MAY 15, 2000
COVER STORY -- E.BIZ -- THE E.BIZ 25

By: Brian Bremner


Masayoshi Son

Son prefers small shares of companies to huge shares



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Masayoshi Son

Softbank
----------
Position: President and CEO

Contribution: He has transformed his company from a Japan-centered distributor and publisher into a worldwide force on the Internet through investments in more than 300 Web companies.

Challenge: He must continue his global expansion in spite of a 50% drop in his share price since January.


He's worth billions, and stalked by young Internet entrepreneurs from Seoul to Silicon Valley seeking his cash and cachet. Yet you would hardly know it from meeting Masayoshi Son. What you get is plenty of boyish charm and a disarming grin. Son, a young-looking 42, is the sort of guy who shows up at a strategy meeting in New York wearing Analog Age white socks--marring his stab at the all-black casual look.

Then again, the Softbank Corp. founder and fabled financier has more important things on his mind. He's in the middle of expanding a worldwide empire of strategic investments in Internet companies. Since 1995, Softbank has spent $3.8 billion to acquire stakes in 300 companies, including portals such as Yahoo! Inc. (YHOO), online trading sites such as E*Trade Group Inc., and all manner of e-commerce players in the U.S. and Asia. Now, Son is lining up an additional $2 billion to expand Softbank in Europe, China, and Latin America. ''We're a strategic holding company, investing in companies that are very important in the digital information industry--in e-commerce, financial services, and media,'' he says.

Global Play. Of course, Son isn't alone in trying to invest his way to dominance in the global Internet economy. Other companies like Internet Capital Group Inc. and Hong Kong's Pacific Century Cyberworks Ltd. are playing the same game. But they lack Softbank's scale--and started later. Merrill Lynch & Co. analyst Mahendra Negi thinks that for public market investors, Softbank is the only global Internet play around. ''It gives you exposure in the U.S., Europe, and Asia,'' he says.

Not all of Son's projects are greeted with cheers. His new $500 million venture fund with the World Bank to seed fledgling Internet ventures in the developing world has drawn the wrath of antiglobalization vigilantes. Both Softbank's bid to buy 49% of state-owned Nippon Credit Bank and its minority stake in Nasdaq Japan, which has its debut in June, have turned heads, too. Some worry that Son will use his clout as a banker and partner in the stock exchange to give preferential treatment to Softbank-linked companies. Ask him about that, and Son will give you an impassioned no. In fact, in both cases, he says, he stepped in partly to help boost the Japanese economy.

Although his strategy is far from proven, Son didn't get to where he is today by playing it safe. He thinks placing hundreds of tiny bets on a host of technologies, instead of grabbing a controlling interest in a few, is the only way to stay ahead in the ever-mutating world of digital technology. His aim: to find the hottest technologies, fund them, help take them public, and then clone them in new markets across the globe. ''On the Net, everything moves so quickly, so you have to do things differently,'' he says.

For investors, betting on Softbank can be a gut-wrenching ride. The blowup in global technology stocks has hit the Japan-based company like a tsunami. Since mid-February, Softbank shares have fallen from $1,900 to $475, a lurch that has vaporized more than $130 billion worth of market capitalization. On top of that, Softbank is expected to report a pretax loss of $550 million for its 1999 fiscal year because of currency losses and charges from the sale of memory add-on maker Kingston Technology Co. and parts of the Ziff-Davis Inc. media group. ''Should Internet market levels decline, Softbank's value could implode,'' says HSBC Securities Inc. analyst Ben Wedmore.

But Son sees the recent market tempest as only a passing squall and says the Net's enormous potential gives his company plenty of staying power. It has $1.3 billion in cash. Its shares are still up nearly fourfold from a year ago. And it's sitting on an estimated $60 billion in unrealized gains from the jewels in its Internet portfolio, particularly. The long-term challenge is to prove its global venture-capital network and web of alliances will generate long-term profits.

Some of the pieces of his strategy already are clicking. On Apr. 18, Softbank's 51%-owned joint venture with Yahoo Japan reported a sixfold jump in profits, to $11 million, on revenues of $54 million. Yahoo Japan is by far the biggest portal in Japan, attracting 78 million page views a day, vs. the 6.5 million of No. 2 Lycos Japan. It's also a powerful vehicle to cross-market other Softbank-linked U.S. transplants such as E*Trade (EGRP) and mutual-fund tracker Morningstar Inc.

Now Son needs to replicate that kind of success in Europe, where he's just getting started. At the same time, his venture-capital operation needs to discover the next Yahoo. Son may ultimately overreach. Right now, though, he's living on the edge and grinning boyishly all the while.



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