SoftBank earnings dive as merger called off

Dow Jones – Japan’s SoftBank said its first-half net profit fell 87% owing to derivative losses on its Alibaba stockholdings.

While earnings were behind expectations at ¥‎113.2bn, operating profit and sales both beat forecasts.

The outcome is a reflection of how the technology firm has become more like an investment fund and less like a telecommunications firm.

SoftBank has been chasing high-profile deals since it launched the Vision Fund in May, with investments for the portfolio ranging from office-sharing firm WeWork to robotics startup Boston Dynamics and Indian e-commerce company Flipkart. SoftBank is also pursuing a multibillion-dollar investment in Uber Technologies.

The company said its operating profit rose 35%, to ¥874.8 billion ($7.67 billion), in the six months ended in September compared with the same period the year before, thanks to the Vision Fund’s investment in chip maker Nvidia. Without the Vision Fund, which includes investments from a Saudi sovereign-wealth fund and tech giants such as Apple, earnings before interest and tax would have gone up only 6%, it said.

SoftBank, which doesn’t give an annual forecast, earned a net profit of ¥102.6 billion in April-September on a 3% rise in revenue.

Before its earnings announcement, shares in the Tokyo-based company closed down 2.6% at ¥9,945, following news it had walked away from months of merger talks between US wireless carrier unit Sprint Corp. and T-Mobile US.

During the talks with T-Mobile, SoftBank’s founder Masayoshi Son sought a way to merge the two wireless rivals with SoftBank as top shareholder in the enlarged entity.

“Things may be tough for three to four years,” Mr. Son told reporters. But he said: “Sprint will become critical for SoftBank as a group in five years’ to 10 years’ time,” as more devices become interconnected. “I’ m glad we were not rushed into a decision that would have hurt the company over the long term.”

In a joint statement Saturday, the companies called off the merger for good.

SoftBank shares, up 28% this calendar year, have pulled back from 17-year highs logged last month.