Japanese Tech Stock Weekly Summary (Nov. 17 - 23, 2008)

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 |  Includes: AAPL, CAJ, ELPDF, NTT, SFTBF
by: IRG Ltd

The following is excerpted from IRG's weekly stock report:

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Hardware

  • Canon Inc. (NYSE:CAJ) will delay the construction of a US$1 billion toner cartridge components plant in Japan by six months as the global downturn hits sales and usage of office equipment. Canon plans to start building the plant in western Japan in June 2009 with production due from March 2010. Canon will spend 60 billion yen (US$621 million) or more to build a toner cartridge plant in the U.S. state of Virginia and the start of output there in December 2009 remains on track. Consumable items such as toners and related services are an important source of profit for office equipment makers as they generally fetch high margins and provide a constant revenue stream. Canon cut its annual outlook, predicting its first profit decline in nine years as the economic slowdown drives up the yen and hurts copier and camera sales.

Internet

  • Banking on the global appeal of Japanese pop and video games, social networking site MySpace would more than double the number of artists on its Japanese pages to get more clicks internationally. The growth of new sign-ups and page views is slowing in Japan for rival networking services such as mixi Inc., but Myspace, which launched its Japanese site two years ago, aims to buck the trend by expanding the range of sales artists can make on its site. This, allied with growing interest in J-Pop music and Japanese video games in other parts of the world, will help the doubled in the last six months to a little under 90,000 people.

Semiconductor

  • Powerchip Semiconductor Corp. and Japan's Elpida Memory Inc. (OTC:ELPDF) are in talks about strengthening their ties amid a slowdown in the dynamic random access memory (DRAM) industry. The two companies already have a Taiwan joint venture, Rexchip Electronics Corp. The company will explore further cooperation (with Powerchip) but it is too early to discuss the details. Closer ties could be financial as well as technological. Elpida was also ready to discuss cooperative ventures with ProMOS Technologies or other Taiwan DRAM makers. Elpida has US$2.2 billion cash in hand. Elpida had no immediate expansion plans in China but would seek to join forces with Powerchip if appropriate opportunities arise on the mainland.

Media, Entertainment and Gaming

  • Yudo Ltd. is releasing a line of games for the Apple (NASDAQ:AAPL) iPhone and iPod Touch that will be priced at US$0.99 cents apiece. Most games available for these devices cost around US$3.00. The new games will be made available worldwide through Apple Inc.'s App Store download delivery service. The first set of four games includes "Cutie Scratch," which involves rubbing the screen to make pictures appear, and "Spy Bug Radar," where a player tilts and moves the device while listening to radar-like sounds to zero in on a location. In addition to marketing its own games, Yudo will also serve as sales agent for games created by individuals, acting as proxy for testing software and signing contracts with Apple. The company will also provide advice on how to make games that will sell.
  • Koei Co. Ltd. will take over smaller rival Tecmo Ltd. in a stock deal worth 20 billion yen (US$207 million), the latest in a series of consolidation moves in the industry. Koei and Tecmo, the maker of fighting game "Dead or Alive" and action title "Ninja Gaiden", plan to merge operations under a holding company in April. Each Tecmo share will be exchanged for 0.9 shares in the holding company, while one share in the holding firm, called Tecmo Koei Holdings, will be allotted to each Koei share, allowing Koei shareholders to take three quarters of the new entity. Larger rival Square Enix Holdings Co. Ltd. earlier this year offered to acquire Tecmo, but the company rejected the takeover bid and would instead merge with Koei, which offers history simulation game "Nobunaga's Ambition".

Telecommunications

  • Softbank Corp. (OTCPK:SFTBF) has seen a drop-off in sales of Apple Inc.'s iPhones due to technical issues, but problems have been resolved. Softbank launched the iPhone in July and is currently the exclusive supplier of the touch-screen handsets. Apple sold about 200,000 phones in Japan in the first two months. Since then, however, demand has been falling steadily, and analysts widely believe sales are unlikely to reach a total of 500,000 units, half the one million units that they previously thought Apple could sell. Softbank is barred from disclosing handset sales figures by its agreement with Apple.
  • Nippon Telegraph and Telephone Corp. (NYSE:NTT) will conduct a 100-for-1 share split on January 4, 2009 to eliminate fractional shares before electronic stock certificates are introduced next year. Stock exchanges in Japan will halt trading in the company's shares from Dec. 25 to 30 and the London Stock Exchange will halt trading in NTT shares from Dec. 24 to Jan. 4. The company aims to protect investors holding fractional shares who fear they could lose all value once the switch to electronic stock certificates is made in January 2009. NTT conducted a 1.02-for-1 stock split in 1995, resulting in a large amount of fractional holdings. The number of stockholders who still retain fractional shares accounts for just under half of all NTT shareholders.