Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

CEO Behind 5,500% Stock Gain Says His Secret Is Raising Salaries

CEO Behind 5,500% Stock Gain Says His Secret Is Raising Salaries

Masaru Tange, 46, says his business model is an attempt to remove inefficiencies in Japan's software industry.
Masaru Tange says the strategy that turned his company into one of Japan's best-performing stocks may be surprising: He buys smaller firms and boosts their workers' pay.

Tange's Shift Inc., a software tester, acquires other businesses near the bottom of the industry supply chain and raises their engineers' salaries. He says he's able to do this and still charge competitive prices by cutting out layers of companies that serve as middlemen in the outsourcing process. And having more workers leads to higher sales.

Shift's shares have risen more than 5,300% since it went public in 2014, the second-best performance on Tokyo's benchmark stock index. The company's market capitalization has surged to about $2.3 billion, pushing the value of Tange's 33% stake to about $745 million.

Tange, 46, says his business model is an attempt to remove inefficiencies in Japan's software industry, where layers of subcontractors take cuts on orders before passing the work to another company below. It's also, he says, a break from the M&A strategy of buying a business and looking to reduce costs.

"I have a strong urge to rescue these young employees," Tange, Shift's founder, president and chief executive officer, said in an interview. "I want to create a fair working environment through M&A."

Tange grew up in what he describes as an ordinary family in Hiroshima in southwestern Japan, where both his parents were civil servants. He established Shift in 2005 after majoring in mechanical engineering and spending more than five years working for a consulting firm.

Shift started out advising companies on how to improve profits. In 2009, it entered the software testing business.

Tange said he wanted to change engineers' perception that software testing was a second-rate job, including by paying them more money.

For example, for a service where the market price was 2 million yen ($18,320), Shift would charge 1.5 million yen. This would enable it to win customers. At the same time, it would raise the amount paid to the engineer to about 800,000 yen from 500,000 yen. It could do so, Tange said, by getting rid of middlemen.

Shift acquired Yusuke Sato's company in 2016. Since then, the software developer says his salary has jumped by more than 70%.

"Joining Shift was a huge turning point in my career," Sato said.

Shift has 3,308 engineers as permanent employees as of the end of February, up more than 14-fold from 228 at the end of November 2015. The company acquired at least 14 firms during that period.

Increasing engineers leads directly to revenue growth because it enables the company to do more business, according to Go Saito, an analyst at Credit Suisse Group AG who initiated coverage on the stock in February with an outperform rating.

"Sales can be derived by multiplying the number of engineers and the unit price for engineers," Saito wrote in a report that month. "The company has already created a framework for the skills development of engineers, enabling it to cultivate high-quality human resources."

Revenue rose to 28.7 billion yen in the 12 months ended August 2020, more than triple the level three years earlier. Profit increased to 1.6 billion yen, compared to 208 million yen three years before. Shift forecasts that sales will jump to a record 45 billion yen this fiscal year.

Software engineers are underpaid in Japan compared to the US and there's a shortage of them, according to Saito. That's one reason why Shift's model of outsourcing software testing works, he said.

"We're the biggest in Japan in this area," Tange said. "I do see revenue reaching 100 billion yen," he said, referring to the company's goal for the fiscal year ending August 2025.

Shift's soaring shares haven't been immune to pullbacks. They've fallen about 22% from a record in October as investors sold high-growth technology stocks. Even after the drop, the company trades at about 87 times estimated earnings.

For veteran investor Mitsushige Akino, the stock may see more volatility in coming months and could fall in market downturns. But its "fundamentals are solid and Shift is making progress on the vision it laid out," the senior executive officer at Ichiyoshi Asset Management Co. said. "It won't be strange to see more buying of these types of shares if investors focus once more on growth stocks."

Credit Suisse's Saito says the key will be whether Shift is able to continue to increase its number of engineers.

Whether that will happen remains to be seen, but Tange, at least, isn't short of confidence.

"We're just getting started," he said.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×