Japanese Tech Stock Weekly Summary (Apr. 20 - Apr. 26, 2009)

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

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Telecommunications

• Softbank's (SFTBF.PK) earnings will be impacted by an unexpected 75 billion yen (US$758.7 million) loss as a side-effect of the acquisition of Vodafone's (VOD) Japanese operations. The charge was related to defaults on the collateralized debt obligations (CDOs) it had taken out to insure against defaults on its loans. Softbank will redeem the bonds through a credit line facility provided by Mizuho Corporate Bank. But despite the charge, Softbank has added 10 billion yen (US$102.8 billion) to its 2008 earnings forecast, due to gains from the company's cost-cutting measures. The company now expects to post an operating income of 350 billion yen (US$3.6 billion) when it announces its results on April 30. The company expects the charge to impact net income by 44.4 billion yen (US$456 million). Softbank declined to provide a net profit forecast but said it will remain positive despite the unexpected charge.
• KDDI Corp. (KDDIF.PK) is expected to report a 12 percent rise in consolidated operating profit to about 450 billion yen (US$4.6 billion) for the fiscal year ended March 31. This closely matches KDDI's earlier forecast of 443 billion yen (US$4.5 billion). Revenue at the company is expected to have shrunk for the first time in six years, with falling sales of cellular phones and reduced usage charges resulting in lower average revenue per user. The increase in KDDI's net subscribers will be about 503,700 for fiscal 2008, which is significantly lower than the 2.15 million subscribers in the previous fiscal year. Business conditions at KDDI are not expected to improve significantly in fiscal 2009. The company's operating profit is expected to rise, partly because sales expenses will decline through the offering of installment plans.

Semiconductor

• NEC Electronics Corp (NELTY.PK) is in talks to combine with Renesas Technology Corp in a merger that would create Japan's biggest chipmaker as shrinking demand for semiconductors spurs the industry to consolidate. NEC Electronics said it was considering options to improve competitiveness including a tie-up with privately held Renesas and had not come to a decision. Renesas, a semiconductor venture of Hitachi (HIT) and Mitsubishi Electric Corp, and NEC Electronics, the chip unit of NEC Corp, aimed to reach an agreement this month and combine by April next year. A merger would create Japan's biggest chipmaker with annual sales of more than 1.2 trillion yen (US$12.3 billion). Chipmakers are seeking to consolidate as the global recession drives down demand for chips used in vehicles, flat-panel televisions and mobile telephones. Semiconductor industry sales were projected to fall 24 percent this year. NEC Electronics and Renesas compete in the production of microcontrollers, mini-computers dedicated to a specific function, such as operating a liquid-crystal display in a microwave oven, cruise-control in a car, or remote control for a digital versatile disc player. They also make chips that operate LCDs. Falling prices for computer memory forced Taiwan's government to try to reorganize the US$23.6 billion industry that had record losses in the past two years, the biggest overhaul chipmakers have seen since 1999.
• Vice Minister of Economy, Trade and Industry Harufumi Mochizuki fell short of confirming recent media reports that the government is close to selecting Elpida (ELPDF.PK) as the first company to use the capital-boosting program. However, he acknowledged the strategic importance of Elpida and Japan's sole DRAM chipmaker to Japanese manufacturing, considering its supply chain. Elpida will partner with Taiwanese chipmakers to survive the recession. Mochizuki's comments came a day after media reports that another senior industry ministry official had visited Taiwan and conveyed a message to the Taiwanese side that the Japanese government intends to support Elpida. Elpida will apply for the program to receive government-guaranteed capital investment from the Development Bank of Japan.
• Toshiba Corp. (TOSBF.PK) posted operating loss of 250 billion yen (US$2.5 billion) in the year ended March 31, 11 percent smaller than the company had forecast after production cuts helped drive up prices of the semiconductors. Prices of flash memory chips, which store songs and data in portable musical players and digital cameras, have surged 75 percent since Jan. 29, when Toshiba last made its earnings projections. The company will cut 3,900 temporary jobs this fiscal year, mainly at the chip and liquid-crystal-display divisions, after eliminating 4,500 such positions last fiscal year.

Media, Entertainment and Gaming

• Hindus urge Sony (SNE) to withdraw Hanuman video game “Hanuman: Boy Warrior” video game for PlayStation2, saying it trivializes the highly revered deity of Hinduism. In a video game setup, the player would control the destiny of Lord Hanuman while in reality the believers put the destinies of themselves in the hands of their deities. Zed, who is president of Universal Society of Hinduism, argued that re-imagining Hindu scriptures and deities for commercial or other agenda was not appropriate as it hurt the devotees and controlling and manipulating Lord Hanuman with a joystick/button/keyboard/mouse was denigration.
• Nintendo (NTDOY.PK) revealed that the Nintendo DSi handheld, released April 5, has sold 435,000 units in North America in its first week. This figure surpasses initial sales of the handheld's previous iteration, the Nintendo DS Lite, which sold 226,300 in its first week on the market and remained strong at 563,000, even in advance of the April 5 launch of the new Nintendo DSi system. According to Nintendo, without its products, the industry would be down 14 percent for the year.

Wireless/Mobile

• NTT DoCoMo (DCM) signed up 60 percent more new users in March, as its lower phone prices won back customers in a key sales month ahead of the new academic year. DoCoMo, which revamped its brand last year with bigger discounts for long-time users and cheaper cellphones, signed up 278,200 new users on a net basis compared with the same month a year earlier. DoCoMo pushed out second-ranked KDDI, which gained 223,100 net new users, but continued to trail third-ranked Softbank, which gained 381,700 net sign-ups. Subscriber gain at Softbank was down 30 percent, but it beat its rivals for the 22nd straight month helped by low-cost fee plans and aggressive advertising. No.4 eAccess signed up 121,900 net new users, on strong sales of wireless data cards sold with smaller and cheaper laptops such as Asusek Computer's Eee PC. PHS provider Willcom added 6,100 subscribers in March to reach a total of 4.56 million subscribers.