Softbank Building Internet Empire
Mar. 20, 2000
TOKYO (AP) _ Just a few years ago, Softbank Corp. was still something of a maverick, shaking up Japan's corporate establishment with its aggressive strategy of investing in Yahoo! Inc., ETrade and other Internet companies.
Today, Softbank rules over a cyber empire spanning more than 300 companies worldwide and appears positioned to dominate Japan's booming Internet business.
The Japanese have coined a phrase for the phenomenon _ ``Internet zaibatsu'' _ comparing Softbank with family-business conglomerates such as Mitsubishi and Mitsui that rose to power in the 1800s.
Softbank stock has soared, peaking last month at 198,000 yen a share, or about $1,855 at current exchange rates, on the Tokyo Stock Exchange, up nearly 30-fold from 6,700 yen in January 1999.
The shares have since plunged, ending last week at 105,000 yen, or about $984, but some analysts had long said their value was inflated _ a common criticism of high-tech issues. Tokyo markets were closed Monday for a holiday.
There's no doubt Softbank's game is risky.
Internet business is growing at an explosive rate, with users now totaling 17 million in Japan, compared to 94 million in North America. But it remains a volatile market. The search for qualified workers has been a problem as well.
Softbank also faces increasing competition. There is a flood of rival venture capital seeking to invest in the Internet, making future acquisitions more expensive, says Luigi Limentani, an analyst with Nikko Salomon Smith Barney in Tokyo.
``Softbank's game of investing in the Internet is becoming very difficult,'' he said.
Last month, Softbank added the banking business to its portfolio in an attempt to further solidify its strategy in electronic commerce.
The Japanese government picked a consortium led by Softbank for exclusive negotiating rights for debt-laden Nippon Credit Bank, which had been placed under government control.
The bank deal could turn out to be Softbank's biggest gamble yet, analysts say.
Some say it will provide Softbank with a much-needed banking unit to facilitate payments for e-commerce. Others warn that Nippon Credit Bank is saddled with the old-style management that brought it down.
Still, Softbank is serving as an inspiration for scores of other ambitious startups in a nation where, until only recently, such entrepreneurship was rare.
Founded in 1981, Softbank initially invested in publishing, although it is now concentrating its investments in Internet ventures. Among its Internet investments are holdings in Buy.Com, ETrade Group, E-Loan and ZDNet. It has a 24 percent stake in Yahoo! in the United States and owns about 50 percent of Yahoo! Japan.
Softbank is also the main force behind Nasdaq Japan, a computerized stock market set to open in June, which will list emerging companies much like the Nasdaq Stock Market in the United States _ making it easier for ventures to raise cash.
``Softbank is nurturing new businesses in a high-growth business,'' said Juliette Chow, an analyst with Lehman Brothers Asia in Hong Kong. ``It actually promotes entrepreneurship, which is something that Japan lacked before.''
Softbank's group earnings for the fiscal year ended in March 1999 totaled 37.5 billion yen (about $350 million at current rates), nearly four times the profits for the previous year at 10 billion yen.
Much of the credit for Softbank's success goes to the foresight of its president, Masayoshi Son.
A graduate of the University of California at Berkeley, the 42-year-old Son recognized years ago that the Internet was a gold mine and brought under his wing the top brands in the business with the idea that whatever succeeds in America will also eventually be a hit in Japan.
``I want to continue pushing ahead in the Internet business,'' Son said in a recent interview on TV Asahi. ``Our target is to invest in 780 companies in about five years, but we seem to be running slightly ahead of that plan.''
Yasuhiro Suzuki, president of e-Shopping, a Softbank electronic-retailing venture similar to Amazon.com set up in November last year, says a big advantage is the Softbank brand image, as well as its network of partnerships that include strong companies such as the Seven-Eleven Japan Co. convenience store chain.
As a pioneer in the Internet business, the Softbank brand is widely recognized _ a critical feature in status-conscious Japan.
Suzuki, 35, who felt stifled while at computer giant Fujitsu, says another plus is Softbank's Western-style management of nimble decision-making and promotions based on performance _ both relatively novel policies here.
``What's interesting about President Son is that he seems to be really having a great time,'' Suzuki said. ``He's filled with ideas. He's fun.''
On the Net: Softbank Corp: http://www.softbank.co.jp/sbadmin/index_e.html