Japanese Tech Stock Weekly Summary

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

Media, Entertainment and Gaming

• According to a survey conducted by Japanese entertainment industry statistics site Oricon, stores in Japan that rent manga to customers are not really experiencing massive sales success. Despite efforts to promote manga rental, 41.4 percent of those polled said that they were not aware of shops offering manga rental, compared to 24 percent who were and 34.6 percent who heard about manga rental, but did not know where and how to rent. The business of manga and comic rental attracted the attention of the industry earlier this year when Tsutaya, one of the country’s largest CD and DVD rental chains, said that they would start offering manga rental at some of their stores across Japan. The typical cost for renting manga is 90 yen (US$80) per volume. Tsutaya is currently offering manga rental at a few of their stores as a test project, but plans to expand the service to more stores in August 2008. As for the impact manga rental will have on the market, only 2.6 percent of those surveyed said that manga rental would make them buy more manga, while 23.2 percent said that manga rental would probably make them buy fewer manga. The remaining 74.2 percent expect that manga rental will not affect how much manga they buy.

Mobile/Wireless

• Industry observers note a development in Japan, where some of its latest mobile phones are fitted with motion sensors that let users detect motion or play action games like those on the Nintendo (NTDOY.PK) Wii console. An example is the D904i from NTT DoCoMo, Japan's top mobile carrier, which contains a tiny motion sensor that detects shaking and tilting. Instead of punching a keypad, users can move the handset like a tennis racket or fishing pole in easy-to-play games, similar to those on Nintendo's popular Wii. From Sharp (SCHAY.PK) and Matsushita (MC), two new phones use their built-in cameras to detect motion. Users can control a hip-hop dancer by wagging a finger in front of the camera, for example, or throw punches in the air for a boxing match. The new phones are expected to hitJapanese stores in May. There are no current plans for overseas sales. In a separate development, Nintendo said it is developing 45 software titles for the Wii console, a device that helped drive profit sevenfold in the past quarter. According to its president, the company is also developing 79 games for the two-year-old DS portable player, with plans to release the next batch of games to the market at the end of summer.

Software

• Microsoft Corp. (MSFT) announced that it has signed a deal with Softbank BB Corp. (SFTBF.PK) and Japan Telecom Co. Ltd. to deliver more secure, integrated voice, e-mail, instant messaging and groupware services for the companies' customers in Japan. The companies will begin trials of the services in the second quarter of 2006. Under the agreement, the services are intended primarily for customers in small and medium-size businesses. Microsoft will work through its Japanese subsidiary, Microsoft Co. Ltd. The agreement will look to Softbank for its expertise in VoIP (Voice over Internet Protocol) services, and to Microsoft for its Solution for Enhanced VoIP Services technology, a collection of hosted applications including Exchange Server 2003, Office Live Communications Server 2005, and Windows SharePoint Services. Japan Telecom will be expected to provide a managed IP network to deliver the services.

• Major information technology firms, including Oracle Corp (ORCL), IBM Corp. (IBM), and NEC Corp. (NIPNY.PK) announced the setting up of a consortium to sell servers and systems running the Linux operating system in Japan. Media sources said that this marks the first time that major IT companies are working together in a partnership to market equipment on free software. Linux is considered the most popular type of so-called open source software. Its “cooperative nature” has the Linux community uniting its supporters against Microsoft Corp. and its Windows system. More than 10 Linux developers also compete among themselves, including major server manufacturers such as Hitachi Ltd., Hewlett-Packard Co. and Dell Inc., which are expected to participate, as well as systems developers such as NTT Data Corp. At present, about 78 percent of the servers in Japan run Microsoft Windows, while 14 percent run Linux.

Hardware

• Hitachi (HIT) has announced a trio of new products with 15K RPM Ultrastar, 7200 RPM Ultrastar and 10K RPM Ultrastar, new hard drives aimed at a broad range of enterprise storage systems, from mission-critical and lower duty cycle storage applications to servers. According to IDC, the industry is expected to see a rise in shipments from 2.4 million in 2006 to 9.4 million in 2007 as cost, space and low power considerations in data centers drive the need for a transition to SFF or Small Form Factor, which refers to a small sized case for PC. Industry analysts said that with businesses and their IT organizations going through transition to an all-digital world voice, image and video, the requirement to capture, store and access such data increases exponentially.

• Fujitsu Ltd. (FJTSY.PK) revealed plans to buy France's GFI Informatique SA in a deal valued at 419 million euros (US$569 million) in a bid to add clients and lessen its dependence on Japan. The takeover plan comes after Fujitsu invested some US$280 million in the past eight months buying companies in the U.S. and Germany to expand sales outside Japan. Fujitsu seeks to lift the portion of revenue from overseas to 50 percent from about 36 percent in the year ended March 31. Fujitsu made its offer through Fujitsu Services Ltd. unit, the offer requires that the planned purchase of GFI warrants by Apax Partners Worldwide LLP is withdrawn or rejected by shareholders. GFI builds computer networks and provides consulting services for customers including France Telecom SA, BNP Paribas SA and Telefonica SA. Fujitsu's services include writing software, managing computersystems and setting up networks. London-based Fujitsu Services said it has not reached an agreement with GFI over the buyout. GFI earlier in January said it plans to raise 56 million euros through the sale of equity warrants to Itefin Participation, a financial company 56 percent owned by London-based Apax by 10 days to May 21 to allow investors more time to make a decision on the Apax transaction. GFI posted a 69 percent rise in its net income to 18.9 million euros (US$25.6 million) last year, while sales climbed 16 percent to 633.1 million euros (US$860.1 million). Fujitsu reported a 49 percent gain in its net income to 102.4 billion yen (US$853.2 million) in the year ended March 31, with its revenue posted a rise of 6.4 percent to 5.1 trillion yen (US$42.2 billion).