Wednesday, July 20, 2016

Masayoshi Son, Japanese executives and Risk

Masayoshi Son has been busy for a long time in tech, but really got some attention when going for ARM holdings this week.

Worth digging around about him. It seems to me that if there ever were a guy who would enthusiastically jump into Microvision, it would be this guy.

He's a risk-taker in risk-averse Japan & Risk averse big business. 

He's of Korean ancestry in Japan. This is quite significant in Japan - even though most outside of Japan don't realize it. He's not really on the inside in Japan -- but not really on the outside -- and the restraining parts of the Japanese culture aren't restraining him. (I'm sure I'll get a note correcting this if I've misstated any of this. DF?)

He understands Japan and the "weird" in Japan. Check out the ad.

What is here is a guy who knows capital. A guy who is willing to risk -- and sometimes lose - which is really important. If it's a sure thing, there isn't any risk, but precious little upside as well. We also have a guy who studies the future and gets it right. 

Microvision is a significant part of the future of portable computing, entertainment & the internet of things. 

Those industries have a huge problem - getting large displays from small devices -- and Microvision is the answer to that problem.

From Financial Times
Critically, say analysts, Mr Son embraces risk with skin in the game: a 19.2 per cent stake in SoftBank that is both stick and carrot to his bravura dealmaking. By contrast, the rest of corporate Japan — increasingly led by a generation of salaryman chief executives who hold minuscule quantities of stock and have risen to their positions by avoiding risk wherever possible — does not do very much of that.

Some larger, cash-rich Japanese companies, following pressure from shareholders, have started to become more proactive in looking abroad for long-term growth and a higher return on equity. They logged a record ¥10tn of outbound M&A deals in 2015. Even so, it was an improvement rather than an outright transformation. Those outbound deals were fairly conservative, led by the insurance and banking sectors looking for large, bolt-on businesses in dependable, developed parts of the world. The scale of the deals — modest by global standards — demonstrated a reluctance on the part of acquirers fundamentally to reshape themselves.

While companies such as Intel Corp. design and manufacture chips, ARM is strictly a designer. It charges licensing fees and per-chip royalties to other companies that use its schematics. Customers such as Apple Inc., Qualcomm and Samsung Electronics Co. began flocking in the past decade to ARM-based chips because they drew less power than competing chips from the likes of Intel, which made high-performance but energy-guzzling processors.

"A fresh acquisition is not what the market wants from SoftBank," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.
"It's Mr. Son's style to keep expanding, but isn't he stretching too much?"
Investors fret the purchase of ARM, Japan's largest ever outbound deal, may be too much for SoftBank, still in the throes of turning around U.S. carrier Sprint <S.N> and tackling a $112 billion debt pile.
Others take the longer view.
"There is little synergy with SoftBank's existing businesses, but it makes sense if we look at ARM's future potential," said Tomoaki Kawasaki, senior analyst at IwaiCosmo Securities Co.
"Mr. Son is prioritizing investment for the future over shoring up the balance sheet. It's very Mr. Son-like."
A self-made entrepreneur whom one investment banker described as thinking "in decades", Son, of Korean descent, has long been something of an outsider in corporate Japan.
He wears the somber suits of Japan's salarymen but is an outspoken sometimes outrageous voice, with a celebrity status and 2.5 million followers on Twitter.
Son said he sealed the deal in just two weeks with a handful of advisers. These include Jeffrey Sine, co-founder of niche U.S. merchant bank Raine, who has advised Son for years.
Japan’s favorite TV ad series features a family who sit around bickering and occasionally mentioning the merits of the tariffs offered by mobile network SoftBank.

So far, so ordinary. Mobile operators love to feature regular people and trumpet the joy of communication with bland phrases about being ‘better connected’ and having a ‘world that revolves around you’.

But in the Softbank commercials, the grown up Japanese daughter has a brother who is apparently an American black man. And their father is, well, a white dog.

No one in the ads ever remarks on the weirdness of this.

It’s all very droll, slightly weird and joyfully eccentric.

And wildly popular.
Indeed, Japan’s CM Research Center, which conducts TV ad recall surveys says SoftBank’s ‘Otosan’ ads (Otosan is Japanese for father) have topped most of its polls for the last five years — and earned the firm’s ‘Brand of the Year’ prize every year from 2007 to 2011.


Son loved to buy and sell, throwing money into 600 technology companies, including GeoCities, Ziff-Davis Publishing and the Comdex computer show. Some of these bets went disastrously wrong, such as Kingston Technologies, which lost Softbank $1 billion.

Others did better.

Ziff-Davis’s chief executive, Eric Hippeau, introduced Son to a struggling small company called Yahoo, which wanted $5 million to develop its search engine tech. Famously, Masayoshi Son offered $100 million. Yahoo founder Jerry Yang replied that they didn’t need that much. To which Son countered: “Everyone needs $100 million.”

Thus, Softbank owned more than one-third of Yahoo when it went public in April 1996.

And Masayoshi Son was similarly prescient about Alibaba, offering a big sum to its CEO Jack Ma when he hadn’t even asked for it. As a result, Softbank got a third of Alibaba – a stake worth $75bn on the day the Chinese giant IPOd last month.

SoftBank’s $20 million investment in Alibaba back in 2000 probably ranks as one of the greatest ever.

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