Softbank reports record loss, announces layoffs, CEO apologizes

Time has run out for SoftBank. The Japanese conglomerate that has invested in companies including Uber, Rappi, Nubank and Inter reported a record net loss of 3.16 trillion yen, or about $23 billion, in the quarter ended June 30.

The negative result came with an apology from group CEO Masayoshi Son, and just over a year after SoftBank shocked its critics by delivering the biggest profit in its history.

“When we delivered a big profit, I was almost ‘delusional’ and now, looking back, I’m embarrassed, but I can say that I learned lessons”, says Son, during the company’s results presentation, which was broadcast on the internet with simultaneous translation into English.

In making the mea culpa, Son presented, in his first slidethe famous portrait of Tokugawa Ieyasu, a Japanese shogun – military leadership title used in feudal Japan – after a humiliating defeat that happened because the military man, despite all the advice to stay in the castle, preferred to go into battle against an enemy much more powerful.

Tokugawa Ieyasu, Japanese military leader
Image by Tokugawa Ieyasu (Source: Reproduction / SoftBank)

The painting shows the face contorted in pain and regret and, according to tradition, would serve to remember the defeat that arrogance caused. “That’s what I’m doing now too”, announced Son, when presenting the Group’s results.

The executive’s stance on the result considered “shameful” by himself is quite different from that presented in May 2020, when Son made a headline in the Financial Times when he compared himself to Jesus Christ for being, too, misunderstood.

Since SoftBank’s founding, Son has had two consecutive quarterly losses. “I need to remember and remember that”, he assumed, also referring to the result of the first quarter of 2022, which brought a loss of US$ 16 billion.

changes in sight

The group has since announced three changes to its policy. First, it changed its investment stance and became more defensive and selective in its investments. “Some say that now is the time to buy instead of sell. I can agree, but my face is like the portrait of Tokugawa Ieyasu. We have a vision and it stays the same, but if we pursue that vision at any cost, we could end up losing a lot. And that’s something we want to avoid,” he said.

In addition to the change in investment policy, the company also announced a reduction in its operating costs – also known as layoffs. “Our source is smaller, so we are going to need to reduce teams drastically”, said Son, who did not mention exact numbers, said that the process is still under internal discussion but that there is no “sacred area”: employees of all levels, of all sectors in any countries where the company has operations will be affected.

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The third measure taken was to curb new investments and turn its attention to supporting the 473 companies that are already part of SoftBank’s portfolio. “We need to increase the value of our current portfolio,” he said.

How will this be done? For this question, there is still no answer. What Son only said was that the “winter” period will continue, it is not known whether for three months or three years. With the increase and persistence of inflation around the world, central banks will have to raise interest rates. “Moreover, the pandemic is not over yet and we still have to worry about the tension between Taiwan and China”, he enumerated. Given this scenario and in these market circumstances, Son highlighted that, from the perspective of investors, it must be said that we are in a winter.

He added that listed and unlisted companies will experience the crisis in different ways. “Listed companies have their value reviewed every day. Those not listed are still with valuation high and its founders are not willing to accept a repricing”, he said. “This winter, for unlisted companies, should be even longer,” she declared.

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