• Sony Corp. (SNE) announced its plan to launch an electronic book store on the Internet and start selling a device that displays e-books purchased from the store beginning in October. Dubbed the Sony Connect book store, it will carry about 10,000 books from the top six publishers, including News Corp.'s (NWS) HarperCollins and CBS Corp.'s (CBS) Simon & Schuster. The company said the launch of the store coincides with the official debut of its highly anticipated electronics book reader, which reviewers have said mimic the quality of regular paper. The "Sony Reader Portable Reader" system will sell for about US$350. Sony's latest generation reader attracted attention for the electronic ink technology it employs made by E Ink of Cambridge, Massachusetts. It uses new technology that allows digital text and graphics to be displayed without back-lit screens. Much like regular paper, the Sony Reader screen is not back-lit and requires a light source in the room to view the page.
• Matsushita Electric Industrial Co. Ltd. (MC-OLD) and two other Japanese companies said they would set up a joint venture to sell electronic book readers and distribute novels and comics via the Internet. The new company, to be established with a capitalization of US$2 million, will be held 49.9 percent by Matsushita, 42.1 percent by Japanese publisher Kadokawa Holdings Inc., with the remainder owned by Tokyo Broadcasting System Inc., Japan's third-largest television station. The president of the new company, Words Gear Co. Ltd., said he aims for annual revenue of about 9 billion yen (US$76.1 million) by the year ending March 2011 through hardware and content sales. The electronic book reader, developed by Panasonic maker Matsushita, is smaller than a paperback book and comes with a 5.6-inch liquid crystal display. Words Gear plans to launch the new terminal as early as November in Japan for about 40,000 yen (US$344), and aims to sell about 10,000 units by March 2007. It has no specific plans at the moment for overseas sales. Matsushita started offering its first electronic book reader, called Sigma Book, in 2004, but has sold only several thousand of them due to limited software availability. Words Gear aims to offer up to 10,000 software titles of downloadable content by March.
• Softbank Corp. (OTCPK:SFTBF) said it plans to raise about US$12 billion via securitization of its earnings of the cell phone unit it bought from Vodafone Group (VOD). The move would allow it to secure funds at a lower rate than would have been possible with conventional bank loans. Softbank bought Vodafone Japan for 1.8 trillion yen (US$15.2 billion) after borrowing 1.3 trillion yen (US$11 billion) in short term bridge loans, which was arranged by 17 banks led by Mizuho Financial Group, Deutsche Bank (DB) and Citigroup (C). The scheme would set aside cash from Vodafone Japan for interest and principal payment and would mean that a huge part of its profit would be used to repay debt at a time when it faces tough competition from Japan's two largest mobile-phone operators NTT DoCoMo (DCM) and KDDI Corp. Securitization of individual businesses is rare in Japan, with Softbank being the first company to securitize the cash flow of a particular business arm for such a large amount.
• Japan Net Bank, a specialized Internet bank affiliated with Sumitomo Mitsui Banking Corp., announced that Yahoo Japan Corp. has obtained a 40 percent equity stake in the bank. Under the deal, Japan Net Bank issued new shares worth 34.5 billion yen (US$292 million) in total to the Internet portal and SMBC under a third-party share allotment scheme. The share allotment to Yahoo (YHOO) is based on their business and capital tie-up, agreed in March. Besides common shares, Yahoo purchased preferred shares. The new share issuance brought Yahoo Japan's stake in the bank to 40 percent from zero percent and reduced SMBC's stake to 40 percent from 57 percent. According to Japan Net Bank, when Japanese authorities give approval for Yahoo Japan to become a major shareholder of a bank, it plans to convert the preferred shares into common shares. For the new shares, Yahoo Japan paid 25.8 billion yen (US$218.3 million), while SMBC, the core unit of Sumitomo Mitsui Financial Group Inc., invested 8.7 billion yen (US$73.6 million). Japan Net Bank disclosed that it plans to use the fresh capital to eliminate its cumulative losses.
• Hitachi (HIT) announced that it is considering partnerships in the LCD television sector, even as it aims to bring its loss-making flat-screen television business back to profit. Hitachi said it plans to turn its flat-screen television business around by the January-March quarter. To lower per unit costs, Hitachi has invested in an LCD venture along with Matsushita Electric Industrial and Toshiba (OTCPK:TOSBF), that aims to produce five million LCD panels by the half year starting from October next year. A top company official said that more partnerships may be needed to boost Hitachi's share of the LCD television market to 7 percent by 2010. According to DisplaySearch, Hitachi ranked 20th in LCD televisions, and fifth in plasma television sets. The company is reportedly losing money on both LCD and plasma TV sets.
• Tokyo Electric Power Co., Asia's biggest power producer, revealed that it may sell fiber-optic networks to KDDI Corp., Japan's second-largest mobile phone operator. Earlier, sources indicated that KDDI has agreed to buy Tokyo Electric Power's fiber-optic communications business for about 100 billion yen (US$847.2 million) in shares. With the deal, the utility company will become the third-largest shareholder of KDDI, increasing its stake to about 8 percent from 4.8 percent. An insider source mentioned that the two companies are in discussion although no details about the negotiation have been released. A spokesperson for the Tokyo Electric Power also said that no official agreement to sell has been reached yet. If the deal pushes through, the acquisition will make KDDI Japan's third-biggest provider of fiber-optic networks, helping it challenge larger rivals Nippon Telegraph & Telephone Corp. (NTT) and Usen Corp. Fiber-optic Internet services transmit movies, music and other data faster than conventional copper wires.
• Market sources said that four operators of electronic-money services have agreed to introduce uniform bill-settlement devices at stores and restaurants next spring. The operators indicated their aim to have their services rendered more user-friendly and thus attract more customers. The four are the Suica service operator led by East Japan Railway Co., the iD service operator led by NTT DoCoMo Inc. (DCM), the Edy operator bitWallet Inc. and the Quickpay operator led by JCB Co. Presently, the operators have used devices with different standards for accepting cards, making it hard to expand the number of businesses and customers that use the services. The four services have a combined 40 million users and 100,000 shops and restaurants. Under the deal, the Edy and Quickpay operators are likely to adopt standards for common devices being developed by JR East and DoCoMo. In a related development, a group of bus and railway operators in the Tokyo metropolitan area is planning to introduce a new e-money service, to be called Pasmo, in March.
The following is excerpted from IRG's weekly stock report: