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SoftBank racks up losses as Vision Fund investments plunge

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SoftBank racks up losses as Vision Fund investments plunge

>By YURI KAGEYAMA AP Business Writer

TOKYO (AP) — Japanese technology company SoftBank Group Corp. racked up a loss of 961.6 billion yen ($9 billion) for the fiscal year through March, on red ink related to its Vision Fund investments including troubled office space-sharing venture WeWork.

SoftBank, founded in 1981, said Monday the drop in share prices around the world from the fallout of the coronavirus pandemic had slammed the value of its sprawling investments.

Tokyo-based SoftBank had reported a profit of 1.4 trillion yen the previous fiscal year. Its sales for the fiscal year inched up 1% to 6.2 trillion yen ($58 billion). It did not immediately break down quarterly results or give a forecast for the fiscal year through March 2021.

On top of WeWork’s poor performance, the company suffered damage to the value of Uber and other holdings in its portfolio. The pandemic is adding to uncertainties.

The merger of Sprint with T-Mobile in the U.S. was completed on April 1, in one bit of good news.

The pandemic was not expected to affect SoftBank’s telecommunications business, such as mobile phone services in Japan. As people stay home to help curb the spread of the coronavirus, they tend to use more online deliveries and other internet-based activities.

But the company’s technology licensing and royalty revenues may drop due to Arm, which provides microprocessors and other technology and is also part of SoftBank’s operations, because of pandemic-related disruptions.

SoftBank’s chief executive, Masayoshi Son, told reporters the company was facing “unprecedented challenges” because of the pandemic.

But he said some businesses such as Chinese e-commerce giant Alibaba and Arm hold great potential, and the stock value of SoftBank’s holdings has fallen but is not crashing.

“I realize I am giving excuses, and the extreme economic hardships from this ‘corona-shock’ are very real,” Son said.

SoftBank bailed out WeWork last year, and severed ties with its co-founder Adam Neumann, whose reported lavish living has tarnished the brand. Its IPO was ditched, and SoftBank has shelved its tender offer.

The future of the office-sharing business model itself is in question as reopening economies try to abide by social-distancing measures against the virus that causes COVID-19.

Earlier in the day, SoftBank announced Chinese billionaire Jack Ma was stepping down from the board.

Son said the move was related to Ma’s decision to semi-retire, including from his post at Alibaba. They continue to communicate regularly as “like-minded soulmates,” said Son.

“It’s sad to see him go, but we will be best friends forever,” he said.

SoftBank is a major investor in Alibaba. Ma, who joined the SoftBank board in 2007, and Son have a longstanding close relationship.

Ma, the co-founder of Alibaba, has been focusing on philanthropy lately, such as donating masks and test kits to help in the efforts against the pandemic.

SoftBank announced three new board members, including SoftBank Chief Financial Officer Yoshimitsu Goto and Waseda University professor Yuko Kawamoto.

Another new member is Lip-Bu Tan, founder of Walden International, a venture capital firm focused on computer chips, cloud and artificial intelligence. He is also chief executive of Cadence Design, a U.S. electronic design automation software and engineering services company.

Son said that adding outside board members will enhance corporate governance at SoftBank, responding to criticism he wielded too much control.

Also Monday, SoftBank said it was buying back its own shares, of up to 500 billion yen ($4.7 billion) in value, to shore up its bottom line.

“I am not totally pessimistic, given all the challenges we have faced in the past,” said Son. “We will keep at it.”

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Alibaba sells 5% stake in media asset

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In a regulatory maneuver to reel in Alibaba, the Chinese government asked the retail giant to submit some of its recently owned media assets, resulting in the company disposing of its 5 percent stake in its Chinese broadcaster, Mango Excellent Media Co Ltd.

In March, following a thorough investigation into the tech giant’s media assets, Chinese authorities ordered the company to discard of some of its media properties and conduct a plan to significantly moderate and reduce its media groups.

One media holding is the famous video-streaming service Mango, one of Alibaba’s most recent media assets. Operated by Hunan TV, the platform is the most referred to network in China, after Central Television.

“In Thursday’s filing to the stock exchange, the media company said Alibaba’s investment arm would seek a waiver from a one-year lockup to which it committed at the time of its investment,” according to Reuters. 

The e-comment mogul has intentions of selling its 5 percent in the broadcasting company while trying to find a way to work around an agreement prohibiting Alibaba from selling shares for a year.

Based on Thursday’s stock closing rate, Alibaba’s 5 percent stake was estimated at around $599 million, representing a 38 percent reduction than it initially paid for. However, with the news of the sale emerging, Mango’s share price increased by 6.9 percent on Friday.

It is worth mentioning that Alibaba could not sustain a high-profit margin from Mango Excellent as the tech company suffered a devastating loss of $320 million from the investment based on the listed stock price revealed on Friday.

The media holding’s future sale will come in synchronization with regulatory scrutiny from China’s watchdogs as the giant endures political pressure from Beijing, which in parallel demolished the tech company’s trust with the Chinese government.

The Shenzhen-based company underwent a bundle of scrutinizing tactics on its infrastructure as regulations poured on the company’s previous records and behavior. In the past 12 months, authorities intensified their examination into Alibaba’s business procedures and implemented harsh antitrust fines.

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Apple, Google raise new concerns by yanking Russian app

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BERKELEY, Calif. (AP) — Big Tech companies that operate around the globe have long promised to obey local laws and to protect civil rights while doing business. But when Apple and Google capitulated to Russian demands and removed a political-opposition app from their local app stores, it raised worries that two of the world’s most successful companies are more comfortable bowing to undemocratic edicts — and maintaining a steady flow of profits — than upholding the rights of their users.

The app in question, called Smart Voting, was a tool for organizing opposition to Russia President Vladimir Putin ahead of elections held over the weekend. The ban levied last week by a pair of the world’s richest and most powerful companies galled supporters of free elections and free expression.

“This is bad news for democracy and dissent all over the world,” said Natalia Krapiva, tech legal counsel for Access Now, an internet freedom group. “We expect to see other dictators copying Russia’s tactics.”

Technology companies offering consumer services from search to social media to apps have long walked a tightrope in many of the less democratic nations of the world. As Apple, Google, and other major companies such as Amazon, Microsoft and Facebook have grown more powerful over the past decade, so have government ambitions to harness that power for their own ends.

“Now this is the poster child for political oppression,” said Sascha Meinrath, a Penn State University professor who studies online censorship issues. Google and Apple “have bolstered the probability of this happening again.”

Neither Apple nor Google responded to requests for comment from The Associated Press when the news of the app’s removal broke last week; both remained silent this week as well.

Google also denied access to two documents on its online service Google Docs that listed candidates endorsed by Smart Voting, and YouTube blocked similar videos.

According to a person with direct knowledge of the matter, Google faced legal demands by Russian regulators and threats of criminal prosecution of individual employees if it failed to comply. The same person said Russian police visited Google’s Moscow offices last week to enforce a court order to block the app. The person spoke to the AP on condition of anonymity because of the sensitivity of the issue.

Google’s own employees have reportedly blasted the company’s cave-in to Putin’s power play by posting internal messages and images deriding the app’s removal.

That sort of backlash within Google has become more commonplace in recent years as the company’s ambitions appeared to conflict with its one-time corporate motto, “Don’t Be Evil,” adopted by cofounders Larry Page and Sergey Brin 23 years ago. Neither Page nor Brin — whose family fled the former Soviet Union for the U.S. when he was a boy — are currently involved in Google’s day-to-day management, and that motto has long since been set aside.

Apple, meanwhile, lays out a lofty “Commitment to Human Rights” on its website, although a close read of that statement suggests that when legal government orders and human rights are at odds, the company will obey the government. “Where national law and international human rights standards differ, we follow the higher standard,” it reads. “Where they are in conflict, we respect national law while seeking to respect the principles of internationally recognized human rights.”

A recent report from the Washington nonprofit Freedom House found that global internet freedom declined for the 11th consecutive year and is under “unprecedented strain” as more nations arrested internet users for “nonviolent political, social, or religious speech” than ever before. Officials suspended internet access in at least 20 countries, and 21 states blocked access to social media platforms, according to the report.

For the seventh year in a row, China held the top spot as the worst environment for internet freedom. But such threats take several forms. Turkey’s new social media regulations, for instance, require platforms with over a million daily users to remove content deemed “offensive” within 48 hours of being notified, or risk escalating penalties including fines, advertising bans and limits on bandwidth.

Russia, meanwhile, added to the existing “labyrinth of regulations that international tech companies must navigate in the country,” according to Freedom House. Overall online freedom in the U.S. also declined for the fifth consecutive year; the group said, citing conspiracy theories and misinformation about the 2020 elections as well as surveillance, harassment, and arrests in response to racial-injustice protests.

Big Tech companies have generally agreed to abide by country-specific rules for content takedowns and other issues in order to operate in these countries. That can range from blocking posts about Holocaust denial in Germany and elsewhere in Europe where they’re illegal to outright censorship of opposition parties, as in Russia.

The app’s expulsion was widely denounced by opposition politicians. Leonid Volkov, a top strategist to jailed opposition leader Alexei Navalny, wrote on Facebook that the companies “bent to the Kremlin’s blackmail.”

Navalny’s ally Ivan Zhdanov said on Twitter that the politician’s team is considering suing the two companies. He also mocked the move: “Expectations: the government turns off the internet. Reality: the internet, in fear, turns itself off.”

It’s possible that the blowback could prompt either or both companies to reconsider their commitment to operating in Russia. Google made a similar decision in 2010 when it pulled its search engine out of mainland China after the Communist government there began censoring search results and videos on YouTube.

Russia isn’t a major market for either Apple, whose annual revenue this year is expected to approach $370 billion, or Google’s corporate parent, Alphabet, whose revenue is projected to hit $250 billion this year. But profits are profits.

“If you want to take a principled stand on human rights and freedom of expression, then there are some hard choices you have to make on when you should leave the market,” said Kurt Opsahl, general counsel for the digital rights group Electronic Frontier Foundation.

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Ortutay reported from Oakland, California. Associated Press writers Daria Litvinova in Moscow and Kelvin Chan in London contributed to this story.

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Epic CEO: Apple won’t let Fortnite back until case ends

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Epic CEO Apple won't let Fortnite back until case ends

Tim Sweeney, CEO of Fortnite maker Epic Games Inc., said Wednesday it’s been told by Apple that the game will be “blacklisted from the Apple ecosystem” until the companies’ legal case is resolved and all appeals are exhausted, which could take as long as five years.

Sweeney posted on Twitter that Epic has asked Apple to reinstate Fortnite and promised “that it will adhere to Apple’s guidelines whenever and wherever we release products on Apple’s platforms.”

“Apple spent a year telling the world, the court, and the press they’d ‘welcome Epic’s return to the App Store if they agree to play by the same rules as everyone else.’ Epic agreed, and now Apple has reneged in another abuse of its monopoly power over a billion users,” Sweeney tweeted.

Apple declined to comment.

Earlier this month, the federal judge overseeing the companies’ legal scuffle ordered Apple to dismantle a lucrative part of the competitive barricade guarding its closely run iPhone app store, but rejected allegations that the company has been running an illegal monopoly that stifles competition and innovation. But U.S. District Judge Yvonne Gonzalez Rogers didn’t brand Apple as a monopolist or require it to allow competing stores to offer apps for iPhones, iPads and iPods.

Epic is appealing the decision.

Epic had claimed that Apple has been gouging app makers by charging commissions ranging from 15% to 30% for in-app transactions because it forbids other options on its iPhone, iPad and iPod.

When Epic tried to evade the commissions with an alternative payment system in Fortnite last August, Apple ousted it from the app store to set up a legal showdown that could force it to lower its fees. But Apple has insisted that the commissions are a reasonable toll paid by a minority of the 1.8 million apps in its store to help cover the more than $100 billion it has invested in mobile software.

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