London: Just two weeks separated Masayoshi Son’s private jet flying to the Turkish resort of Marmaris to court Stuart Chambers, ARM Holdings’ chairman. and his company SoftBank announcing Europe’s biggest-ever technology deal, but the Japanese billionaire has never been known for his patience.
At 16, when Masa — as he is now affectionately known — moved from Kitakyushu in south-west Japan to study in San Francisco against his mother’s wishes, he managed to skip three years of high school by taking the college entry exam in three weeks. The young student convinced his teachers to bend the rules and let him use a Japanese-English dictionary, and give him extra time for the three-day test, he stayed past 11pm finishing it each night, much to the annoyance of the examiner. But by 20, he had graduated and sold his plans for a pocket language translator to Sharp for $1 million.
Four years later, when Son moved back to Japan and founded his company, he had just two part-time workers. But on its first day, he stood up on two boxes and made his voice boom across the office, as if addressing a stadium of fans.
Son, a third-generation Korean immigrant born in a remote Japanese city, has never been one for the small time. Thirty-five years on and with a net worth of over £20 billion, Son has lost none of his drive, as the mogul demonstrated last week with the shock £24 billion bid for ARM, the microchip designer whose inventions power the iPhone.
“This is the company I wanted to do for so many years, our most important [deal], my big bet for the future,” he proclaimed. The agreement appeared ludicrous by some standards. Wrapped up in days, the price — £17 a share — came at an enormous profit multiple. But in the world of Masayoshi Son, it was just another step on his charge to making SoftBank not only the biggest tech company in Japan, but one day, the world. Today, SoftBank — in its early days a computer software seller — is a sprawling conglomerate worth 6.5 trillion yen (pounds 50bn). The company runs one of Japan’s biggest mobile networks and owns a 36pc stake in Yahoo Japan, a separate entity from its US namesake and Japan’s second-biggest website.
Operating assets
In 2013, it bought an 80 per cent stake in American mobile network Sprint in a bold attempt to challenge the dominance of Verizon Wireless and AT&T. Son splits his company in two, calling these established businesses his “operating assets”. In the other corner sit investments in fast-growing internet companies. In May, SoftBank was part of a $4.5 billion investment in Didi Chuxing, China’s answer to Uber. Three years ago it took control of Supercell, the Finnish smartphone games maker behind Clash of Clans, which is now being sold to Chinese internet giant Tencent for $10.2 billion. But perhaps his biggest success came back in 2000, when he invested a measly $20 million in a little-known Chinese internet retailer called Alibaba. The stake was gradually increased to 32 per cent, resulting in a huge windfall when Alibaba’s $170 billion IPO in 2014 made it the biggest in history. To finance his ambitious purchase of ARM — which Son called his “big bet for the future” — the company is selling $8bn in shares. Son has had his misses too — many of them expensive. Before the dotcom bubble burst in 2000 he put billions into internet start-ups such as Webvan and More.com, and the crash hit hard: by 2002, SoftBank had lost 98 per cent of its value, a paper loss for Son of $70 billion.
Corporate tradition
Son’s wins have outweighed his losses, though. He approached Steve Jobs about bringing an Apple phone to Japan two years before the iPhone was even announced, a determination that allowed SoftBank a five-year monopoly on the handset as late as 2013. It was the sort of risk unusual in Japan’s closed corporate tradition, where employees often stay at a company for life, and management like to maintain the status quo. It is a criticism often levelled at the likes of Toshiba, Panasonic and Sharp, which dominated consumer electronics in the Nineties but struggled to adapt to the smartphone revolution. Michael Woodford, the British former chief executive of camera maker Olympus who turned whistle-blower to expose one of Japan’s biggest corporate frauds and has railed against business culture in the country, says SoftBank is “one of the best companies in Japan”. “It doesn’t operate in the same way the other Japanese monoliths do,” he said. “He [Son] is not necessarily popular with some of the Japanese business leaders but he understands companies that generate wealth and enterprise. He does have a long-term view, and he’s an internationalist whereas many Japanese companies can’t handle Westerners.” (SoftBank employees are incentivised to learn English). Those close to Son say he also has an eye for detail.
“Masa’s not the type of guy who wants people around him to impress his own team, he’s above that, he’s a billionaire who models himself on Warren Buffett,” says one person close to negotiations over ARM.
Shares
The day after SoftBank’s bid for ARM was disclosed, its shares fell 10 per cent, a swing that cost Son £1 billion on paper. Pundits have raised questions about its 12 trillion yen (£85 billion) debt — a sum that will increase by £7.3 billion to finance the latest deal — and may not have been convinced by Son petitioning bondholders to “[as] Yoda said in Star Wars, listen to the Force”. SoftBank’s last big bet, the $22 billion deal to take control of Sprint three years ago, has also floundered, with continuing losses and the company frustrated in attempts to merge the network with rival T-Mobile. The Japanese company’s shares have fallen by more than 40 per cent since their peak in 2013, and analysts worry that another big deal could divide attention and resources between Sprint and ARM when the US carrier needs it most. Son, of course, is not worried. “One of the reasons why I have decided to announce this deal is I have enough confidence in turning around Sprint,” he said last week. But even when Son had its hands full, ARM was a target. Chambers, the British company’s chairman, was one of the few Western businessmen to run a Japanese company when Pilkington Group was acquired by Nippon Sheet Glass in 2006, and it is likely the two crossed paths. Son is believed to have discussed the two companies working together even before negotiations began in earnest. When Son announced the deal, he outlined a vision in which every household appliance, every car and every robot has an ARM-branded chip in it.
“It will be a big opportunity for all of mankind,” he said. Who would bet against him?
