SoftBank reports Q3 net profit nosedives by 97% amid Arm deal collapse

Picking up the pieces, SoftBank said it will look to take Arm public in 2023.
Written by Campbell Kwan, Contributor
Image: Getty Images

SoftBank group has reported a 97% drop in quarterly profit hours after the revelation that its $40 billion deal to sell Arm will no longer be going ahead.

For the third quarter, SoftBank reported a net profit of ¥29 billion, which pales in comparison to the ¥1.17 trillion recorded a year ago. The weak performance follows on from a poor second-quarter result when the company recorded a ¥342 billion loss.

SoftBank's third-quarter revenue, meanwhile, rose 6% year-on-year to ¥1.6 trillion.

Speaking about the Arm sale fallout, SoftBank founder and CEO Masayoshi Son said his company will now aim to take Arm public in the US sometime in the next fiscal year.

Unpacking the decision, Son admitted during the results presentation that he did not expect governments to be so opposed to the sale.

"The Nvidia side was very keen on the merger until the end. But the governments of various countries took such a strong stand to block the merger, and we agreed to give up because it was unlikely to be approved even if we made further efforts," Son said.

Since the deal's announcement in September, regulators around the world had expressed concern about its impact on competition across various markets. A month after the deal was announced, the European Commission opened an in-depth investigation saying it was concerned that Nvidia would restrict access to Arm IP, which would lead to higher prices and lessened competition.

Nvidia CFO Colette Kress then said in November the US Federal Trade Commission also had its own concerns about the deal, with the regulator eventually filing a lawsuit to block the deal. In that same month, the UK also launched a probe into the deal.

Speaking about SoftBank's overall performance, Son alluded to remarks he made during the second quarter of the company being in the middle of a storm. On Tuesday, he said: "The storm has not ended; the storm has gotten stronger."

"Last year's performance was maybe too good for us, and now we're seeing a downward trend."

The comments were made in relation to SoftBank's net asset value dropping by more than 10%, $19 billion, to $168 billion. Son attributed the hit to the struggles of its Chinese and US investments.

Looking at SoftBank's Vision Funds, the funds saw their quarterly income dip from ¥844 billion to ¥108 billion, representing an 83% year-on-year decrease. The Latin America Funds also performed poorly during the quarter, with the funds going from a ¥60 billion third-quarter profit a year ago to a ¥60 billion loss.

SoftBank also suffered a ¥42.3 billion loss on investments in the latest quarter, which is a stark contrast to the ¥737 billion it earned in the same period a year ago. This investment loss was offset by a ¥68 billion gain, however, that was in connection with previously disclosed prepaid forward contracts on its Alibaba shares. 

For Arm, the chip company reduced its quarterly losses from ¥13.3 billion to ¥2.9 billion.

Even the conglomerate's Japanese telco saw its quarterly profits drop slightly, from ¥213 billion to ¥192 billion. As of the end of the third quarter, SoftBank has 48.7 million customers on smartphone plans as well as 8.2 million broadband customers.

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