TOKYO -- SoftBank Group is expected to recover from its worst ever quarterly loss when it reports April-June earnings on Tuesday after putting its aggressive investment strategy on hold. But analysts say the technology group is unlikely to return to its acquisitive style anytime soon.
SoftBank is expected to post a net profit of 795 billion yen ($7.5 billion) in the fiscal first quarter, according to consensus estimates on S&P Capital IQ, compared to a net loss of 1.4 trillion yen in the previous quarter.
The company's near $100 billion Vision Fund likely rebounded from its 1.1 trillion yen operating loss in the previous quarter, as valuations of some of its tech investments stabilized. SoftBank's overall bottom line is also likely to be influenced by a string of one-off items related to deals during the period.
Those include profits from merging its U.S. mobile arm Sprint with rival T-Mobile, as well as a subsequent deal to sell part of the stake.
SoftBank also raised $13.7 billion by promising to sell shares in Chinese e-commerce group Alibaba Group Holding in the future. SoftBank has insured itself against changes in the value of Alibaba shares using derivatives but has left some upside if shares rise before it settles the transaction.
The string of deals were part of a 4.5 trillion yen asset sale program unveiled in March, marking SoftBank's shift from one of the world's most aggressive buyers of tech stocks into one of the most active sellers. It has used some of the proceeds to buy back about 1 trillion yen worth of shares and has committed to another 1.5 trillion yen in buybacks.
The program's announcement and the rapid execution of deals indicate SoftBank founder and Chairman Masayoshi Son's concerns over the long-lasting impact of the coronavirus. Son, who has been calling for large-scale COVID-19 testing, believes the outbreak will continue well into 2021, according to several company officials. SoftBank recently launched a subsidiary to roll out rapid coronavirus testing in Japan.
"There is a high possibility that the coronavirus calamity will continue," Ken Miyauchi, CEO of SoftBank's domestic telecommunications unit and one of Son's key deputies, said in a news conference last week.
The cautious outlook and focus on shareholder returns has reassured investors as the spread of COVID-19 shows no signs of slowing down. SoftBank's stock price has more than doubled from its low in March and is around its highest level in 20 years.
"SoftBank is hardening its defensive position. It has completely turned off the tap on the Vision Fund," said Shinji Moriyuki, an analyst at SBI Securities.
But the fading appeal of the Vision Fund -- which Son has positioned as the next pillar of SoftBank -- is a double-edged sword. Its void has been filled by the likes of Google, which invested $4.5 billion in India's Jio Platforms, and Microsoft, which is in talks to acquire the popular video app TikTok in some countries from its Chinese parent ByteDance.
Rival funds are also emerging -- U.S. private equity firm KKR recently raised $11 billion for a new pan-Asian investment fund.