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With shopping spree, SoftBank hopes to lay more golden eggs

Tim Hornyak | Dec. 8, 2014
Masayoshi Son, the maverick head of Japanese mobile giant SoftBank, has sunk millions into a taxi app and floating wind turbines, all in one week. It was nothing unusual, though.

Not all of SoftBank's plays work out as planned. It was stymied in Sprint's failed attempt to acquire T-Mobile USA amid regulatory challenges. But that doesn't seem to have ruffled Son very much. He has recently trumpeted the success of his $20 million investment in Chinese e-commerce behemoth Alibaba back in 2000, a share that's now worth about $86 billion following its IPO in September.

"SoftBank wants to be like the goose that lays golden eggs," Son told investors at an earnings presentation in November, at which he displayed a large slide of the fabled fowl with the caption "SoftBank = Goose."

"My style of decision making is based on 10-, 20- and 30-year forecasts," he said, predicting that China and India will be the top two economies over the next few decades and that Snapdeal could become the next Alibaba. He pointed to successful investments in Yahoo Japan, video game maker GungHo and telecommunications infrastructure company UTStarcom, adding that over about 10 years, SoftBank has turned a ¥387 billion ($3.2 billion) cumulative investment in Internet companies into ¥11.6 trillion ($96.7 billion).

SoftBank's orientation as an Internet company has benefited its communications business, according to its spokesman, Nicholson. "For example, our partnership with Yahoo Japan played a major role in the success of our broadband service, Yahoo BB, and continues to do so, and our US-based SoftBank Capital invested in Fitbit, whose wearable products are a major component of our SoftBank Healthcare service."

Net income at Softbank for the six months to Sept. 30 was up 37 percent from a year earlier, and the company is hoping that it can continue to benefit from synergies with its network of group companies that have infrastructure, services and content. The biggest millstone around its neck, though, is Sprint, which is struggling to reform its business as the third-largest mobile carrier in the U.S.

"Obviously telecoms (principally Softbank/Yahoo and Sprint) dominates SoftBank's revenue and income, but it stands out from the average telecoms/Internet firm by how strong its position is outside of core connectivity services," Strategy Analytics wireless analyst Philip Kendall wrote in an email.

"It has taken on a real challenge in turning round Sprint and early signs have been promising, but there is a long way to go there. More generally, we are quite early in Softbank's corporate journey -- telecoms dominates today, but it is on a long path to increasingly commercialize and monetize its investments."

 

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