TOKYO (Reuters) - Rakuten Inc’s quarterly operating profit was almost wiped out in the three months ended September as investment in its e-commerce and mobile units weighed on profits, with the value of its bet on ride-hailing firm Lyft also sliding further.
Rakuten’s billionaire founder and Chief Executive Hiroshi Mikitani is under pressure on multiple fronts as a slide in his tech bets compounds pain from squeezed margins at the firm’s e-commerce business and a delay to its mobile market entry.
The Japanese firm booked a 103 billion yen ($945 million) writedown on its 11% stake in Lyft Inc, as bets on the ride-hailing industry by Rakuten and its rival SoftBank Group Corp, the largest shareholder in Uber Technologies, sour amid a market sell-off of money-losing startups.
Mikitani defended Lyft as an “excellent investment” at a news conference, saying it was making a return for Rakuten.
Rakuten has started its own mobile business, saying it has radically cut the cost of building its network by using cloud-based software rather than expensive hardware.
But construction delays led to an embarrassing climbdown in September when Rakuten said it would offer free services to just 5,000 customers, with no concrete revised date for the launch, which had been due to take place in October.
Rakuten would have 3,000 base stations built by year-end with “coverage improving dramatically,” the mobile unit’s Chief Technology Officer Tareq Amin said.
Rakuten’s mobile network delay relieves potential downward price pressure on its bigger telco rivals NTT Docomo, KDDI and SoftBank Corp.
Rakuten’s operating profit came in at 1.1 billion yen in the third quarter, versus a profit of 43.9 billion yen a year earlier. That was better than an average forecast for an operating loss of 2.5 billion yen from three analysts polled by Refinitiv.
Its shares closed up 2% ahead of earnings, compared with a 0.1% rise in the benchmark index. Rakuten’s shares are up 45% this year but have lost almost 20% since June.
Reporting by Sam Nussey; Editing by Himani Sarkar and Edmund Blair
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