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

To: Athena7 who wrote (5541)	10/20/2000 9:49:02 PM
From: ms.smartest.person	Read Replies (2) \| Respond to of 6018

Softbank on a Soft Shoulder worldlyinvestor.com By Gabriella Faerber Correspondent 10/20/2000 03:16 PM Did you hear that thud? It was the sound of Softbank (SFTBF: Nasdaq ADR) crashing. The Japanese Internet investment vehicle has seen its ADRs plummet from $1,700 last February to a recent $84. That hurts. Analysts are busy conducting a post-mortem on the stock's meteoric rise. "Softbank is caught in the middle of a sentiment shift. We can assess the temperature around the stock. And it's cold to lukewarm," says Thomas Rodes, Internet analyst with Salomon Smith Barney in Tokyo. He's being charitable. That stock plunge has erased roughly $170 billion in market value. Which leads one to wonder if the stock will ever find support. "Softbank is beginning to look like an attractive stock to buy given the rate at which it's been sold off," adds Rodes. But he's still in the minority. Globally, Softbank owns a piece of roughly 400 technology companies. It has key stakes in many Nasdaq-listed companies, including on-line broker E-Trade Group (EGRP: Nasdaq) and Morningstar. And Chief Executive Masayoshi Son has no plans to let the sell-off deter him. He said he plans to invest in 780 Internet companies by 2003. But that won't necessarily boost the stock in the short-term. Many of the companies Softbank has invested in are in the seed stage and will likely take a few years more for those outfits to turn in a profit. The Yahoo! Factor Clearly, Softbank's fortunes are inextricably tied to the fate of US Internet portal Yahoo! (YHOO: Nasdaq). Softbank holds some 22% of the company (which has been reduced from a 37% stake). Analysts estimate that the US' Yahoo! and Yahoo Japan account for some 80% of unrealized gains in Softbank's total public portfolio. The European and Korean versions of the Yahoo! site are held in Softbank's unlisted portfolio. Though Yahoo! continues to grow smartly, its stock has headed south in recent months. Revenue for the third quarter came in at $295.5 million. That's a 90% increase year-on-year. But still lower than the second quarter's 110% year-on-year increase. Yahoo! stock fell more than 20% on that news. "Softbank needs to reallocate its public portfolio and become less dependent on Yahoo!" says Mina Koide, Internet analyst with Merrill Lynch in Tokyo. The company is responding to that concern: Softbank's Sky Perfect division public has just listed on the Tokyo Stock Exchange's Mothers market and some speculate that Softbank's investment arm may go public in the next few quarters. Buoyant markets that grease the IPO pipeline will be crucial: Koide suggests that if market sentiment is positive, it may be possible for Softbank to reduce at least some of its market dependency on Yahoo! But IPO windows open and close very quickly. And Softbank may likely find itself firmly back in bed with Yahoo! as the European cousins prepare to list. From Technology to Banking? Softbank's controversial decision in September to take over debt-ridden lender Nippon Credit Bank (NCB) is also pressuring on the stock. Softbank paid around $465 million for 49% of the bank. That's a relatively high amount for a firm that typically invests $100 to $200 million in its holdings. The move helped to diversify the company away from its technology base. And the bank could serve as an additional financing mechanism for all of Softbank's initiatives. But banking is a notoriously tricky business. And analysts were quick to question the strategic fit. "Some experts argue that there is almost no synergy between Softbank's financial arm -- Softbank Finance -- and NCB, which used to specialize in real-estate loans," noted Singapore's IDEAglobal in a recent report. So investors sent share of Softbank down even further when the deal was announced. Since then, the suicide of NCB president Tadayo Honma has created a fresh headache for Softbank. With little banking experience, the company now seeks to quickly install a credible management team. But other analysts seek to downplay investor concerns. Jardine Fleming Internet analyst Noriko Manabe says the investment really isn't a whole lot in the context of Softbank's overall investments. Merrill Lynch's Koide adds that it's a relatively low-risk investment. She highlights the fact that the downside risk is hedged by the Japanese government, which must buy back loans that fall 20% or more in value within three years. Unwieldy Structure For now, analysts conclude that Softbank's increasingly unwieldy structure has turned away investors. Elements such as the complicated structure of the Softbank organization, its sprawling global reach, the perceived difficulty of its investment strategy and the fact that Softbank holds 50% of the recently launched Nasdaq Japan may make investors uncomfortable, say analysts. But they are quick to point to the bigger Internet picture, to the potential of many of Softbank's investments and to the anticipated stability in the Yahoo! stock. "Softbank is a proxy stock for the Internet. People who are looking to buy believe in the long-term prospects for the Internet," says Salomon Smith Barney's Rodes. Furthermore, Softbank still has about $5 billion worth of venture capital around the world, which it is still investing. Softbank's picture remains cloudy. But with the stock down 95% from its peak, bottom-fishers are hoping that the picture soon clarifies. ©