SAKURA internet - Company History

SAKURA internet begins on 23 December 1996, when Tanaka Kunihiro, then a student at the Maizuru National College of Technology in Kyoto Prefecture, started renting out server capacity. He had been running a server in the college dormitory; lending space on it to acquaintances drew enough word of mouth that requests started arriving from outside the school. Japan’s households were only just going online, and hosting — selling a slice of a server cheaply to individuals and small firms that wanted a website — had few takers. Tanaka launched a shared rental-server service, Sakura Web, and ran it as a sole proprietorship for nearly three years.

In August 1999 the business was incorporated in Chuo-ku, Osaka, as SAKURA internet Inc., capitalised at $87,843 (¥10m), to provide rental and dedicated server services. In April 2000 it absorbed two companies, S.R.S. Corporation and Inforest Ltd., renamed itself SRS SAKURA Internet, and added housing — hosting customers’ own machines — and internet connectivity. The shape of the company was set here: a back-office business of the internet, running everything from the circuit to the data center, with server rental at its core. In July 2004 it took the name SAKURA internet back, and that December moved its head office to Minamihonmachi in Chuo-ku, Osaka.

In October 2005 the company listed on the Tokyo Stock Exchange’s Mothers market, under president and CEO Sasada Ryo. It was small but profitable — sales of $17.5M (¥2bn) and ordinary profit of $1.2M (¥132m) in the year to March 2005 — and broadband was pushing demand for rental servers up as personal sites and online shops multiplied. With the credibility and the cash the listing brought, SAKURA internet went for scale.

Acquisitions and new ventures followed immediately: X-Phase in December 2005, Kairos in January 2006, a web-production arm and a US subsidiary, SAKURA Internet (USA), in 2006, and then an online-game operation. Sales reached $39.9M (¥5bn) in the year to March 2007 — 2.4 times the level of two years earlier — but the growth carried no profit with it, and the same year brought an ordinary loss of $2.9M (¥346m) and a net loss of $4.2M (¥494m). Stacking up revenue through acquisition and diversification had run into a wall within two years.

In the half-year to September 2007 the company wrote down $3.3M (¥391m) on the exclusive licence for the online game The Lord of the Rings Online and others; the interim net loss reached $4.9M (¥575m) and SAKURA internet fell into negative net worth. Game licence fees and running costs had outgrown the membership they attracted, draining the profit the hosting business earned. In November, Sasada resigned to take responsibility, and the founder, Tanaka Kunihiro — until then a director and chief operating officer — became president. He shed the acquired companies one after another: X-Phase had already gone in July 2007, Kairos followed in January 2008, and the web-production and US subsidiaries in March. Each was sold roughly two years after being bought or founded, and what remained was the business the company had started with: rental servers and data centers.

Repairing the balance sheet required outside capital. In December 2007 SAKURA internet agreed a capital alliance with the trading house Sojitz, and a third-party share issue that February left Sojitz holding 28.26% as the largest shareholder. Negative net worth was cleared and the risk of failure receded. The return to the core business worked quickly too: the year to March 2009 brought sales of $75.9M (¥7bn) and net profit of $4M (¥374m), and operating cash flow reached $22.8M (¥2bn) a year later. In March 2011, through a tender offer and a shareholders’ agreement with Tanaka’s asset-management company, Sojitz became the parent. Internally the company was pruning in parallel — the Honmachi data center closed in August 2010 and the Ikebukuro site was scheduled for closure with a write-down — consolidating scattered small urban rooms and committing to running everything, from service development to operations and maintenance, in-house.

The turning point was Hokkaido. Data centers in the 2000s were built near the big cities, but on expensive land around Tokyo and Osaka the trading and property companies could outspend anyone, and Tanaka concluded that the company “was becoming unable to win in the urban model.” Betting instead on the spread of cloud computing, he chose a site where vast land was cheap: a suburban-scale data center in Ishikari, Hokkaido, deliberately sized so that investment could be added in small increments on land left deliberately empty. It was financed with long-term borrowing and began operating in November 2011.

The opening came with SAKURA Cloud, virtual servers rented online. Front-loaded costs pushed ordinary profit down in the year to March 2012, but earnings recovered as utilisation climbed, and sales passed $94.5M (¥10bn) in the year to March 2014, when the second building came online. In November 2015 the company moved from Mothers to the First Section of the TSE. Sojitz still held 40.29%. Backed by a trading house’s balance sheet, a rental-server company was turning into a cloud and data-center infrastructure business.

In 2016 SAKURA internet began renting GPU servers under the name Koukaryoku — “high firepower” — computing. Launched in the first wave of the deep-learning boom, this AI service became the foundation of the generative-AI cloud that followed; Tanaka would later point out that the business dated “from 2016.” The same year brought the security firm Gehirn into the group, an IoT platform with an embedded communications module, a Chinese subsidiary to take it overseas, and, in December, the third building at Ishikari. In January 2017 the company acquired a systems-operations firm later renamed ITM, picking up the enterprise customer base it had lacked. That March, a public offering combined with a secondary sale by Sojitz and the ending of the shareholders’ agreement removed Sojitz as parent, and the company became substantially independent again. Acquisitions for technology and customers continued — Bitstar in Hokkaido in 2017, the storage-software firm IzumoBASE in 2018.

Sales grew from $124.8M (¥14bn) in the year to March 2017 to $205.1M (¥22bn) three years later. But the cost of extending Ishikari, of acquisitions and of hiring ran ahead of the revenue, holding operating profit in a band of roughly $5.5M (¥600m) to $9.2M (¥1bn), and net profit in the year to March 2019 thinned to $843,959 (¥92m). Investment continued regardless — a joint venture with SoftBank, BBSakura Networks, in 2019, and Tellus, running the government satellite-data platform, in 2021. Scale and thin margins had become the settled condition, and how to restore the balance between investment and return was the open question.

In 2021 the company declared it would concentrate its resources on cloud services. Expiring housing contracts made the year to March 2022 a year of falling revenue, but a head-office move premised on remote work and a smaller Tokyo branch lightened the cost base. In April 2022 the TSE’s market restructuring put the company in the Prime section. SAKURA Cloud was registered under ISMAP, the government’s security assessment scheme for information systems, and entry into the government cloud within a few years was written into the growth strategy. Accepting a fall in revenue in order to swap out what it sold was something the company had not done since the divestments of 2007.

From late 2022 the generative-AI boom set off a worldwide scramble for GPUs. Japan’s Ministry of Economy, Trade and Industry treated the shortage of compute as an economic-security problem and, in a cloud programme announced in January 2023, offered to subsidise up to half the cost of data-center construction and GPU purchases; SAKURA internet and SoftBank were the first two certified. The company committed roughly $92.5M (¥13bn) over three years, subsidy included, to buy about 2,000 NVIDIA H100 units and serve them from Ishikari — then, on the strength of demand, said in August that it would pull the plan forward by a year.

The commitment kept growing. By June 2024 some 2,000 GPUs were running in Ishikari, and by Tanaka’s account “all 2,000 sold the moment they went on sale.” Successive certifications in 2023 and 2024 lifted the maximum state support to about $376.2M (¥57bn), against a plan to invest some $745.9M (¥113bn) in roughly 10,000 GPUs. To house servers that run this hot, the company adopted container-type data centers that can be installed in about four months, and liquid cooling. GPU cloud revenue reached $42.4M (¥6bn) in the year to March 2025, in only its second year of sale.

In November 2023 SAKURA internet became the first Japanese company conditionally selected to supply the government cloud, the shared platform for national and local administration — the first domestic entrant since the Digital Agency chose Amazon Web Services and other foreign providers in 2021. With the political argument for a home-grown cloud behind it, the market re-rated the company: the share price rose from around ¥500 at the start of 2023 to a peak of ¥10,980 in March 2024, and market capitalisation multiplied roughly tenfold in five years. A June 2024 offering raised $118.8M (¥18bn) for GPUs and for meeting the government-cloud requirements. Tanaka had long told staff the goal was to become “the most used and best-known cloud in Japan, after Amazon and Microsoft,” and he treated the government contract as the way in — starting from 1–2% of the market and aiming, over a decade, for 30–40%.

The year to March 2025 set records: sales up 43.9% to $209.9M (¥31bn), operating profit of $27.7M (¥4bn), and 997 employees group-wide. Tanaka nonetheless stayed wary of building large data centers alone, announcing a strategic partnership with the US operator Equinix in October 2024 and signalling that facilities could be leased rather than owned. In March 2026 SAKURA Cloud met the conditions attached three years earlier and became the only domestic provider formally selected for the government cloud; in the same year it supplied about 1,100 of NVIDIA’s newest B200 units to large Japanese customers, with GPU cloud revenue up a further 20.3%. Sojitz sold part of its holding that year, ending some eighteen years of capital ties. A rental-server business born in a college dormitory had, in thirty years, become the domestic operator of the country’s digital foundations.