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

• • •

Hardware

  • Panasonic Corp. (PC) will slash about US$1.5 billion from its planned investment in two new flatscreen TV plants and shut down unprofitable businesses as demand for high-end electronics falls globally. The company will cut about 23 percent from its planned US$580 billion investment through 2012 in two new TV panel factories in Japan. The company scaled back its ambitious plan as a result of market conditions. The company still plans to sell 50 percent more TVs next fiscal year, a total target of 15.5 million units. It will also undertake a major launch of home appliance sales in Europe during that period. Panasonic makes flat-screen TVs based on both plasma and liquid crystal display technology, and is ramping up production to keep up with domestic rivals such as Sharp (OTCPK:SHCAY) and Sony (NYSE:SNE).
  • Hitachi Ltd. (HIT) is expected to post a group net loss of more than 100 billion yen (US$1.1 billion) for the year ending March 31, 2009 due mainly to a sharp fall in microchip sales. The company had forecast a net profit of 15 billion yen (US$165 million). Renesas Technology, a chipmaking joint venture of Hitachi and Mitsubishi Electric (MSHBY) , is also expected to report a net loss of about 200 billion yen (US$2.2 billion). Like many Japanese exporters, both companies are also being hurt by the yen's strength against the dollar and the euro. Hitachi is expected to report a 13 percent fall in group operating profit to just under 300 billion yen (US$3.3 billion). Orders for automotive equipment are down and sales have been lackluster for flat-panel TVs and other electronics.
  • Toshiba (OTCPK:TOSBF) is in talks to buy Fujitsu's (OTCPK:FJTSY) hard-disk drive business in a deal reportedly worth 30-40 billion yen (US$335-US$447 million). A deal would create the world's largest maker of small hard drives that are used in electronics products such as laptops and car navigation systems. A deal would be announced at the end of the month if the heads of the two companies come to an agreement at a meeting to be held within the week. Toshiba wants to buy Fujitsu's hard-drive manufacturing and sales networks, including Fujitsu's two hard-drive plants, one in Thailand and one in the Philippines. The deal is not expected to include a plant in Nagano prefecture, north of Tokyo, where Fujitsu makes hard-drive parts, or the hard-drive production segment of Fujitsu unit Yamagata Fujitsu. Fujitsu is looking at selling its remaining hard-drive operations to other firms with an eye on withdrawing from the business altogether.
  • Toshiba has expanded its collaboration with Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) to enable it to develop devices including an LCD TV, an LCD TV/DVD, and a standalone network player that all support the Widget Channel applications framework promoted by Intel and Yahoo (NASDAQ:YHOO) and include Microsoft's Extender for Windows Media Center technology. The Widget Channel applications framework allows viewers to access a rich content library over the internet and information services via an interface on a TV screen. The Extender for Windows Media Center technology will enable viewers to access a wide range of digital content from Windows Media Center on the PC through their big screen TV.
  • Sanyo Electric Co. (OTC:SANYY), which is being acquired by Panasonic Corp., cut its annual profit forecasts, citing falling demand for semiconductors, electronic components and the stronger yen. The company now expects to break even in the year ending March 31 compared with net income of 35 billion yen (US$393 million) forecast on November last year. Sanyo cut its forecast of operating profit, or sales minus the cost of goods sold and administrative expenses, by 40 percent to 30 billion yen (US$331 million).
  • Sony is expected to post an operating loss of about 100 billion yen (US$1.1 billion) for 2008/09, far short of the company forecast for a profit of 200 billion yen (US$2.2 billion). The operating loss, the first in 14 years, could be double that depending on inventory conditions in the January-March quarter. Analysts on average see an annual profit of 18.5 billion yen (US$204.2 million). The company is expected to cut 16,000 jobs, curb investment and pull out of some businesses to save US$1.1 billion a year as the global recession hits demand for its products.

Telecommunications

  • Softbank Mobile Corp. (OTCPK:SFTBF) saw the largest net increase in subscriptions among mobile phone carriers in Japan for the first time in 2008, after topping the rankings consecutively for 20 months through December. The company's free phone service between its subscribers and the release of Apple Inc.'s (NASDAQ:AAPL) iPhone 3G in July and that of other new handsets helped it attract customers. Softbank's cumulative total of subscriptions exceeded 20 million on January 1, 2009. Softbank's net subscription increase last year came to 2,386,300, followed by NTT DoCoMo Inc. (NYSE:DCM) at 1,004,600 and KDDI Corp. (OTC:KDDIF) at 995,400. KDDI dropped to third from first place in 2007, while NTT Docomo, the largest of the three, moved up one notch to second from the third slot.
  • NTT DoCoMo and Fujitsu have co-developed a mobile phone for the Taiwanese market based on the FOMA F905i model sold in Japan. The new handset was officially launched under the model name F905i in Taiwan by Far EasTone Telecommunications. This first mobile phone codeveloped by NTT DoCoMo and Fujitsu for a market outside of Japan is said to allow users to view and input the traditional Chinese character set, the standard writing system in Taiwan, enabling access to Far EasTone Telecommunications's i-mode mobile internet service in the local language.

Semiconductor

  • SanDisk (NASDAQ:SNDK) and Sony have announced the joint development of two expanded Memory Stick formats to achieve a maximum storage capacity of 2-terabytes and enable a maximum datatransfer speed of 60 mbps. The new Memory Stick Format for Extended High Capacity of up to 2TB of data is 60 times higher than the Memory Stick PRO format's current 32GB limit. The new format is scheduled to support the MagicGate copyright protection technology and Access Control Function. Memory Stick HG Micro format has an 8-bit parallel interface and offers an increased interface clock frequency of 60MHz, enabling 60Mbps data transfer speed, which is three times faster than the conventional serial 4-bit parallel interface and 40MHz interface. SanDisk and Sony share a long collaborative history of developing products and technologies.

Media, Entertainment and Gaming

  • Japan Broadcasting Corp., better known as NHK, has compiled a deficit budget for fiscal 2009, its first in 13 years, as the costs of introducing digital terrestrial broadcasting are expected to rise. NHK is expecting income of 670 billion yen (US$7.3 billion) in the next fiscal year starting in April, up 1.9 percent from the previous fiscal year, while expenditure is estimated up 4.0 percent. Of the expenditure, 15.8 billion yen (US$174 million) will be allocated for the introduction of digital terrestrial broadcasting, which will be completed in July 2011.
  • Goldman Sachs Group Inc. (NYSE:GS) plans to make a takeover bid for full control of USJ Co., operator of the Universal Studios Japan theme park in Osaka. Goldman’s Tokyo-based Crane Holdings fund that now holds a 41 percent stake is preparing to acquire the remaining shares in the company by March 31, the person said, declining to be identified. The 59 percent stake to be purchased would be worth about 51 billion yen (US$568 million). Goldman Sachs invested 20 billion yen in Universal Studios Japan in 2005. The Nikkei newspaper said earlier that Goldman Sachs may turn USJ into a unit and delist the company from the stock exchange. It didn’t say where it obtained the information. Universal Studios Japan opened in 2001, drawing 30,000 customers on its first day. The company reported net income of 4.13 billion yen for the six months ended Sept. 30 with revenue of 34.33 billion yen, after introducing new characters including Sanrio Co.’s cartoon cat Hello Kitty. The park’s attendance will be about 8.6 million for the year ending March 31, compared with 9.9 million five years earlier, USJ’s Takahashi said.
  • Japan's Square Enix Holdings Co Ltd (OTCPK:SQNXF) said it enjoyed robust holiday sales despite a slowing economy, and the videogame maker expects its operating profit to be roughly in line with its forecast for the year to March. The global downturn has prompted some consumers to give up purchases of big-ticket items such as cars and flat TVs, but the game industry is relatively well-shielded as people stay home and turn to low-budget entertainment. Square Enix, known for such blockbuster titles as "Dragon Quest" and "Final Fantasy", said last November its operating profit was likely to dip 2.4 percent to 21 billion yen (US$236 million) this business year compared with the previous year. Analysts on average expect Square Enix to post an operating profit of 27.4 billion yen, according to Reuters Estimates. In the longer term, President Yoichi Wada said the company now appears likely to miss its recurring profit target of 50 billion yen for the year ending in March 2011, given the global downturn and a firmer yen, which eats into exporters' revenues when converted into the Japanese currency. Japanese videogame software makers including Square Enix and rivals Konami Corp (NYSE:KNM) and Capcom Co Ltd (OTC:CCOEF) will need to expand their overseas presence as the population in Japan is shrinking as well as ageing rapidly. For the current business year to March, Square Enix forecast a recurring profit of 20 billion yen. Wada said he was in talks with quite a few companies on possible acquisitions, repeating his usual reply to M&A questions. Square Enix last year offered to buy smaller Japanese rival Tecmo in a deal worth at least about US$100 million, but Tecmo rejected the proposal and said it would instead merge with another Japanese game developer, Koei Co Ltd.

Mobile/ Wireless

  • Domestic shipments of mobile phones including those for the personal handy-phone system in November tumbled 29.8 percent from a year earlier to 3.49 million units, a decline for the fifth straight month. While the cellphone market is already saturated, product offerings lacked enough appealing new functions to stir demand and consumers were also cutting down on spending. Shipments between January and November also plummeted 16.9 percent to 38.83 million units, and shipments in 2008 are expected to fall sharply from the year before. The so-called One-Seg handsets that let users view terrestrial digital television programs accounted for more than 90 percent of the total monthly shipments in November.