Japanese Tech Stock Weekly Summary (Feb. 16 - Feb. 22, 2009)

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

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Telecommunications

• Yahoo Japan Corp. (YAHOF.PK) plans to buy a data-center unit from its largest shareholder, Softbank Corp. (SFBTF.PK), for 45 billion yen ($480 million) to meet demand for video content on the Internet. Yahoo Japan is owned 41 percent by Softbank, Japan’s third-largest mobile-phone company, and 34% by Yahoo! Inc. (YHOO) in the U.S.

Hardware

• Toshiba Corp. (TOSBF.PK) will buy Fujitsu Ltd.’s (FJTSY.PK) unprofitable computer-storage drive business to help narrow its gap with industry leader Seagate Technology (STX) in the $32.6 billion market. Toshiba aims to buy 80 percent of the business by the quarter ending June 30 and eventually acquire full ownership. The companies said they have yet to agree on a price, estimated by Deutsche Bank Group AG (DB) to be hundreds of billions of yen. The combination would almost double Toshiba’s market share in hard-disk drives to about 16 percent, rivaling Hitachi Ltd.’s (HIT) rank as the industry’s third-largest producer. The sale allows Fujitsu to shed a business that’s been unprofitable since 2007 to focus on providing computer services. Revenue at the hard-disk drive business will rise to about 600 billion yen ($6.5 billion) in the year ending March 2013. Toshiba, the industry’s fourth-ranked producer, said the Fujitsu business will help raise its market share to 20 percent by 2015.

Media, Entertainment and Gaming

• GungHo Online Entertainment Inc., an Internet game developer, surged by its daily limit 20 percent in Osaka Securities Exchange, the sharpest gain since March 27, 2008, after reporting a profit in 2008. The Tokyo-based company, an affiliate of a Softbank Corp. unit, announced that it had an operating profit of 1.2 billion yen ($13 million) in the year ended Dec. 31, 08, with a 50 percent surge in sales. It had an operating loss of 317 million yen (US$3.5 million) a year ago. Its net loss narrowed to 26 million yen, from 4.93 billion yen (US$54.1 million) a year earlier, as stock devaluation charges abated. GungHo Online’s shares have risen 23 percent this year, compared with a 12 percent decline in the benchmark Topix

Index

• Sony Computer Entertainment (SNE) said that sales of its portable game console PlayStation Portable topped 50 million units worldwide as of January since its debut in 2004, with 11.5 million units sold in Japan. The figure compares with the cumulative sales of its rival Nintendo Co.'s (NTDOY.PK) Nintendo DS at 96.22 million units as of the end of last year. Nintendo DS debuted around the same time as the PSP. Sony had also sold around 200 million units of its more than 2,000 game titles, which can be played on the handheld game player, as of the end of December last year.

Internet

• Rakuten Inc. (RKUNF.PK) reported record operating and pretax profits for the year ended Dec. 31, but still posted a 54.9 billion yen ($597 million) net loss stemming largely from write-downs on shares in Tokyo Broadcasting System Inc. The online retailer said group sales rose 17 percent to 249.8 billion yen ($2.7 billion). In its core e-commerce segment, which includes the Rakuten Ichiba virtual mall, sales climbed 20 percent to 92.3 billion yen ($1.0 billion). Rakuten's travel segment saw sales jump 24 percent to 16.5 billion yen ($179.4 million). Group operating profit surged to 47.1 billion yen ($512.2 million), boosted by improving profitability in the firm's credit card operations. Group pretax profit shot up to 44.5 billion yen ($483.9 million) from 2.3 billion yen ($25million) in the previous fiscal year. But Rakuten took a hit from its 19.8 percent equity stake in TBS.

• Rakuten Inc. will raise its equity stake in eBank, Japan's top online bank, from 46.39 percent to 67.22 percent. The increase will be conducted in two stages. Rakuten will buy roughly 330,000 shares to be issued by eBank in a private placement, paying 9.99 billion yen (US$108.6 million) to lift its stake to 56.48 percent. It will also spin off the loan division of fully owned subsidiary Rakuten Credit Inc. and merge it with eBank. In conjunction with the integration, which will be completed April 1, eBank will issue about 580,000 shares to Rakuten Credit, which will transfer them to Rakuten in lieu of a dividend payout.