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Last fall, it looked as if Masayoshi Son had lost his fabled touch. A three-year, $4.5 billion acquisition run had left his Softbank Corp. with scads of debt--just as a severe recession in Japan started to hammer earnings at its core software and network-services business. By November, a rush to the exits by investors sank Softbank's stock to $11 a share--29% below its net book value. And as if that weren't enough, somebody broke into Softbank's corporate headquarters in Tokyo and filched the blueprints for the house Son was building in a fashionable section of the city.

Although Softbank's debt is still high, at $1.7 billion, and although the Japanese economy remains in the tank, Son is sporting an irrepressible grin. How come? It has a lot do with Son's savvy investments in Internet phenoms. For starters, he holds a 31% stake in Yahoo! Inc. (YHOO). Beyond that, he's into GeoCities (GCTY), E*Trade (EGRP), and other highfliers. Altogether, Softbank and affiliated venture-capital funds have poured nearly $1 billion into Silicon Valley startups, currently yielding paper profits of about $4 billion. And the nonstop dealmaker shows no signs of letting up. ''We are one of the world's biggest investors in cyberspace,'' says the 40-year-old billionaire.

SET TO JELL. Son isn't looking just for quick investment plays. His forays into Silicon Valley are part of a much broader strategy of forging alliances with the most promising Internet sites and then adapting them to Japan and other Asian markets. Such high-powered alliances have already given Softbank a leading edge in exploiting the fledgling markets for Internet services, online trading, and E-commerce in Japan. It's the next step in Son's plan to refashion Softbank, which already owns the Ziff-Davis computer publishing sprawl and the Comdex trade show business, into a global technology powerhouse.

Getting there won't be a cinch. Yet the strategy is starting to jell, and Softbank's shares have vaulted 94% since the start of the year, to $46 a share. Merrill Lynch & Co. (MER) analyst Mahendra Singh Negi thinks that the stock could well jump an additional 25% before long, as investors start to appreciate Son's eye for spotting and exploiting promising online markets. ''Softbank is transforming itself into a venture-capital firm,'' he says.

Take Yahoo. Son plunked down $100 million for his initial equity stake in the company back in 1996, and he made a killing when Yahoo went public later that year. Not stopping there, he set up Yahoo! Japan Corp., a joint venture that is 51% owned by Softbank. Launched in early 1996, the Japanese-language version of Yahoo became the most popular site in Japan in a matter of weeks. It turned a profit in its first year and has enjoyed a successful public offering on Japan's over-the-counter market.

BOON TO BROKERS. Now, Son is looking to leverage those gains. On Aug. 21, Softbank bought a 27% stake in fast-growing E*Trade Group Inc., a Palo Alto (Calif.) online brokerage, for $400 million. E*Trade plans to set up a company in Tokyo, 58% owned by Softbank, to provide online trading of stocks and mutual funds just as the interest in discount brokering is starting to pick up with the liberalization of Japan's financial markets. Yahoo Japan and mutual-fund tracker Morningstar Inc. (MSTR), another Softbank partner, will provide financial news and market analysis to the online service. And Son, an ethnic Korean, has similar plans in the works for South Korea.

Son thinks he's on to something. First, bring together some of the biggest sites on the Internet and cross-market their brand names to create attractive online services. Then, lure enough of Japan's 10 million Netizens to draw big-name advertisers. Of course, Son's digital dreams could unravel if the sky-high valuations on his U.S. Internet investments suddenly crash. Without his Net-related paper profits as a cushion, investors might again cast a gimlet eye on Softbank's debt load and dump the company's shares once more. For now, though, Son's surfing skills are looking top-notch.

By Brian Bremner in Tokyo




TABLE: The Be-All and Do-All of the Net

TABLE: Name That Internet Brand

CHART: Yahoo! by the Numbers


RESUME: Timothy Andrew Koogle



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Updated Aug. 27, 1998 by bwwebmaster
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