Lyft Stake Didn’t Help Rakuten’s Results This Quarter
Originally published on:
Read the original article
August 10, 2019
Rakuten Inc. reported an unexpected quarterly loss, hit by the depressed value of its investment in ride-hailing firm Lyft Inc. and heavy spending on a new wireless service.
Japanese tech conglomerate Rakuten Inc announced their results for the second quarter and, it seems they are weaker than expected. As it turned out, the loss came out because of the weaker value of their investment in ride-hailing firm Lyft Inc and huge spending on a new wireless service.
The company said the operating loss during the April-June quarter was 1.8 billion yen ($17 million) compared with a 61.6 billion yen profit in the same period a year earlier.
Rakuten’s founder and Chief Executive Hiroshi Mikitani, who holds also a chair of Lyft’s board, presented a 28.4 billion yen unrealized loss on its stake in the ride-hailing firm for April-June, as it had warned in July. It recorded a 110 billion yen gain in the quarter before.
It seems that ride-hailing companies had a bad influence on each and on every of their investors. Just a day before Rakuten came out with the results, another company presented the hail-raiding-company-related loss. SoftBank Group Corp posted an unrealized loss on its stake in Lyft rival Uber for the April-June quarter. The two companies are frivolously spending their cash in order to dominate each other. For now, except for great losses – it hasn’t been showing some improvements.
It’s interesting though that Lyft was the backing of Rakuten’s success a quartal before. Their first-quarter operating profit jumped fourfold because of booking a $1 billion gain on its stake in U.S. ride-hailing company Lyft Inc. Except Lyft, Rakuten’s has stakes in online scrapbook company Pinterest Inc, which listed in February this year. It also took a stake in Dubai-based ride-hailing firm Careem.
Mikitani founded his company in 1997, hoping that carrier services will help drive traffic to Rakuten’s other businesses as an online mall and financial services.
The efforts are an industry talking point, with Rakuten saying it is trying to cut the cost of building a network by using cloud-based software and commoditized hardware instead of proprietary wireless radios.
Rakuten had operating loss also in its mobile services business, as it steps up investment in a new wireless service that is due to launch in October. The move will make it Japan’s No. 4 mobile carrier. Its CEO announced this week that their 5G services will be available in June 2020.
It is called 5G because it’s the fifth generation of mobile internet that guarantees optimization of network speeds that can allow big-data content like for example, ultra-high-definition video to quickly load on devices.
It is also presumed that this will be of help for the driverless car users because, at the same time, the standard’s low latency helps the information to be delivered almost instantly.
Mikitani added that the company doesn’t have to create a totally new network to roll out 5G services.
“We are going to deploy what we call mobile edge computing. In Japan, we are going to have over 4,000 edge servers,” said he.
The company has constantly been under pressure on multiple fronts as it invests in fields like logistics in order to bolster its core online mall business amid competition from rivals like Amazon.com Inc and, already mentioned SoftBank-backed Yahoo Japan Corp. And at the same time, it continues its spending on areas like financial services and telecoms.