Japanese information technology company GMO Internet announced on December 25 that the company would no longer manufacture or sell crypto mining rigs due to an "extraordinary loss in the cryptocurrency mining business" during the last three months of 2018.
GMO Internet says it will record a consolidated loss of approximately 35.5 billion Japanese yen (JPY) – about $320 million – due to the recent decline in virtual currency prices, which has caused the sales of mining rigs to plummet.
According to the announcement, the IT company lost 24 billion JPY from the manufacturing and sales of devices used to mine cryptocurrency. The other 11.5 billion JPY in consolidated losses is due to "impairment loss." Impairment losses occur when an asset's value is higher than its future returns. In other words, GMO wouldn't be able to make its money back.
GMO Internet began providing internet services, including hosting and website creation support, in 1995. The company decided to get into the crypto mining business in September 2017. Mining's impact on the company has been marginal at best. In May, it released its financial statement for the first quarter of 2018, which shows the company recorded a net loss of JPY 735 million. The factors that contributed to this loss are not specified.
According to the 2018 third quarter financial results published in November 2018, GMO Internet's crypto mining operation suffered a loss of approximately JPY 640 million due to "worsening external environment" which in turn caused a drop in demand for mining rigs and therefore in the price of these machines.
The company's latest announcement states that GMO Internet will continue its crypto mining business – just not the mining rig manufacturing side – but will relocate its mining center to a "region that will allow [the company] to secure cleaner and less expensive power supply." It is not specified what type of miner the company will use to continue this operation if not its own. The statement also mentions that GMO will assess the "revenue structure of its in-house mining business."
In an effort to quell the fears of customers and investors, GMO Internet stated, "The Company ensures financial integrity even after recording an extraordinary loss through the sale of shares in subsidiaries."
Crypto winter has drastically affected many participants in the crypto ecosystem. In November the CEO of Steemit Inc, best known for its eponymous social media site, announced he would lay off about 70 percent of his staff due to the changes in the crypto market. In December blockchain company ConsenSys said it was laying off of 13 percent of its staff, which many connected to the falling price of Ether. And just this week, Bitmain, which is heavily involved in producing and selling mining rigs, suggested it would be making mass layoffs.
GMO Internet was not available for comment by press time.