who wrote (3425) From: steve harmon - analyst Thursday, Dec 23, 1999 5:24 AM ET Reply # of 3455 softbank - did a report nov. 4, the stock has been moving up most of the year...it's a global player with a diverse internet portfolio un-rivalled by any other firm: e-harmon.com's NetStock! by Steve Harmon ceo of e-harmon.com e-harmon.com the internet investment source ___________________________ 1999.11.04 Ichi Internet: Softbank Value? Whole Worth More Than Parts Ichi ban.com, welcome to Softbank, the global Internet company whose portfolio includes Yahoo, ETrade and dozens more from Silicon Valley to Tokyo. The big question raging all year has been what's Softbank really worth? I can get to about $55 billion in my estimated intrinsic value for Softbank's entire operation and portfolio, a premium to its market cap today on the Tokyo exchange (9984). While difficult to trade and track because of its relatively-high price per share and non-U.S. base, I believe despite its recent runup and downturn Softbank still represents one of the better ways to play the Internet globally. The downturn came as a result of a critical book about Softbank published in Japan. Much ado has been made about Softbank in various circles the past 12 months. I recall 3 years ago conventional wisdom said the Japanese-based technology and investor firm was going to implode on sheer range of its Internet investments. Its investment of $105 million for one-third of Yahoo at the Web network's IPO was seen as laughable. At the time I noted Softbank's moves and thought either Softbank would win really big or lose really big. The investment in Yahoo was a good sign since I was a believer in its model and prospects. In fact I told an entrepreneur in 1997 if Softbank didn't invest in them then something was definitely wrong since it was putting cash on everything that moved in the Net space. Still is, sort of. There was no in between for this sort of shotgun investing. Put bets on all tables. In the ensuing period Softbank (and its related affiliates or subsidiaries) has made more than 75 Internet investments in the U.S. and Asia in firms including ETRADE, Ziff-Davis (ZDNet), Yahoo Japan, ETrade Japan, and just about everything else .com Japan for its U.S. counterpart. Here's a snapshot of some of the better-known investments: Company Ticker Percent owned Value Etrade EGRP 27% $ 1,728 MessageMedia MESG 24% $ 145 USWeb USWB 70% $ 2,027 Yahoo YHOO 27% $ 12,614 Ziff-Davis ZD 70% $ 1,211 ZDNet ZDZ 85% $ 1,327 E-Loan EELN 9% $ 66 Insweb INSW 28.30% $ 159 Sub total $ 19,276 NASD Japan GeoCities Japan ONSALE Japan Broadcast.com Japan Yahoo Japan CarPoint Japan Misc. Japanese units Est. total $ 20,000 Venture portfolio $ 15,000 Management premium/barrier to entry TOTAL ESTIMATED SOFTBANK VALUE $ 54,276 _________________ ¸ 1999/2000 e-harmon.com, Inc. May be shared 100% intact Some of the key value drivers we believe are sheer girth, diversity of investments in the Internet, geographical and sector investments, Softbank's capital availability, current value of its portfolio, and perhaps greatest of all, Softbank's established positions in key Internet value points. Specifically, we would place a value on Softbank's kereitsu reach across ecommerce (E*Trade, E-Loan and private investments), content (Yahoo and ZDNet), community (GeoCities-Yahoo and GeoCities Japan), communication (MessageMedia, Yahoo, broadcast.com Japan), business-to-business (NASD Japan) and the dozens of startups at various stages. In other words, the combination of the portfolio should command a premium to the underlying assets based on the built-in leverage of the portfolio network as a whole. The whole being greater than the parts. Translated that means that it will be extremely difficult if not impossible for a rival to match Softbank's reach and influence in the Internet, especially in Japan. Is Softbank perfect as an investor? No. Quite honestly we believe it made a big mistake buying Kingston and Ziff Davis. It bought into non-Internet assets at a time when Internet was the better choice. At the time of the Kingston acquisition we were dumbfounded as to the benefit of the chip maker with Softbank. Trade magazine publishing giant Ziff Davis and tech trade show king COMDEX had similar reactions from us as being weak investments, although were a little closer related to Internet. While it is difficult to value privately-held assets we place an aggressive 10x multiple on Softbank's venture capital (vs. a 15x historical) and add in a market leader premium to arrive at our estimated fair value of $55 billion. Underscoring this valuation is the fact that a dollar (or yen) in today's Internet spent to build marketshare we believe worth 2x or 3x the cost it will likely be next year. Driving value is the notion that a dollar/yen invested today goes farther than one invested tomorrow. Was true in 1996 when Softbank bought 1/3 of Yahoo for what looks like peanuts and remains true today. That implies that invested capital buys opportunity today at a fairly steep discount to tomorrow's market. The cost of competition drives later entrants in any Internet market to pay up to participate. In short, Softbank (and others investing wisely in the Internet) pay a fraction of the future value of the markets and segments they want to own. NASD Japan, for example, the new stock exchange Softbank announced with NASD. Having locked up NASD for Japan prevents rivals from moving with NASD in that growing theater. Yahoo and GeoCities provide two clear earlier examples. Once Softbank owned a third of Yahoo that percentage ownership alone was a barrier to entry for rival venture investors owning a large slice of Yahoo. So rather than value Softbank as an old-fashioned earnings play we prefer to value it as a portfolio of global Internet companies that continues to invest at paces un-rivaled by any single firm to date. Ichi ban in the dot-com space anyone?