The Mogul's Annual Surprise
“Interesting.”
Robert Edward Turner III, commonly known as Ted Turner, sat in his office on 59th Street in New York, staring in surprise at the colorfully printed booklet in his hands. The cover bore the large Android logo, with the rather long subtitle “Year-End Settlement Report for Major Shareholders.” The booklet had been waiting on his desk when he arrived at work. At first he had wondered what it was. He had founded CNN and various other cable networks, and had poured large sums into several listed companies, yet not once had any of them sent him a detailed settlement report at the end of the year.
Android Inc. was listed on the Nasdaq, and he himself held a ten-percent stake, so he could examine the accounting books whenever he wished. But the company had never been this proactive about reporting changes in its assets. Nor had it engaged in creative accounting to present only the most flattering numbers. The document had been prepared and notarized by one of America’s most reputable accounting firms, so any possibility of window-dressing was out of the question. In any case, Android was performing so well that it needed no such embellishment. Its stock price today was already approaching thirty-five dollars, a steady climb driven by the overwhelmingly positive reception of the recently released Android 95.
He had briefly considered that the company might only issue reports in good times and withhold them in bad, but the very first page addressed that thought directly: the report would be published regularly every winter.
“He really is special.”
Ted Turner smiled contentedly as he pictured Yoo Jae-won’s face, though a trace of regret soon followed. He often found himself wondering lately what might have happened if he had bought a larger stake when the opportunity first arose. The share price, which had stood at twenty-three dollars at the time of the IPO, was now nearing thirty-five—an extraordinary return of over sixty percent in a very short period. Among all the investments Ted Turner had made over the years, none had generated such rapid and massive gains.
“A complete monopoly.”
According to the booklet, Android had sold more than forty million packages of Android 2.0 Gaming Edition in 1994 alone. Over ninety-seven percent of all PCs shipped worldwide came pre-installed with the Android operating system. The report also helpfully noted separate revenue streams from ad slots on the adware version and from enterprise licenses.
“Five point six billion dollars? No—five hundred and sixty million.”
Ted Turner had been reading with satisfaction until he reached the operating-profit line, where a question mark appeared. Despite the enormous market share, the operating profit was lower than he had expected. The reason was easy to find. In the old Microsoft era, a single DOS package had cost a hundred and twenty dollars. Now, even though Android was a full-scale operating system distributed on CD, it sold for a mere 9.9 dollars. No matter how many units were sold, the revenue could never match the old margins.
Hardware licensing proved far more profitable. The Live Force Feedback technology that added vibration to game controllers alone generated well over a hundred million dollars in licensing fees. While the Japanese PlayStation did not include the feature as standard, every third-party joystick sold with it, because the presence or absence of vibration made a dramatic difference in gameplay enjoyment.
The report also detailed Android’s various application programs and their sales figures—video-editing software, simple waveform editors, and many others. Total revenue for 1994 reached seven hundred and fifty-four million dollars, with net profit after all expenses listed at four hundred and fifty-two million four hundred thousand dollars. Of that amount, two hundred million would be retained internally, while two hundred and fifty-two million four hundred thousand dollars would be distributed as dividends early the following year. Shareholders were invited to submit any objections to the board.
With his ten-percent stake, Ted Turner stood to receive twenty-five million two hundred and forty thousand dollars in dividend income—an unprecedented payout among Nasdaq-listed IT companies. Still, a small pang of regret remained. Had Android priced its operating system at the old Microsoft level of a hundred and twenty dollars, the dividend would have been in the hundreds of millions.
“I heard the 95 series starts at twelve dollars?”
At least Android 95 had raised the price slightly to twelve dollars. While still far below a hundred and twenty, it represented an increase of more than twenty percent.
“I hear that friend of mine is eyeing a broadcast network next year?”
Ted Turner’s own world was broadcasting. The latest rumor in the industry was that Nextcomcast was preparing a massive M&A campaign. Speculation ranged from acquiring regional networks to launching a nationwide channel. Some even claimed the entire offensive had been triggered when Yoo Jae-won saw his own name plastered across Nextcomcast’s customer bulletin board in the most unflattering terms and became furious. While a terrestrial broadcast license remained out of reach, Nextcomcast’s cable infrastructure could easily deliver new channels into living rooms across the United States and Canada.
“With an expert right next door, why hasn’t he made a single phone call?”
Ted Turner set the Android year-end report aside and voiced his complaint aloud. He was, after all, a legendary figure in American broadcasting—the man who had built CNN and TBS from nothing.
“Surely he didn’t call that Murdoch fellow first?”
His polar opposite in the industry was Rupert Murdoch, chairman of News Corp. Just as CNN and Fox News stood on opposite sides, Ted Turner and Rupert Murdoch were fundamentally different in temperament, yet Murdoch was undeniably a major player. The mere thought that Yoo Jae-won might have consulted Murdoch first made Ted Turner’s blood boil. Objectively, nothing had even begun yet, so there was no reason for any movement, but the possibility alone narrowed his perspective.
“Hmm. That won’t do.”
Most people would have let the irritation simmer, but Ted Turner was not most people. He picked up the phone and dialed Yoo Jae-won’s number directly. A pleasant ringtone sounded, followed by a click as the call connected.
“Of course…… Naturally. Why would I ever contact Mr. Murdoch, with whom I have no personal connection?”
Every eye in the room turned to Yoo Jae-won. ID Investment’s year-end settlement presentation had just begun when the unexpected call arrived. Under normal circumstances he would have asked the caller to wait until the meeting ended or taken a message, but the caller was Ted Turner, vice chairman of Time Warner, so Yoo Jae-won paused the presentation to take the call.
“Acquiring a broadcast station? Since we already own the cable network, it makes sense to have our own content. Whether we acquire an existing station or build one from scratch, we haven’t decided yet. We’re still in the research phase…… Of course, once we move seriously into the market, you’ll be the first person I contact, Vice Chairman Turner. Everyone knows you’re the foremost expert in this field. Besides, you’re also a major shareholder in Android Inc.…… Yes, I’ll call you directly next time.”
The conversation lasted only about three minutes, yet its implications were significant. Yoo Jae-won had expressed his intention to focus on Nextcomcast in 1995, though no concrete plan had been formulated. Still, he had personally stated that if an acquisition route were chosen, he would speak with Time Warner first. Even though nothing was finalized, the remark carried considerable weight in a potential multi-billion-dollar transaction.
“Mr. Vincent, I apologize for the interruption. Please continue.”
—Yes, I’ll resume the presentation.
At Vincent’s words, the screen once again displayed the achievements of ID Investment in 1994. The total value of its U.S. IT-sector holdings had surpassed twenty billion dollars—an achievement well worth boasting about. While Yoo Jae-won had flagged the major names—Intel, AMD, Cisco, Qualcomm, Micron, Texas Instruments, IBM—Vincent and his investment managers had also selected numerous other stocks that delivered outstanding returns.
—The outlook for the IT sector remains very bright, as I mentioned earlier. IT drove Wall Street’s growth in 1994, and that momentum shows no sign of slowing. Moreover, the emergence of the cellular-phone market will expand the growth potential even further.
—However, Asia requires caution. In particular, many companies in Southeast Asia and Korea are relying heavily on debt under the banner of attracting foreign capital. At the same time, the scale of N-carry trade is expanding at an astonishing rate. Recently it has spread into East Asia, and its combination with derivatives is increasing the risk. It may be a stretch, but if even one link in the chain breaks, a chain-reaction currency crisis could sweep across East Asia.
“Wow, you’ve already mapped out the entire picture?”
—Thanks to the many hints you provided, Chairman, it was relatively easy to identify. The details will be included in the year-ahead forecast report, which we plan to distribute by the end of December at the latest.
“Understood. I’m looking forward to it.”
Yoo Jae-won wondered how people would react once ID Investment’s report was released.
—Shin-Nihon Investment Bank also posted solid growth of sixteen percent. Given the spectacular performance of our U.S. IT investments, sixteen percent might seem modest, but considering Japan’s overall economic growth rate of only 2.3 percent, it was an impressive result.
—The Bolivian lithium mine also recorded remarkable sales growth compared with the previous year, driven by rising global demand for secondary batteries and the expansion of the LCD industry. Vincent displayed a chart. Global production totaled fourteen thousand tons, of which more than five thousand tons came from the Bolivian mine owned by ID Investment. At twelve dollars per kilogram on the international minerals market, that translated to roughly sixty million dollars in revenue. After profit-sharing with local mining companies and the Bolivian government, actual net profit stood at approximately twenty-five million dollars. For ID Group, which boasted numerous businesses generating hundreds of millions, a twenty-five-million-dollar mining operation was little more than a passing mention. Yet once lithium demand exploded in the twenty-first century and China began weaponizing rare-earth resources, the price would easily rise tenfold. Production volume would also increase steadily, raising the possibility that mining profits could one day surpass those of Android Inc.
—And just yesterday, the Chilean government expressed interest in having us develop a rare-earth mine in the Atacama region. Jealousy knows no borders. Chile and Bolivia had fought a territorial war and remained deeply hostile. When Bolivia suddenly struck it rich with lithium development, Chile’s envy was only natural. Chile also possessed regions rich in lithium and other rare minerals, but had previously been reluctant to invite foreign capital. Seeing Bolivia thrive with ID Investment’s backing, however, had clearly changed their thinking.
“Of course we should respond positively. If any documents have arrived, please send them over for immediate review.”
Yoo Jae-won had not favored Bolivia out of any special affection; he had simply concentrated on the Uyuni mine. Therefore he was perfectly willing to consider additional investment opportunities. Moreover, Bolivia was politically unstable—a coup was scheduled for 1995. While the coup forces were unlikely to tamper with the Uyuni mine, the only reliable source of hard currency in an otherwise impoverished country, the future remained uncertain. Diversifying supply sources for critical resources was strategically prudent for political reasons as well.
—We haven’t received a formal proposal yet; it was merely a tentative inquiry. Once we convey your positive response, they will take further action.
Having completed the business update, Vincent moved on to the accounting figures. Various line items appeared on the screen. While each carried deep meaning, the figure that stood out most clearly to Yoo Jae-won was net profit—the amount remaining after personnel costs, operating expenses, and corporate taxes.
Vincent, already attuned to Yoo Jae-won’s priorities, addressed the number directly.
—Operating profit came to two billion five hundred and ninety-eight million four hundred and ten thousand dollars. After deducting all expenses and taxes, net profit reached one billion two hundred and fifty-seven million six hundred thousand dollars.
“That much?”
Yoo Jae-won had not expected operating profit of two and a half billion dollars while the investments were still unrealized. The reason was straightforward: a large number of investors had requested redemptions or reinvestments in ID Investment’s products. Subscription fees were charged at entry, and upon early redemption or at maturity, performance fees and operating costs amounting to roughly thirty percent of profits were deducted. While thirty percent might seem high, it was far more generous than industry norms, where early cancellation often meant surrendering seventy percent of gains. ID Investment charged only thirty percent for mid-term settlements and twenty percent at maturity—exceptionally low rates. Given the IT sector’s returns of several dozen percent in 1994, many investors had been satisfied and requested partial redemptions. Vincent explained that the introduction of HTS, which allowed clients to check returns instantly from home, had significantly increased the number of mid-term settlements.
Conversely, the proven high returns had attracted a flood of new capital, generating far more operating profit than anticipated.
“You’ve done excellent work. I look forward to your continued efforts.”
—It’s my pleasure. We will continue to do our utmost.
Yoo Jae-won concluded the ID Investment report with words of appreciation. Knowing that an enormous reserve of ready capital was available at any moment left him feeling deeply reassured. Only two companies remained: ID Technology, the backbone of ID Group, and the formidable newcomer ID Entertainment.