SoftBank Net Profit Rises 19%

SoftBank operates Japan’s third-largest mobile carrier and owns struggling U.S. wireless carrier Sprint. ENLARGE
SoftBank operates Japan’s third-largest mobile carrier and owns struggling U.S. wireless carrier Sprint. Photo: Bloomberg News

TOKYO— SoftBank Group Corp. 9984 -1.03 % ’s net profit for the fiscal first quarter rose 19% in its first earnings report since the Japanese company took the global semiconductor industry by surprise with a $ 32 billion deal to acquire ARM Holdings ARMH -0.05 % PLC.

The telecommunications and internet conglomerate said its net profit rose to ¥254 billion in the April-to-June quarter from ¥213 billion a year earlier, while operating profit inched up 0.2% to ¥319 billion and revenue rose 2.9% to ¥2.13 trillion. The company didn’t provide earnings forecasts.

SoftBank, which operates Japan’s third-largest mobile carrier and owns struggling U.S. wireless carrier Sprint Corp. S -7.36 % , struck a deal earlier this month to buy U.K.-based chip designer ARM in a bet on demand for internet connectivity in everyday devices such as automobiles and refrigerators.

“I believe ARM will become most central to SoftBank’s future growth,” Masayoshi Son, SoftBank’s founder and chief executive, said during an earnings briefing Thursday. Mr. Son said he would devote around 45% of his time on turning around Sprint, another 45% of his time on ARM, and the rest on other matters.

The acquisition of ARM was SoftBank’s first major deal since former Google executive Nikesh Arora, handpicked by Mr. Son to be his successor, abruptly left the company last month.

It also came after SoftBank raised about $ 17 billion in asset sales—including selling shares in Alibaba Group Holding Ltd. BABA -0.59 % and Finnish game maker Supercell Oy—funds that some analysts hoped would be used to fix its balance sheet.

After the asset sales, SoftBank said it is saddled with around ¥7.1 trillion in consolidated net debt, of which around ¥3.3 trillion is tied to Sprint, which SoftBank bought in 2013 for $ 22 billion.

Instead, the cash is going to pay for the purchase of ARM and SoftBank will be taking on even more debt—around ¥1 trillion in bridge loans—that will convert into longer-term financing. Mr. Son has said the ARM deal reflects his confidence that the fortunes of Sprint were turning around.

SoftBank has been cutting expenses to revive the No. 4 U.S. mobile carrier.

Unlike Sprint, however, ARM is profitable. For 2015, ARM reported revenue of $ 1.5 billion and profit of £340 million ($ 450 million).

ARM has recently devoted more of its resources to designing chips for the Internet of Things, such as lightbulbs that will have small chips in them that store information about energy use and then transmit that data to the internet.

Mr. Son has depicted the acquisition as part of a broader strategy to build artificial-intelligence functions into the kinds of devices that carry ARM-designed chips.

Mr. Son’s vision in these areas has already been in motion for several years. In 2014, he introduced a humanlike robot named Pepper that he said could sense human feelings. On Monday, SoftBank said the robot will be available to corporate customers in Taiwan through a subsidiary of Foxconn Technology Group, 2354 0.77 % marking the first time Pepper will be available outside Japan.

SoftBank also announced last week that it would work with Honda Motor Co. HMC 0.67 % to build cars that would learn to perceive drivers’ emotions from sensors and cameras, as well as from conversing with the motorists.

Write to Alexander Martin at [email protected]


WSJ.com: US Business

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