Japanese Tech Stock Weekly Update

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

Internet

• Oricon, a publishing company of music hit charts, said it has withdrawn from Japan's MC music download market, explaining its decision as a result of iTunes and the iPod “outrunning” the company. Oricon said that it will instead post links from its web site to online music stores while concentrating on music downloads for mobile phones. Oricon's online store has lost nearly US$214,000 each month since its launch in March of 2005, and has raised its monthly download volume of 90,000.

• Best Broadband Television Ltd. (BestTV), which provides a solution for setting up and managing video channels on the Internet, announced its agreement with Japanese investment company Invensys to establish a video Internet platform in that country. BestTV predicts that the contract will generate US$2 million in revenues over the next two years, and could grow to tens of millions of dollars as the service expands in Japan. BestTV was founded in 2002, and has mostly focused on developing the technology in recent years. The company has developed an Internet TV platform that is installed in video servers, enabling the management of television channels and video-on-demand [VOD] systems, while providing statistical, billing, and advertising tools. The agreement with Invensys is the company’s first large international deal. Under the agreement, BestTV and Invensys will launch an Internet television platform using a fiber-to-the-home [FTTH] system.

Mobile/Wireless

• Sierra Wireless (SWIR) and Tomen Electronics Corp. jointly announced their signing of an agreement designating Tomen as the primary distributor for all Sierra Wireless products in Japan. This deal also marks the formal entry of Sierra Wireless into the Japanese 3G wireless market. According to Gartner, revenue from mobile data services in Japan is forecasted to rise from 1.9 billion yen (US$16.1 million) in 2005 to 2.5 billion yen (US$21.1 million) in 2009. The research group also said that the number of mobile connections is expected to grow from 88.5 million to 95.9 million during the same period. Under the agreement, Tomen will offer sales, integration support, and field application engineering support for all Sierra Wireless products in Japan. Tomen Electronics Corp. is a leading distributor of semiconductor, storage, and communications components in Japan, with annual revenue of approximately US$1.1 billion. Sierra Wireless develops and markets reliable, high quality wireless communications products that provide mobile professionals with data and voice access to wide area wireless networks.

Software

• Advanced Telecommunication Research Institute International [ATR], a private laboratory in Kyoto Prefecture, announced that it has recently developed Internet software for cell phones that translates Japanese sentences into English and vice versa. Major cell phone firms plan to introduce the software as part of their new services by the end of the year. Software for Chinese translations will be available next spring. The software inputs about 1 million sentences, including travel expressions in Japanese and English. It can offer translations comparable to a TOEIC level of 800. Translations will appear on the screen and are pronounced via audio. ATR aims to develop software for voice-activated sentence translation in foreign languages such as English and Chinese by around 2008

Hardware

• Sharp Corp. (SHCAY.PK) announced its move to boost its solar cell production capacity by 100 MW to 600 MW per year. With an investment of about 3.5 billion yen (US$29.8 million) in its plant in Nara, the company said it is now ready to start full-scale production of 600 MW per year in November 2006. An annual output of 600 MW is reportedly the world's largest capacity. Sharp has expanded the output before, once in January 2005 and once in November 2005 to 400 and 500 MW respectively. Despite the ongoing concerns for a shortage in Si materials, Sharp steadily advanced its preparation to boost production by signing a long-term purchasing contract of Si wafers for solar cells with Sumitomo Corp. and through other efforts. Sharp said it will effectively use Si materials by reducing the thickness of cells and enhancing its thin-film solar cell lineup, while improving yields and fortifying production lines as well.

• Fujifilm Holdings Corp. (FUJIY) pointed to China as the country that may overtake Europe in four years as its third-biggest market, on demand for LCD televisions. The company’s top official noted the rising demand in the Chinese economy, which is growing four times faster than the EU nations. According to DisplaySearch, LCD TV shipments in China may grow to 22.6 million units in 2010 from 4.6 million units this year. The Tokyo-based company forecasts rapid growth in its flat- panel components businesses, assured by an earlier venture with China's SVA Electron Co. that makes color filters for LCDs. The company's sales in China posted a 7 percent growth to US$1.5 billion in the year ended March 31, compared with a 13 percent rise in its European revenues, to US$2.6 billion. The company said its overall revenue went up by 5.5 percent to 2.6 trillion yen (US$23 billion), with Japan still remaining its biggest market, accounting for 62.5 percent of worldwide sales. The rest have the Americas taking 17 percent, Europe 11.5 percent, and Asia 8.9 percent.

Ventures/Investments

• Nomura Holdings Inc. (NMR), Japan's largest securities firm, announced its decision to acquire the U.S. electronic brokerage Instinet Inc., from Silver Lake Partners to gain access to more hedge fund clients. Silver Lake spent some US$208 million in December 2005 to acquire Instinet but Nomura did not disclose the amount it is spending for the acquisition. With the deal, Nomura will have access to Instinet's nearly 700 hedge fund clients and its JapanCrossing system, which electronically matches orders for large blocks of stock and handles about 4 percent of the shares that change hands on the Tokyo Stock Exchange. Hedge funds are responsible for almost half the trading on the New York and London exchanges. Instinet handled a daily average of 189 million shares traded in the U.S. during the second quarter, more than double the year-earlier, as investors increasingly turned to electronic systems to execute orders for less. It also handled average daily trades in Europe valued at US$1.1 billion and US$586 million in the Asia-Pacific region.

Telecommunications

• AFL Telecommunications, a division of Fujikura Ltd. of Japan, an industry leader in fiber optic products and services, and Procera Networks, Inc., a developer of intelligent network traffic and service management infrastructure equipment, announced a certified reseller agreement whereby AFL will resell and support Procera's products to Fiber-to-the-Home [FTTH] and Fiber-to-the-Premise [FTTP] network developers. Under the deal, AFL will now be able to provide their end-users with Procera's solutions for a variety of market segments, including fiber-powered triple play applications for Internet broadband connectivity, voice over IP and streaming media. AFL has sales, manufacturing and administrative offices in the United States, United Kingdom, Japan, China and Mexico and sells its products and services throughout the world.