Japanese Tech Stock Weekly Summary (Mar. 30 - Apr. 5, 2009)

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

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Hardware

• Toshiba Corp. (TOSBF.PK) will consolidate its two domestic white goods factories into one by year end as part of efforts to reorganize its struggling home appliance business. White goods subsidiary Toshiba Home Appliances Corp. is to stop production at its Aichi Prefecture plant. Subsequently, output of washing machines and clothes dryers is to be transferred to a unit in Guangdong Province, China. Production of large items generally will be shifted away from Japan, except for air conditioners.

• Toshiba has entered into a share transfer agreement with Panasonic Corp. (PC) under which Toshiba will acquire all of Panasonic's shares in Toshiba Matsushita Display Technology Co., Ltd (TMD), for reportedly US$20.3 million. TMD is a joint venture that develops, manufactures and sells liquid crystal displays (LCDs) and organic light emitting displays (OLEDs). Toshiba currently has a 60 percent stake in TMD. The share transfer is scheduled to take place in April 2009.

• Dell (DELL) made a move in Japan that could signal a change in the way the vendor sells laptops and assists operators worldwide looking to push data access plans. The Japanese arm of Dell has become an MVNO and is bundling its notebook PCs with a built-in HSPA cards. The laptops will go on sale this summer starting at about US$500 and increasing to almost four times that amount. Dell will reportedly bundle a fixed amount of mobile broadband access, after which users pay by credit card for additional access. The computer maker is understood to have applied for an MVNO license and is using NTT DoCoMo's (DCM) network.

Telecommunications

• The Financial Times reports, citing two unidentified people close to the sale process, that Japan's NTT Communications and Hong Kong's Pacnet each are separately in the running to acquire Pacific Crossing Limited (PCL), which operates one of the largest trans-Pacific undersea fiber cables. It is rumored that Japanese telecom giant NTT Com and Hong Kong-based Pacnet have offered between US$80 and US$90 million for the company. PCL has about 20 owners, some of which are hedge funds who bought in at valuations above US$400 million. The sale is part of the sell-off of assets worldwide by hedge funds who bought in during the boom. Pacific Crossing operates the PC-1 cable between Japan and Washington and California in the US, the second largest trans-Pacific cable after Tata’s TGN system.

• A Softbank Corp (SFBTF.PK) unit has sold over 490,000 Yahoo Japan Corp (YHOO) shares this month to buyers outside the Softbank group. Softbank group's interest in Yahoo Japan however should not change much from the current 42 percent because of an upcoming retirement of shares by Yahoo Japan. Softbank unit SBBM Corp sold the shares for about 12.5 billion yen (US$128.4 million) and incurred a loss of about 14 billion yen on the deal.

• Aeon Co. (AONNY.PK) and NTT DoCoMo Inc. will jointly establish a marketing company in May using DoCoMo's mobile phone service. The new company, capitalized at Y800 million, will provide cell phone users with such information as discount notifications for Aeon stores after they sign up for the service. The company plans to post sales of 1 billion yen (US$9.9 million) during the fiscal year through March 2010, and to raise sales to Y10 billion during the next five years. Aeon will hold a 51 percent stake in the company while NTT DoCoMo will hold 29 percent.

Semiconductor

• Elpida Memory Inc. (ELPDF.PK) likely sustained a record 160 billion yen (US$1.6 billion) group-net loss in the fiscal year ended, worsening from the year-earlier 23.5 billion yen (US$234.4 million) as DRAM prices slipped below the break-even point. Its group operating loss appears to have widened to roughly 140 billion yen (US$1.4 billion) in fiscal 2008. Prices of DRAMs used in personal computers have fallen by half over the past year. On top of slumping PC sales, overseas DRAM manufacturers sold excess inventories at fire sale prices. Elpida's shipments actually increased 80-90 percent from a year earlier, but the price decline canceled out this positive effect. Elpida has an agreement with banks that requires it to pay back loans before maturity if its net assets drop to 75 percent of the year-earlier figure or below. But the company appears to have avoided such a penalty, since its net assets didn't actually fall under the threshold, which in this case is 260.8 billion yen (US$2.6 billion). Elpida seeks to turn an operating profit in the year ending March 2010, expecting DRAM prices to rise above the break-even point by this coming summer.