Softbank’s earnings on a rise, future growth dependent on Sprint turn-around and ARM acquisiton



Quarterly earning call season it is! Some businesses have shown tremendous growth and soared in this quarter, while others have presented a disappointing outcome. Another multinational — Softbank — has today announced its quarterly results and joined the former list of rising and shining businesses.


Softbank, the Japanese telecom and Internet giant has posted strong results with revenues rising 2.9 per cent, amounting to a total of 2.13 trillion yen. It has also clocked a net profit of 254 billion yen, which is 19 per cent higher than the same quarter in the previous year. The operating profit, however, flatlined and rose a meager 0.2 per cent to 319 billion yen. The report also sheds light on the fact that losses in the U.S telecom provider Sprint were offset by solid earnings for its domestic telecommunications business.

The consolidated results saw a uprise in all KPIs, including net sales, EBIDTA, and net income. The sales figure increased by 3 per cent amounting to 2126.5 billion yen, and the EBITDA rose by 8 per cent and peaked to a record high of 678.4 billion yen — in its thirteenth consecutive year. The Japanese conglomerate has shown a steady growth in each of the segments it has invested in, except for some expected operating losses in Sprint.

In the quarterly earnings report, Softbank CEO Masayoshi Son added that he will be diving his time equally between — Sprint, the currently money losing U.S telecom carrier and ARM Holdings, the British chipmaker that it has agreed to acquire for $32 billion. Son further goes on to add that,

Sprint has been a drag, but I’m now seeing signs of a V-shaped recovery at Sprint.

And with regard to its recent almost certain acquisition of the British chipmaker, he added that,

I am convinced in my heart that ARM will become the biggest and most central pillar of SoftBank’s business.

Earlier this month, Softbank had announced that it has signed a definitive agreement to acquire ARM to expand its reach and create synergies using the same and it’s telecom business. Son during the earnings call also added that ARM would turn out to be an integral part of its business and skeptics will be proven wrong as the Internet of Things, smartwatch and smart-home businesses expand. The multinational giant also believes that it has done the right thing in acquiring the chipmaker ARM, rather than Intel or Qualcomm due to anti-trust issues.

Son also took the time to dispense more details on the current working conditions of the chip maker, which will operate independently and retain its own brand, management and business model. The ARM chips that currently power over 95 per cent of the smartphones, will see investments pouring in for research and development and hiring more engineers. None of Softbanks’s own staff members will be transferred to the British chip maker, added Son.

In an all-cash transaction that is valued at $32 billion, Softbank will be adding even more large dent to its already negative balance sheet. It had recently raised over $17 billion by selling it’s stake in Chinese e-commerce giant Alibaba and gaming giant Supercell Oy, which has been purchased by Tencent. These funds, however, aren’t enough to pay for the acquisition. Thus the Japanese multinational is raising even more money, about $9.49 billion in bridge loans.

Enough talking about the positive scenarios and future profitable businesses. Let’s divert our focus to one of the key backlogs in the company’s arsenal of strong business — Sprint.

Sprint is currently the fourth largest telecom provider in the U.S, but it has been struggling to on-board users on its carrier services. After reporting losses and minimal user growth in previous quarters, the telecom provider had added over 173,000 postpaid net subscribers in this quarter. This is an impressive feat for the company. The operating losses have, however, widened ever further to $302 billion, in this quarter. At this point, Son again brought up ARM and said that he was confident that Sprint is on the verge of a run-around and their bet on ARM can help them become profitable once again.

And how can one go about Softbank, without mentioning Nikesh Arora — the president of the company — who recently quit to not waste anymore time waiting for the position of Chief Executive. The shocking news of his departure from the company came the same day, when he got a clean-chit for the internal probe into his actions at the Internet giant. Arora’s two year tenure costed Softbank a staggering 31.5 billion yen($300 million), which is comparable to Apple CEO Tim Cook.

Even after Arora’s departure, Son again took center stage to defend his compensation and participation in the growth of the conglomerate. He added that,

Look at the fundraising rounds that followed our investments, they are valued at a new level by outside parties. That’s an extremely high return on the scale of hundreds of billions of yen.

If you’re unaware — Arora is recognized as the man responsible for bringing Softbanks’s money into the country. He actively spearheaded investments in Indian e-commerce provider, ride-hailing service Ola Cabs, real-estate website and hotel-booking app Oyo Rooms. And all of them, without any doubt have outperformed themselves.

And Masayoshi Son also added that Nikesh Arora was responsible for the assets sale of Alibaba and Supercell. Commenting on the same, he adds that,

Nikesh was in command of Supercell sales and liquidation of Alibaba stake. That contribution alone is more than enough.

And that is pretty much the truth. If Softbank hadn’t been able to sell its stake in these Internet and gaming giants, then it wouldn’t have been able to go forward with the acquisition of British chipmaker ARM. Also, when asked about the company’s stake in Yahoo, which has now been acquired by Verizon for $4.83 billion, Son denied to comment as he hadn’t discussed the same with the former’s board.

So if you take an all-round look at the company’s growth — positive. And the prospects of future growth are also on the plus side, thanks to the ARM acquisition.



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