Japanese Tech Stock Weekly Report

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

Internet

• Kyocera Corp. (KYO) disclosed that it was seeking carriers it can work with on plans to expand its iBurst wireless broadband in high-growth markets. The company said it is targeting markets with large potential, naming in the process markets including Russia, India and the U.S. Kyocera said it has already entered into an agreement to have its wireless broadband in the U.S. by March. Other areas named were the Netherlands, Norway, Tanzania and Malaysia.

• Industry sources said that a joint venture between News Corp. (NWS) and the Softbank Corp. (SFTBK.PK) will see the launching of MySpace.com Internet business in Japan this month. The report said the 50-50 venture is producing a new entity called MySpace Japan, and will first offer services for personal computers and will eventually allow users to post photos and write blogs via mobile phones. Softbank did not issue any comment and no other details about the deal were released. Online services such as those offered by MySpace.com have become very popular in Japan, with Mixi Inc. remaining as the country’s most popular online social networking site.

• GameOn Co., an online game service operator, said it has received approval to list on the Tokyo Stock Exchange's Mothers market. The company said it will offer 17,130 shares to the public in its initial public offering. Of those, 3,000 are newly issued shares and 14,130 are shares currently held in private. GameOn will offer all the shares through the book-building method. GameOn said it looks to raise some 1.6 billion yen (US$13.6 million) from the IPO. The Tokyo bourse approved GameOn's listing on the Mothers market in August, but the company canceled the plan to go public due to a leak of customer information. For the current fiscal year through December, the company forecasts a parent pretax profit of 2 billion yen (US$17 million), net profit of 1.1 billion yen (US$9.3 million), and revenue of 5.9 billion yen (US$50.1 million). Nikko Citigroup is the lead underwriter of the offer.

• MonotaRO Co., an online seller of industrial-use products, announced that it has received approval to list on the Tokyo Stock Exchange's Mothers market. The company will offer 5,270 shares to the public in its initial public offering. Of those, 500 are newly issued shares and 4,770 are shares currently held in private. The company will conduct a book-building for the IPO shares. Daiwa Securities SMBC Co., the lead underwriter of the offer, has a green shoe option to offer an additional 780 shares in the event of exceptional demand. For the current fiscal year through December, the company forecasts a parent pretax profit of 535 million yen (US$4.5 million), net profit of 535 million yen (US$4.5 million), and sales of 9.5 billion yen (US$80.7 million). MonotaRO said it looks to generating 183.3 million yen (US$1.5 million) from the IPO. Last fiscal year, the company posted a parent pretax profit of 200 million yen (US$1.7 million), net profit of 219 million yen (US$1.8 million), and sales of 6.7 billion yen (US$57.0 million).

Mobile/Wireless

• Napster (NAPS) Japan announced the launching of a mobile-based master ringtone and full-song download service. The offering is done in cooperation with NTT DoCoMo. The service, called Napster Tower Reco Koshiki (Napster Tower Records Official), will be available via NTT DoCoMo`s popular i-mode mobile-based Internet access service and will feature 20,000 master ringtones and 10,000 tracks as full-song downloads for US$2.6.

Media, Entertainment and Gaming

• Sony Pictures Entertainment (SNE) announced the launching of a film clip download service on its Grouper platform. Analysts see the move as a way to narrow the gap between user-generated web video and contents that are under copyright protection. The Sony subsidiary is launching "Screen Bites" on Grouper, a user generated video site similar to YouTube that it has acquired for US$65 million. Like other sites that specialize in user-generated content, Grouper faces legal problems related to copyright laws. Under the new service, however, Grouper users will be able to take clips from Sony's film library and "embed" them in blogs and social networking sites such as MySpace. There will be no charge for the service although Sony is hoping users will be encouraged to buy the full-length versions of the films and television programs in downloaded or finished DVD forms.

• Sony said it expects its PlayStation 3 to be a success as the company launches the device in Japan even with limited supply, the company said it has managed only to ready some 10,000 machines. The company said that when the PS3 goes on sale in the U.S., about 400,000 consoles will be made available. For Europe, Sony said the launch has been pushed back until March. Powered by the new "Cell" computer chip and supported by the next-generation video format, Blu-ray disc, the console delivers nearly movie-like graphics and a sense of reality in gaming. The more expensive model with a 60-gigabyte hard drive, costs about 60,000 yen (US$600) in the U.S. Still, Sony said it expects to lose 200 billion yen (US$1.7 billion) in its gaming division in the fiscal year through March 2007. Last month, Sony lowered its forecast for its fiscal 2006 group net profit by 38 percent to 80 billion yen (US$680 million), citing costs for the battery recall and PS3 expenses, including production problems and price cuts.

• Sega Sammy Holdings Inc., formed by the merger of a game-maker and a pinball company, announced growth of 52 percent in the fiscal first-half, which the company ascribed to a hit slot machine product and good amusement equipment sales. The company said its net income went up to 38 billion yen (US$323 million) in the April-September period, compared with 24.9 billion yen (US$211.6 million) the same period the previous year. Sega Sammy reported sales for the first half increasing by 14.1 percent to 284 billion yen (US$2.4 billion) from 249 billion yen (US$2.1 billion) , figures attributed to strong performances from a slot machine title as well as amusement equipment for both the consumer and arcade markets. For the fiscal year ending March, Sega Sammy cut its group net profit outlook to 60 billion yen (US$510 million) from its earlier forecast of 75 billion yen (US$637.5 million). The company also dropped its group sales outlook to 580 billion yen (US$4.9 billion), from 682 billion yen (US$5.7 billion).

Telecom

• Nippon Telegraph and Telephone (NTT) posted a 12 percent decline even as it maintained its earnings forecast for this fiscal year to March at 500 billion yen (US$4.2 billion) profit on sales valued at 10.8 trillion yen (US$92 billion). The company said its group net profit went down to 291.5 billion yen (US$2.4 billion) in the first half to September from 330.7 billion yen (US$2.8 billion) the same period a year earlier. NTT posted a 0.3 percent rise in its sales to 5.2 trillion yen (US$442 billion) in the six-month period. The company has been experiencing revenue growth from its Internet data transmission, even as these positive results are not able to counter the diminishing profit from its fixed-line business and mobile carrier unit. In a related development, the company said NTT DoCoMo, the company's mobile carrier, still dominates the Japanese market although prices have been going down because of intensifying competition after the arrival of number portability last month.

NTT said it is considering the potential of Internet-related services such as social networking and blogging while banking on a super-fast third-generation data transmission on mobile phones. NTT is facing competition from Softbank, which acquired British mobile company Vodafone Group's Japanese unit earlier this year. Softbank, already strong in the nation's broadband market with Yahoo! BB, dominates in Voice over Internet Protocol telephoning - technology that transmits phone calls over broadband Internet connections.