The Japanese tech giant is currently going through difficult times.
(Photo: AP)
Rio, Tokyo The global slump in tech stocks has hit Softbank, the world’s largest tech investor, hard. In the first nine months of the Japanese financial year, Softbank’s net profit fell by 87 percent to 392.6 billion yen (around three billion euros), the group announced on Tuesday afternoon in Tokyo.
The result in the third quarter in particular is a bad omen for the rest of the financial year up to March. Between September and December 2021, Softbank’s net profit fell by 98 percent to just 29 billion yen (around 220 million euros). And analysts warn that Softbank’s loss in tech stocks since the start of the year will weigh even more heavily.
But that’s not the only blow Softbank is currently taking. In addition, the exit of Softbank’s number two, Marcelo Claure, and the failed sale of Softbank’s British chip designer Arm to the graphics manufacturer Nvidia worsens the situation. Both sides abandoned the deal after fierce opposition from antitrust authorities. Because the chips of many Nvidia competitors are also based on Arm’s design.
>>> Read about this: Nvidia fails to acquire Arm
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The reason for the wild fluctuations in Softbank’s income statement is its one-sided bet on tech and internet stocks. Well-known are the Softbank Vision Funds, which Son uses to aggressively invest in large artificial intelligence-related startups. He wants to make Softbank the leading company in what Son calls the “information revolution”.
Both important investments in listed companies such as Deutsche Telekom and Softbank’s large investment funds caused high book losses this time. The Softbank Vision Fund 1 and 2 alone, whose investments in start-ups made Softbank the third-most profitable company in the world last year, contributed a loss of 767.8 billion yen to the balance sheet this time.
Masayoshi Son’s balance sheet press conference, who wants to explain the figures from 8:30 a.m. Central European Time, is awaited with even greater excitement. A big question is how he wants to finance a promised share buyback, which is supposed to support the group’s share price, despite the failed Arm sale and the collapse in profits.
Important source of money dried up
Because the group not only has to cope with book losses. At the same time, the slump in tech stocks threatens to dry up an important source of money for Softbank: the IPO of some of the more than 300 large start-ups in which Softbank has invested globally with its two vision funds and a Latin America fund.
In addition, the departure of Softbank’s Chief Operating Officer Claure is unsettling the market. The manager was primarily responsible for the remaining operating companies and contacts with Deutsche Telekom, whose US mobile network T-Mobile had taken over US Softbank’s American mobile network Sprint.
At the same time, Claure managed the young Latin America fund, which has so far brought in more than one billion euros in profits. Observers worry that other managers could follow him and leave Softbank. Claure hired five of the directors herself. At least one – the ex-boss of McKinsey in Brazil Nicola Calicchio – is said to have already left the company, suspects Geraldo Samor from the business news service Brazil Journal.
It will now be seen whether Claure’s skill was decisive for Softbank’s good performance in Latin America, or whether Softbank will be able to continue this success story on its own, said Samor.
More: Softbank COO Marcelo Claure leaves the group