Son's Big Dare
Foreign investors aren't enchanted with his risky ploys
-- ACCOUNTING Softbank is writing off $2.7 billion in goodwill over a 30-year period from his Ziff-Davis and Comdex buyouts rather than the more conventional 10 to 15. So instead of a $270 million charge against earnings, Softbank is taking only $90 million a year. That allowed it to report a net profit of $132 million in 1995, instead of barely turning a profit.
-- STOCK AS CHEAP MONEY Softbank has raised $630 million in fresh equity to finance its spending spree. So far, the dilution hasn't hurt investors. But that could change when $640 million in convertible bonds come due over 5 years. Softbank's stock has already fallen 20% from its high, reducing Son's buying power.
-- CURRENCY RISK Son bought Comdex and Ziff-Davis when the yen soared. Now the yen has weakened. That cuts his buying power even as it boosts earnings. Some 25% of Softbank's earnings in fiscal 1995 came from currency gains.
-- LEVERAGE Son's $3 billion spending spree on U.S. assets has saddled Softbank with $2.4 billion in debt--more than twice its equity level. With 70% of its pre-taxearnings now coming from the mature Comdex and Ziff-Davis buyouts, Son can't afford to misstep.
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.