Spend a few minutes with Masayoshi Son these days, and odds are he will sit you in front of his computer screen and give you a demo of Yahoo! BB, his new Japanese high-speed Internet access service. First comes a video news clip of Osama bin Laden firing his Kalashnikov, followed by a performance from the local rock group. "This is the fastest broadband access anywhere," Son says, smiling. "We have a mad scientist engineer who did this."

The president and CEO of Tokyo-based Softbank, the globally ambitious Internet venture fund, has reason to be obsessed with the five- month-old service. After all, its transmission speed is twice as fast as anything in Japan, the US, or South Korea. And Son is counting on Yahoo BB to be the smash hit that will start to turn around the fortunes of his struggling company. The service has already signed up 200,000 subscribers and is angling for 1.5 million more. Moreover, Yahoo BB is not merely a new add-on to Softbank’s 51%-owned Yahoo Japan, the offshoot of megaportal Yahoo. It could allow Softbank to migrate all its Japanese affiliates to a faster and more profitable broadband track.

That’s the plan, anyway. Certainly, Son needs to counter all the bad news about Softbank of late. A sprawling operation with about $3.6 billion in revenues and a patchy profit record, Softbank has invested in 600-odd Internet and wireless outfits since the mid-1990s. Son made a killing by getting in early on Yahoo, E*Trade, and mobile-phone service provider UTStarcom.

But many Softbank companies are now beginning to losing money.

Back in 1999, when Softbank was sitting on unrealized gains from its Internet stock portfolio of about $15 billion, Son was hyped at home and abroad as a visionary. It seemed more than deserved. But the cratering of global high-tech stock prices has diminished Son’s aura. In late November, Softbank reported a half-year net loss of $448 million, mostly because it was forced to mark down the value of its Internet portfolio. Softbank’s market capitalization has plunged to about $27 billion, from roughly $200 billion back in 1999. Worse, Japan’s recession is pounding the profitability of its core publishing and software retailing operations, and its fledgling online financial services.

Dot-bombs
Although Son has made some shrewd investments in Silicon Valley over the years, he and his team got badly burned at the tail end of the Net frenzy, when venture funds on the West Coast, Softbank’s VC arm included, bid up companies with unproven business models to ridiculous heights.

There may also be a bomb hidden deep inside Softbank: the $800 million or so it has invested in unlisted startups, primarily in the US that are expected to break even next year. Still, debt pressures are mounting. Softbank owes $4 billion to creditors, $800 million of that is due in the next two years. True, it has $1.22 billion in cash and marketable securities. It also has a credit line of $700 million. But with unrealized gains on its portfolio down to $6 billion from $15 billion, analysts are starting to worry.

Son knows it’s show time on the profits front. JP Morgan Chase analysts figure the company will lose $633 million for the fiscal year that ends next March, on about $3.3 billion in sales. Son concedes the write-downs on soured investments and Japan’s recession likely will result in a big loss.

Some are saying Softbank should pull out of the VC game, do triage on its portfolio, and get down to the nitty-gritty detail work of turning its subsidiaries into lean, mean profit machines. Son has already shuttered a money-losing online Japanese bond-trading venture with Lehman Brothers and pledges to be ruthless in cleaning out the rest of his stable.

No rest
For the moment, Son is being selective about new and second-round financing in the US and Asia. And he isputting in 19-hour days getting Yahoo BB on track.

Now that the service is up and running, Son thinks he can get that critical subscriber base of 1.5 million by late next year. His stable of e-commerce units expect to see a jump in sales by cross-promoting on a souped-up Yahoo that reaches some 20 million Japanese Web surfers.

Son still argues that the Internet will change everything. That may be true, but Son has to prove he can make money on the hot technologies he has already backed. Otherwise, the Internet revolution may move on to its next phase without him.

By Brian Bremner in Tokyo in BusinessWeek. Copyright 2002 by The McGraw-Hill Companies, Inc