SoftBank reports 97% drop in third-quarter net profit amid Arm deal collapse

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SoftBank Group reported a 97% drop in quarterly profits after it was revealed that its $40 billion deal to sell Arm will no longer take place.

For the third quarter, SoftBank reported a net profit of 29 billion yen, which is nothing compared to the 1.17 trillion yen recorded a year ago. The weak performance follows a poor result in the second quarter when the company posted a loss of 342 billion yen.

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

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

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

“The Nvidia side was very enthusiastic about the merger all the way. But the governments of various countries took such a firm stance to block the merger, and we agreed to give up because it was unlikely that it would be approved even if we made extra efforts,” the son said.

Since the deal was announced in September, regulators around the world have expressed concern about its impact on competition in various markets. A month after the deal was announced, the European Commission opened an in-depth investigation, fearing that Nvidia would restrict access to Arm IP, which would lead to higher prices and less competition.

Nvidia’s chief financial officer, Colette Kress, later said in November that the US Federal Trade Commission also had its own concerns about the deal, with the regulator eventually taking legal action to block the deal. In the same month, the UK also launched an investigation into the deal.

Speaking about SoftBank’s overall performance, Son alluded to remarks he made during the company’s second quarter amid a storm. On Tuesday he said: “The storm is not over; the storm has gotten stronger.”

“Last year’s performance was perhaps too good for us, and now we are seeing a downward trend.”

The comments were made in relation to SoftBank’s net asset value down more than 10%, $19 billion, to $168 billion. Son attributed the hit to the difficulties of his Chinese and American investments.

As for SoftBank’s Vision Funds, the funds saw their quarterly revenue drop from 844 billion yen to 108 billion yen, representing an 83% year-over-year decline. Funds in Latin America also performed poorly in the quarter, with funds falling from a profit of 60 billion yen in the third quarter a year ago to a loss of 60 billion yen.

SoftBank also suffered a loss of 42.3 billion yen on its investments in the last quarter, in stark contrast to the 737 billion yen it earned in the same period a year ago. This investment loss, however, was offset by a gain of 68 billion yen, linked to previously disclosed prepaid futures on its Alibaba shares.

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

Even the conglomerate’s Japanese telecommunications company saw its quarterly profits drop slightly, from 213 billion yen to 192 billion yen. At the end of the third quarter, SoftBank had 48.7 million customers on smartphone plans as well as 8.2 million broadband customers.

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