VC

SoftBank Is Back

SoftBank is back in the black. On Tuesday, the Japanese conglomerate reported $12 billion in quarterly profit. 

CEO Masayoshi Son says he’s still in “crisis mode.” Back in May, SoftBank disclosed a historic loss of $17.7 billion for the previous fiscal year. 

Graphic design is only one of SoftBank’s passions

While I’d love to exclusively dwell on SoftBank slide decks, let’s instead focus on how the company is reducing debt and appeasing investors. 

The crown jewel: SoftBank’s first Vision Fund, the largest tech investment vehicle in the world, notched a $2.8 billion gain in Q2. SoftBank’s $300 million investment in Lemonade, an insurtech startup that recently IPO’d, has appreciated by 2.7x. SoftBank-backed BigCommerce also recently went public. 

• Son said five or six more portfolio companies are preparing to IPO. 

Pruning the hedges: SoftBank is offloading shares in winning bets, including e-commerce giant Alibaba, and putting some proceeds into stock buybacks. SoftBank also recently said it would sell roughly $21 billion-worth of its T-Mobile stake. 

• The company confirmed it’s exploring a sale or public listing for Arm, the British chip designer it acquired for $32 billion in 2016.
• But...Fond of financial engineering, SoftBank said it would ditch quarterly operating profit disclosures. The gambit could irk investors.  

Becoming more boring: Son says SoftBank is forming a $555 million fund to invest in publicly traded Big Cos. like Amazon and Facebook.

Vision Fund 1, the SoftBank ballad

• Big checks to late-stage companies
• Profitability comes later 
• WeWork and Uber underwater
• Uh oh  

VF1’s flagging performance scuttled SoftBank’s ambitions to raise an even larger Vision Fund 2. VF2 is currently operational with only $38 billion committed by SoftBank. I use “only” because last year, SoftBank said LPs ranging from Kazakhstan to Goldman Sachs were putting in $108 billion for VF2. Those commitments were retracted or put on ice. 

Big picture: SoftBank’s investment thesis is still being battle-tested, albeit at a smaller scale.

5G

Unleash the 5G Beast

If you love 5G, set the spectrum free. 

On Tuesday, the U.S. government said it’s reallocating airwaves in the 3.45GHz–3.55GHz frequency range from military to consumer use. The Federal Communications Commission will auction off a 100 MHz chunk of the mid-band spectrum next December. 

The auction attendees: U.S. carriers are hungry for more mid-band spectrum, which offers a good mix of range, bandwidth, and cost-effectiveness. The issue? Many slices of the U.S. mid-band range are currently tied up for military use and satellites. 

Why it matters: Governments get the right of first refusal for the scarce resource that is spectrum. They don’t need it all, so they use market-based mechanisms to generate revenue and sell licenses for the leftovers.

The process isn’t always so laissez-faire. Since 5G has prompted a land grab for airwaves, the FCC has flexed its eminent domain muscles on satellite operators currently authorized to use key spectrum bands.

+ For more on spectrum, the mid-band, and internet toasters, read our 5G guide.

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BIG TECH

The Fortune 500 Under 500

Fortune published its Global 500 list for 2020. For the fiscal year ending on March 30, the 500 companies raked in $33.3 trillion of revenue and $2.1 trillion in profit. 

Being the nerd that I am, I tabulated revenue per employee for each company in the tech category. Find the full list here...a few highlights: 

• Apple—$1.9 million
• Facebook—$1.6 million
• Alphabet—$1.4 million
• Microsoft—$874,000
• Tencent—$869,000
• Samsung—$688,000

Fortune 50 comparisons: Amazon wasn’t counted as a tech company. But it had $352,000 in RPE, edging out 43% of the global F500 tech companies. 

• Berkshire Hathaway had $650,000, Ping An had $495,000, AT&T had $731,000, and Ford had $821,000. 
• Praying Gmail’s AI filters don’t mark this newsletter as spam due to all the dollar signs...

Bottom line: RPE tends to track with productivity rates and investments in AI/automation/robotics, although it varies significantly by industry. Because you’re wondering, Netflix had the highest tech RPE in 2019 with $2.3 million. 

BITS & BYTES

Stat: Ming-Chi Kuo, a leading Apple analyst, predicts iPhone shipments will drop 25-30% if Apple is forced to remove WeChat from the App Store.

Quote: “Every day is like a war. Cash is the defense for us.”—SoftBank CEO Masayoshi Son on this week’s earnings call. Happy birthday to Son, who turned 63 yesterday.  

Read: OneZero offers a 100-year history of the self-driving car.

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WHAT ELSE IS BREWING

• Foxconn says it will shift some supply chains and manufacturing outside China. The country’s “days as the world’s factory are done,” Foxconn Chairman Young Liu said. 
• Facebook says automated systems proactively flagged 95% of the 22.5 million posts that were removed for hate speech violations in Q2. 
• Clearview AI, the controversial facial recognition startup, has hired prominent First Amendment lawyer Floyd Abrams. He has ample experience litigating free speech cases, but he doesn’t own a smartphone. 
• Baidu is launching the Apollo Computing Unit, a hardware platform for autonomous vehicles. 
• Gogo is seeking a buyer for its in-flight internet business, Skift reports.
• Walmart and Instacart are partnering to offer same-day delivery in four markets across California and Oklahoma.

TRIVIA

On Monday, the newsletter had a pair of stories about cloud gaming. The next few months are shaping up to be critical for the technology. Let’s run it back and see how much you remember about cloud gaming.  

Take the quiz here.

TECH THINGAMABOBS

For Android users on the San Andreas fault: Google and the U.S. Geological Survey are building ShakeAlert, an opt-in earthquake detection system leveraging Android phone accelerometers and fine-tuned algorithms. Eventually, ShakeAlert could also serve as an early warning system.  

For happy belateds: Yesterday wasn’t just Masayoshi Son’s bday. It was also Apple cofounder Steve Wozniak’s 70th birthday.

ICYMI

Catch up on the top Emerging Tech Brew stories from the past few editions: 

• Multiplayer in the cloud
• Washington ramps up tech decoupling with “Clean Network”
• Quantum meets the final frontier