‘Bill Gates of Japan’ Will Buy Comdex : Softbank to Pay $800 Million for Computer Shows
Leaping boldly onto the main stage of the U.S. computer industry, Japanese software distributor and publishing company Softbank Corp. has agreed to acquire the giant Comdex computer trade show and related operations from the Interface Group for $800 million.
Together with the purchase last fall of Ziff-Davis Publishing’s exposition and conference division, the deal makes Softbank the dominant player in the booming computer trade show business. And it guarantees a much higher U.S. profile for Softbank Chief Executive Masayoshi Son, a 37-year-old entrepreneur who is sometimes called the Bill Gates of Japan.
“I’d like to be a global player in the industry,” Son said in an interview. “I’ve been active only in Japan until the beginning of last year. But I said to the people in our company I would expand our business heavily into the United States, and maybe in the near future to Europe and other parts of the world.”
For the privately held Interface Group and its chairman, Sheldon Adelson, the sale of Comdex marks the end of an extraordinary run in which Comdex grew from fewer than 4,000 attendees in 1979 to nearly 200,000 last year--making it the largest trade show in the United States.
The show has become so large in recent years--and so expensive and inconvenient for the computer companies that exhibit there--that some big firms have toyed with the idea of boycotting the show and possibly launching a competitor. But most exhibitors--who come to Comdex to show their wares to retailers--say they can’t afford to skip the show, despite what some allege are extortionate rates.
Adelson, who owns 60% of Interface’s trade show division, said Son began pursuing him about buying the operation 18 months ago.
“That kind of persistence and tenacity said something to me,” he said. “He’s committed: PCs are his life. Before him, we never found the right combination of TLC and price.”
Son, the son of Korean immigrants and a maverick personality on the staid Japanese business scene, is putting together a seemingly disparate set of computer-related businesses through acquisitions and partnerships.
Softbank reported profits of $29 million on revenue of $640 million for fiscal year 1994, with about half the revenue coming from selling software wholesale to Japanese retailers. The rest came from 20 computer magazines and several hundred computer-related books.
Son said he expects Softbank’s revenue to hit about $1 billion in the fiscal year ending March 31. Softbank went public last July, raising about $200 million at that time, Son said.
Since then, Son, who still owns 70% of the company, has been on a buying spree. He made a $1.6-billion bid last fall for Ziff Davis Publishing Co., which was rebuffed, but he then bought Ziff’s trade show business for $202 million. Son said the company will issue about $300 million of new stock and borrow the balance necessary for the Comdex buyout.
“At the beginning of last year we had only five employees in the United States,” Son said. “Now we have six companies and 700 employees. At the end of this year it will be 1,200 employees . . . .”
Son said he expects a “synergy” effect from Softbank’s strong position in the conference and exposition business. He also wants to expand further in such areas as publishing of documentation for personal computers, outsourcing service for software providers and general information services, including magazine publishing.
Although Interface Group does not disclose figures, a published report last year estimated that Comdex earns between $20 million and $45 million a year on revenue of between $165 million and $225 million. Interface also puts on about 16 other computer-related trade shows.
Chuck Goto, an electronics industry analyst with Smith Barney International in Tokyo, called Son a “visionary” but expressed uncertainty about the latest acquisition.
“We don’t know if he’s paying too much or too little,” Goto said. “It’s a very risky investment. Eight-five percent of what he’s buying is goodwill. . . . Most of the assets are in people and the right to host Comdex.”
Although Son came from a poor family--and Koreans in Japan are routinely subject to racial prejudice--they managed to send him to study in the United States when he was 16. He finished high school in a few weeks by skipping grades, he said, then entered a private college and later transferred to UC Berkeley, graduating in 1980 at the age of 22.
While working toward his bachelor’s degree in business there, Son said he made his first million by inventing an electronic dictionary, created with the assistance of Berkeley researchers. This was sold to Sharp, he said, and is used today in the Sharp Wizard.
At almost the same time, Son said, he started importing used video game machines from Japan and setting them up in the Berkeley area, earning another $1 million. Son then returned to Japan and started a software distribution business. A few months later, he launched his first computer magazine.
Son’s American way of doing business has attracted U.S. partners. Softbank owns 26% of Novell Japan, a distributor of Novell’s PC networking products. It also owns 12% of Cisco Japan, which sells Cisco networking products.
Son said he considers himself a person of mixed culture who is not really typical of Japanese, Americans or Koreans.
“Being educated in the United States gave me a good understanding of American culture,” Son said. “I think I got a lot of influence from the entrepreneurial mind in the United States.”
Adelson remembers meeting Son at a Comdex show in Tokyo a decade ago. “I can still sketch his booth in my mind. All the Japanese there would basically take their computer and put it on a pedestal and that was it,” he said. “He stuck out because he presented himself in the way that an American company would.”
T. A. Dolotta, president of Softbank America in Santa Monica, said there is a common theme to Son’s acquisitions.
“We’re in the business of providing infrastructure,” he explained. “We provide the stage for the computer industry to display, sell and advertise its services and wares. As Shelly Adelson likes to say, ‘Trade shows are magazines in the flesh.’ ”
Holley reported from Tokyo and Pitta reported from San Francisco.
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Trade Shows Trending Up
Trade shows for hawking everything from computers to curlers to power tools draw hundreds of thousands annually. Technology-related trade shows in particular have been a boom business in recent years, and Softbank--with its proposed purchase of Comdex and its previous acquisition of Ziff-Davis’ exposition business--now stands to become the dominant producer of such events.
* Headquarters: Tokyo
* Chief executive: Masayoshi Son
* Employees: 700
* 1994 revenue: $653 million
* 1994 profit: $28.7 million
* Major businesses: Japanese leader in software distribution with 50% of the market share; Japan’s largest computer-related magazine and book publisher
Note: Fiscal year ends March 31
1995: 200,000 (estimate)
LARGEST COMPUTER-RELATED TRADE SHOWS
Here are the largest U.S. trade shows for the computer industry:
Show / Attendance:
Comdex / fall*: 200,000
PC Expo / New York: 120,000
Windows World*: 100,000
Comdex / spring*: 100,000
Winter Consumer Electronics Show: 91,000
National Manufacturing Week: 75,000
NAB and MultiMedia World: 72,000
America’s Computer Systems Conference & Exposition: 66,000
Personal Computer & Electronics Expo: 60,000
NetWorld + Interop**: 60,000
* Owned by Interface Group
** Owned by Softbank
Sources: MediaMap, company reports
Researched by JENNIFER OLDHAM and DAVID NEIMAN / Los Angeles Times