Issue link: https://maltatoday.uberflip.com/i/1484365
8 OPINION 17.11.2022 SoftBank recovers, but US tech giants are shedding workers George Mangion George Mangion is a senior partner at PKF, an audit and consultancy firm, and has over 25 years' experience in accounting, taxation, financial and consultancy services. His efforts have made PKF instrumental in establishing many companies in Malta and established PKF as a leading professional financial service provider on the Island M asayoshi Son (pictured) is a Japanese investor who created Sobank in the 1980s (now with version 2) through which he now wants to mimic a "virtual Silicon Val- ley", meaning a platform on which unicorns (start-ups that turn out to become billion-dol- lar marvels) can offer each other contacts and advice, buy goods and services from each other, and even join forces. e child of second-genera- tion Korean immigrants, Son grew up in relatively humble circumstances. His childhood home was built on land that belonged to the Japan Nation- al Railways, contributing to a sense of instability throughout his early life. Son's father sup- ported the family by raising pigs and chickens. He also showed a willingness to take risks that his family would inherit, starting an illegal sake brewing business. It paid off, allowing the Sons to buy a car, the first in their neigh- bourhood. Son is known for his uncon- ventional and often sanguine presentations at earnings an- nouncements, where he high- lights the thinking behind sometimes controversial de- cisions, such as investing gen- erously in risky ventures like the troubled WeWork. He told CNBC that people should brace themselves for the proliferation of artificial intelligence as it will change the way we live within two decades. Son has grand visions of what technological advancements the future holds. SoftBank's subsidiaries are pushing the frontiers of technology in areas such as the "Internet of ings", artificial intelligence and deep learning. For this purpose, the Vision Fund is aggressive- ly competing with traditional technology investors in Silicon Valley in a no-holds-barred fight for talent. SoftBank has surged, reach- ing the highest close since the company went public in 1994, and flying past a long-standing record two decades ago, as a boom in tech companies helped lift SoftBank's portfolio. Son believes he has a unique abili- ty to predict future technology trends, and gallantly states he is ready for the gamble. Readers are aware that when it comes to the use of artificial in- telligence in powering complex robotics, these reduce cost of manufacturing. One may ask, who is funding such expensive research? e answer is a co- hort of venture capitalists who are constantly poised to look out for talented persons in their ongoing recruiting outreach. It isn't uncommon for research firms to seek top notch univer- sity graduates who show leader- ship potential. SoftBank as an organisation is synonymous with its charis- matic founder that is reshap- ing global tech with its colossal treasure box. e latest news is that Japan's SoftBank Group posted a net profit in the second quarter, partly thanks to gains from the recent reduction of its stake in Chinese e-commerce giant Alibaba. e investment behemoth has made huge bets to fund and grow new tech companies around the world – making its earnings vulnerable to fickle market forces. SoftBank's results have lurched between dizzying highs and lows in recent years, while China's crackdown on its tech sector has also taken a toll on the company. Commenting on the recent drama surrounding crisis-hit cryptocurrency plat- form FTX.com, he reassured listeners that SoftBank's invest- ment in these virtual currencies and crypto assets is extremely small. Recently, FTX Group an- nounced that it filed for Chap- ter 11 bankruptcy proceedings, adding it has begun an "orderly process to review and monetize assets for the benefit of all glob- al stakeholders". In August, the SoftBank group announced it would sell some of its shares in Alibaba, reducing its stake in the Chinese tech gi- ant to around 15 per cent from 24 per cent. is helped boost SoftBank's earnings in the sec- ond quarter for a net profit of €21.2 billion. SoftBank's per- formance in the April-to-June quarter was dragged down by a global tech share rout, triggered by interest-rate hikes by the US Federal Reserve and other cen- tral banks to tackle inflation. In September, SoftBank con- firmed that 30 per cent of its investment advisors would lose their jobs. e company also sold off its entire stake in ride-sharing company Uber, garnering a $1.7 billion profit from its original 2018 invest- ment in the company from these sales. e news came as SoftBank announced the re- moval of several high-profile executives from its board, fol- lowing investor pressure to im- prove governance. At the end of September, SoftBank held positions worth $16.8 billion in stocks including Amazon.com Inc, Google par- ent Alphabet Inc and Facebook Inc. e fair value of SoftBank's options and futures positions was $2.7 billion at the end of September. It booked a record gain in the quarter from invest- ments via its two Vision Funds, though much of that typically reflected unrealised profit from portfolio companies. e figure compared with a loss a year ear- lier. e first fund is now worth some $76.4 billion. at total does not include gains over the life of the fund in- cluding a $4.5 billion gain from exited investments and a $1.5 billion gain from derivatives. It is notable that layoffs arose from major high-tech com- panies, like digital mortgage originator Better, delivery app GoPuff, online real estate bro- kerage Redfin, and fitness tech startup Tonal. However, what's most impor- tant is that we are seeing lay- offs ultimately spread across US tech and into other sectors, boosted by hiring among retail- ers and the travel sector ahead of the year-end holidays, private employers created 239,000 jobs in October, according to the US National Employment Report. In a statement, ADP chief economist Nela Richardson said that although the figure shows the labour market re- mains "really strong", hiring was not broad-based, with manu- facturing firms, which are heav- ily sensitive to interest rates, losing 20,000 jobs in third quar- ter. Moving on we now witness most of America's biggest tech- nology firms are having a bad time. More than $1trn has been wiped from their market value in recent weeks. Is the mam- moth sell-off nothing more than investor jitters? Or is it a symp- tom of something more funda- mental about the future of the tech sector? Simply one may mention Uber, the Netflix group, Meta, Am- azon, and others. Others ask what they can learn from China, where tech behemoth Alibaba has seen its share price plunge by 77% from a 2020 peak. And if this is a turning point, what does that mean for the global future of the formerly most profitable tech sector in America? Only time will tell if there is a twist of faith in high technology. Masayoshi Son (pictured) created Softbank in the 1980s Japan's SoftBank Group posted a net profit in the second quarter, partly thanks to gains from the recent reduction of its stake in Chinese e-commerce giant Alibaba