Softbank and GungHo Online Entertainment

Mukesh ValabhjiThe previous blog explained how Softbank is expanding by buying other technology and telecommunications companies in a strategic manner. Mukesh Valabhji endeavours to keep followers informed of the latest business news via his Pinterest page, follow Mukesh to read more.

GungHo Online Entertainment is a Japanese video gaming corporation which hosts the Japanese server of Ragnarok Online. It has also developed Ragnarok DS for the Nintendo DS. Its mobile game Puzzle & Dragons was extremely successful; in 2013, the company made $1.6 billion in revenue, of which 91% was attributed to this game. Since its launch, the game has been downloaded 37 million times.

GungHo’s specialisms are the planning, development and distribution of online computer games, applications for use on smartphones and console games.

Softbank already had a stake of 33.6% in GungHo; it bought another $265 million of stock which increased its stake to 58.5%, making GungHo a subsidiary company. As part of the deal, Softbank also acquired 73,400 shares in Asian Groove.

Softbank and Gungho have previously acted collaboratively; in 2013, they jointly bought a 51% stake in Finnish computer gaming company Supercell in a deal costing them $1.53 billion.

Softbank has set itself the target of becoming the number one mobile network provider in Japan, and wants to reach 1 trillion yen in annual operating profit by March 2017. The acquisition of GungHo is a strategic step towards this goal.

The Secrets of Softbank’s Success

Mukesh ValabhjiThe previous blog post took a look at Softbank, the multimedia Japanese conglomerate, and how its profits had been affected by its acquisition of Sprint Corp. However, there are many strands to Softbank’s financial position.

By the end of the 2014 financial year, it is expected that Softbank will have generated an operating profit of 950 billion yen. This is ahead of the target of 900 billion which was set 6 months previously.

Softbank Mobile performed very strongly, acquiring more smartphone customers and Finnish gaming company Supercell boosted profits further. The original target for Softbank was 1 trillion yen, but this was downgraded to 900 million yen due to the drag caused by Sprint Corp.

The conglomerate has further plans for expansion; in June 2015 it announced that it was investing $1 billion in the Korean company Coupang which specialises in e-commerce. Coupang is broadly speaking the Amazon of Korea. Valued at $5 billion, the company now joins a few elite with valuations of over $1 billion.

Coupang has achieved great market penetration; Korea has a population of 50 million, and its apps have been downloaded 25 million times. Mobile accounts are 75% of its revenue and 85% of total traffic to the service. The company has a logistics network which it set up itself as well as customer fulfilment centres, and its own fleet of delivery drivers. At first, Coupang used third parties for deliveries but then it began to replace them with its own employees to build brand awareness and to connect better with its customers.

It has offered same-day delivery for almost two years, and has set new standards for e-commerce throughout the world. Softbank thinks globally, but for the time being it is very strongly focussed on Korea.

Mukesh Valabhji’s final post in this series looks at Softbank’s investment in another company GungHo Entertainment.