Tokyo Deutsche Telekom has to look around for a new candidate for the supervisory board. Marcelo Claure, the chief operating officer of Japanese tech investor Softbank and head of Softbank Group International (SBGI), is leaving his employer.
Both sides had mutually agreed to separate, Softbank announced on Friday. Claure’s successor at SBGI, which runs much of Softbank’s international operations, will be Michel Combes, the previous president.
Both sides were friendly. “I will be eternally grateful for my experience at Softbank over the past nine years,” said Claure, who has long been at Softbank’s founder Masayoshi Son, one of the most powerful investors in the world. Son was his “mentor and friend”. Son also thanked Claure for his dedication and wished him “continued success”.
Softbank did not give a reason for the separation. But according to media reports, Claure’s high salary demands shattered his relationship with the Softbank boss. At the end of last year, it was leaked that the chief operating officer had demanded payments of around two billion dollars for his work over the coming years. Such a sum does not sit well in a country like Japan, where company bosses rarely earn more than a million euros a year.
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Still, the split comes as a heavy blow to Softbank. Because Claure was not only responsible for the fast-growing Latin America fund Softbanks and the restructuring of the office broker WeWork, but also an important contact between Timotheus Höttges, the head of Deutsche Telekom, and his Japanese partner and major shareholder Son.
After all, Claure Softbank’s US mobile network Sprint had merged with T-Mobile US, the successful mobile provider of Deutsche Telekom. The companies even turned the merger into a strategic partnership with the Japanese taking a 4.5 percent stake in Germany’s leading telecom group. And Claure, as a board member, should leverage synergies between Softbank’s large start-up empire with more than 300 company investments and the services of Deutsche Telekom.
Softbank is threatened with a new leadership and succession crisis
But for Softbank, a possible German-Japanese relationship crisis is only a side issue. What is worse is that the tech investor is now falling into a leadership crisis at an economically critical time. On Thursday alone, the stock lost more than eight percent in value after the US Federal Reserve announced higher interest rates. Because investors see the technology companies, whose share prices determine Softbank’s profits and losses, as losers in the global interest rate turnaround.
Now founder Son in Claure is also losing his adjutant, whom he had built up to Chief Operating Officer against great internal resistance. The 51-year-old was even considered a possible candidate to succeed the now 64-year-old Japanese investor legend.
>> Read here: Who is Marcelo Claure? A portrait of one of the most powerful tech investors in the world.
In fact, Son had relied heavily on Claure since the beginning of their business relationships, whose founding Brightstar made billions in North America selling used US cell phones in Latin America in the 1990s. This success made the Japanese Son sit up and take notice: As a start-up founder, he has a soft spot for entrepreneurial types.
Without further ado, he bought Brightstar because he wanted Claure in his ranks. “He may look like a bandit, but he’s a wonderful guy,” Son described his new purchase at the time, towering two heads above the legendary investor from Japan.
And the Japanese didn’t stop at verbal laurels. Redex Research analyst Kirk Boodry, Japan-based analyst at Redex Research, said Son was confident enough that he put Claure in charge of struggling Softbank subsidiaries. Sprint’s turnaround was just the first case.
In the group, however, Claure was controversial. The head of the powerful Softbank Vision Fund, Rajeev Misra, even tried to force the manager out of the group. That failed, but Claure didn’t have direct access to the fund, which was worth almost $100 billion at the time.
Son’s big problem: he can’t find a successor
However, Son stuck by Claure and solved the conflict in his own way: with power and money. He appointed Claure as COO, involved him in his investment decisions, and later gave him $5 billion to start his own fund focused on Latin America. The project got off to a promising start economically.
Softbank was the first major investor to discover South America’s start-ups. Softbank’s Latin America fund was therefore able to grow quickly without much competition. In autumn 2021, Claures Fonds had already invested in more than 40 companies. But the Bolivian was apparently not happy with that and demanded more money than Son was willing to give.
The separation may be logical. But the loss of his confidante also becomes a symbol of Son’s greatest weakness: the founder just can’t find a successor. Because Claure is not the first candidate to fail.
In 2014, he hired Google’s senior vice president Nikesh Arora for $130 million. The Indian is said to have earned more than $200 million at Softbank in two years. But after two years, the liaison was over and Arora moved out with Son, with a hefty severance payment in the bank.
Softbank crisis: Son has a lot to explain to investors
So Son has another problem to explain to his investors when he reports Softbank’s third-quarter results on Feb. 8. He’s under pressure again. Because the crash in technology stocks in the USA and also in China, where Softbank has invested heavily, is likely to cause high book losses.
In addition, Son is hit hard by the fact that the sale of his British chip designer Arm to the world’s leading graphics card manufacturer Nvidia will probably fail. With the deal, Nvidia – and indirectly Son as a major shareholder – wanted to become the largest supplier of chips for applications such as artificial intelligence.
But this week it transpired that Nvidia wants to back down. Because antitrust authorities are resisting, since Arm is also an important supplier for Nvidia’s competitors. Plan B is an IPO Arms. But that takes time and should bring in less.
So Son could now run out of money for new investments – and especially for share buybacks. At the beginning of the corona crisis, he managed to reverse the crash with a huge buyback and propel Softbank’s share price to new historic highs. But since March 2021, Softbank’s value has more than halved again. And it is still unclear where Son wants to raise money for another turn. In any case, Claure won’t be able to help anymore.
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