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Softbank prepares to convert to holding company

Accounts should be more meaningful

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Japanese uber conglomerate Softbank Corporation is preparing to expose its books to meaningful scrutiny for the first time, by transforming itself into a holding company. The conversion which takes place on April 1, will help the company to improve efficiency, while making clear each subsidiary’s profit and overall performance, Softbank says. The company could also gain substantial tax benefits in the future, according to Bloomberg, which reports that a post-war Japanese law banning holding companies was repealed only last year. However, Softbank and other Japanese conglomerates still have some lobbying to do, judging from the Bloomberg report, as the Japanese government “hasn't yet given permission for holding companies to minimize taxes by offsetting earnings at profitable subsidiaries against losses at others”. Softbank is probably worth less than the sum of its parts. Although that statement has to be qualified, in light of the unknown quantity of debt residing in the company. Softbank embarked on an enormous buying spree in the early and mid-90s, paying top dollar for a clutch of big name but highly disparate firms operating in the computer sector. The result -- an unwieldy conglomerate sprawled across the world -- stands as monument to the hubris of Masayoshi Son , Softbank’s “billionaire deal maker” (as he’s called by Bloomberg). Of course, It is always easy to be a dealmaker if you insist on overpaying. You can even end up owning some good property. And Softbank has some of the best. It owns Ziff-Davis, the world’s biggest computer magazine publisher, Comdex, the world’s biggest computer exhibitions organiser, an 80 per cent stake in Kingston Technology (probably the world’s best known supplier of branded memory), and substantial chunks in a clutch of US Internet companies, including Yahoo (currently capitalised at more than $7 billion). It is also Japan’s biggest software distributor and its tentacles even extend to a helpdesk operation in the UK. But what is Softbank worth? In retrospect, Kingston was a wild overpayment, while Ziff-Davis turned out to be a good judgement call. Softbank’s Californian VC activities has landed it with scarce Internet real estate, which could be worth billions of dollars. However the company’s consolidated accounts makes it impossible to make more than educated guesses about the performance of subsidiaries. Softbank could remove investor suspicion at a stroke by adopting US accounting standards. That could be some time coming.®

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