Cisco Gives Softbank a Hand...and Some Cash
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Cisco Systems Inc. Thursday poured money into Japan's struggling Internet investment house Softbank Corp. and committed to invest $1.05 billion in a private venture capital fund Softbank is initiating. The fund will target companies developing broadband, optical, wireless and Internet-based technologies across Asia.
Cisco took a 1.65 percent stake in Softbank for $200 million, making it the company's eighth largest shareholder, and at the same time bought back most of the 12 percent stake Softbank took in Cisco Japan in 1994. The company paid $275 million to get back that equity. Softbank wanted out of that deal after Cisco decided not to take Cisco Japan public.
The two companies already have strong ties. Masayoshi Son, Softbank's chief executive officer, sat on Cisco's board from 1995 to 1999 after Softbank's investment in Cisco Japan helped that business break into Asian markets.
Cisco is looking to the deal -- especially the investment in the venture capital fund -- to generate new Asian customers for its Internet switching equipment. At the same time, it is counting on Softbank to manage the VC fund wisely and generate money by investing in Internet companies at depressed prices. Softbank has not committed any of its own money to the fund, though it may do so, and has not yet brought in other backers. Softbank said it is unlikely the fund will grow beyond $2 billion.
Japan's market looked favorably on the deal, pushing Softbank's share price up 16.53 percent Thursday, a welcome change from past months which has seen the company's stock fall as much as 95 percent since the Internet bubble was pricked.