Cisco Gives Softbank a Hand…and Some Cash

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.

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