Comdex is on list of holdings to be sold off

Peter Poole-Wilson

Thursday, July 15, 1999 | 10:55 a.m.

TOKYO -- Softbank Corp., seeking to restrict its $15 billion investment portfolio purely to Internet companies, said it will sell its stakes in other companies, sending its shares to a record high.

Softbank, which has direct and indirect stakes in more than 100 U.S. and other companies doing business on line, will begin by selling its 80 percent interest in closely held memory-chip-module maker Kingston.

The move was designed to "limit its majority position in companies that do not operate totally on the Internet," Softbank said in a statement.

Separately, Softbank said it approved a decision by Ziff-Davis Inc., the largest publisher of computer magazines, in which Softbank holds about 69 percent, to consider selling some or all of its businesses to boost its stock price. Ziff-Davis owns the Comdex computer shows. The fall Comdex show in Las Vegas is the world's largest trade show.

Softbank's shares, which have more than quadrupled in the past year, surged to a record high of 34,800 yen.

"These are positive developments. They make Softbank into a much more focused company," said Mahendra Negi, an analyst at Merrill Lynch Japan Inc., who rates Softbank "buy." "This is in line with what Softbank is all about, which is high-growth Internet companies."

Tokyo-based Softbank has accumulated more than $15 billion in unrealized gains on a series of early bets on fast-growing U.S. online ventures, three-fourths of which are accounted for by Yahoo! Inc. and ETrade Group Inc.

The company is now using those latent profits to secure a stake in every industry of the emerging Internet economy, in accordance with billionaire founder Masayoshi Son's goal of building the world's first "Internet conglomerate."

Founded in 1981 as a software distributor, Softbank is a major investor in many of the most-visited online businesses, and analysts say its portfolio represents between 3 percent and 8 percent of the total market capitalization of listed Internet companies.

Ziff-Davis, the publisher of PC Week magazine, said it hired investment bank Morgan Stanley Dean Witter & Co. to explore options for the company, including alliances, joint ventures, a merger or a sale.

The move comes as Ziff-Davis, which has a current market value of $1.46 billion, tries to whittle down about $1.5 billion in debt and bolster its share price, which has fallen 35 percent since it set a 52-week high of 29 on March 30.

"The indication is that pretty much anything is on the table," said La Salle Street Securities analyst Daniel King, who has a "buy" rating on Ziff-Davis. "(Ziff-Davis's) share price has not performed well ... and ultimately they need to show they can provide shareholder value."

New York-based Ziff-Davis has interests in publishing, trade shows and conferences, television and Internet-content businesses, and it owns 86 percent of ZDNet, an Internet-based technology-news publisher.

In one possible scenario, Softbank would reduce its holdings in Ziff-Davis to a minority stake by selling a large block of shares to a strategic partner, King said. That would fit with Softbank's plan to reduce non-Internet holdings. It would also result in a Ziff-Davis alliance with some new partner that could potentially help the company win over investors, he said.

New York-based Ziff-Davis said in May that it had hired Morgan Stanley to help it explore a possible sale of its unit that provides marketing services to technology companies.

A Ziff-Davis spokesman said that sale "is a totally separate process" from the announcement made in New York yesterday.