Yahoo Japan's CEO Discusses F4Q 2011 Results - Earnings Call Transcript

Apr.25.12 | About: Yahoo Japan (YAHOF)

Yahoo Japan Corp. (OTCPK:YAHOF) F4Q 2011 Earnings Call April 24, 2012 3:30 AM ET

Executives

Manabu Miyasaka – President and Chief Executive Officer

Shin Murakami – Executive Officer and Chief Mobile Officer

Analysts

Yoshitaka Nagao – Nomura Securities

Yosuke Tomimatsu – Merrill Lynch Securities

Oliver Matthew – Mizuho SA

Manabu Miyasaka

Hello everyone. How do you do? And effective from April, I’m Miyasaka, I’m effective from April, and now I’m serving as the Corporate Officers and the CEO.

From now on, let me make my presentations about the full-year and the quarterly business results. So first of all, the revenues, for the first time and annually, we have exceeded 33 billion yen and then also our net income for the first time have exceeded 100 billion yen. This is the actual business results.

And this is the historical migrations at revenues and starting from the services, we have achieved gross 15 years in a row. Next, this is about the historical trend of the profits. Again, also for this profit, we have the gross of the profits in 15 years in a row.

And this is about our business ended Q4, and when it comes to revenue, we have a 79.9 billion yen, with about 43.8 billion yen of operating income and 27.6 billion yen of net income, so that’s a 13.3% growth of net income. And we’re going to terminate the contract with the recruitment business, so that we have this – the settlement money, we have to recognize it like this.

And when it comes to that historical trend of this quarterly sales, as it’s shown here on this slide and when I look at (inaudible) the January to March period over 2003, and this – you can look at that historical trend and also now we have this, the continuous growth of the revenues also on a quarterly basis.

And when it comes – this is the total of the revenues on a quarterly basis, it’s shown here and ¥4.1 billion and to the total and 5.4% of the gross year-on-year, but this is the breakdown of each of the business units and particularly, in the business services business, we have with a double-digit growth and also a 5.2% growth in consumer business, these have be favorable.

And when it comes, this been a focus on the advertising business on a quarterly business and annually, we have a ¥2.7 billion of growth and when it comes to listing, we have [8 times] growth and when it comes, now we have a double digit (inaudible) digit of this advertising business, comes from the mobile.

But when it comes to display advertising, that we have – and we found and get up to a good start in January and so, this is just our the goals limited than the other listing and the other areas. This is about comes industry-wise break down of the listing advertising and has been – adverting – is going back to when it comes to front site and read it the areas has some moved into the growth. But for all the other areas we have the growth just like this.

This is about the breakdown of – the industry breakdown of business for advertising performance (inaudible) and this is because of the financial insurance and that we have a decline the business on this the – financial and insurance and also when it comes to this usual game areas and because that – we’ll have the advertising on the feature phone advertising, a decline on a year-on-year basis. And this a rather a historical profit trend on a quarterly basis.

Next, we’re going to talk about this the Q1 of FY2012. This is the forecast, would you please check out the forecast. And today, we’d like to talk little details about – now, we have new organizations in April and with three weeks have passed and working together within all this new team members and now we have discussed considerably the hump to grow our business. Now we’re in the middle of the discussions. But now we’d like to report that one of our ideas to grow our business. And we think that’s – we’re going to generate that the second foundation of the company. This is one of the keyword. And in order to achieve this, the second foundation, so that we were like to reaccelerate that revenues and profit. Although, we haven’t kept growing the gross revenues and profits in the past 15 years, but we’d like to more dramatically grow our gross revenues and profits.

Now, let me talk about that the reason why Yahoo! Japan have successfully increased the revenues and profits. First to go and we have insisted on our top philosophy of users first. We’d like to also insist on the (inaudible) about this onward and our mission is that we’d like to provide that the solution providing engine to solve (inaudible) older people and social issues with information technology.

For example and (inaudible) we suggesting is searching and obviously the shopping or selling or that will meet the demand of that knowledge so that we provide a needs, also the news and also they’re providing the opportunity to volunteer to help with each other. So all these issues underneath can be met with information technology. And we can provide that information technology; we can help them to solve all these problems. These added our corporate philosophies and we have achieved it a lot. And when it comes to the solution providing engines and we have successfully provided to all business solutions, so now currently, and for the PC internet users, about 84% of the users use the Yahoo! JAPAN at least once a month. And not only for the Yahoo! JAPAN, but also when I look at this [page], searching engines, we are top like number one, whereas for the News we are number one, also the Auctions we are the top player. And also the mail users that will also like the number one, and also the Knowledge Search is ranked number one.

So, just like this on a – as a whole and then also agent specific service and we have a positioning as service as a really top portion of the market. On the other hand, when you look at an order, actual internet access market and now a lot of the people hook up to the internet on a multiple devices basis, and (inaudible) business just indicated that last year and no growth in that internet access through PC. So, not also and the feature phone of decline, so then access by a smartphone haven’t grown rapid like this. This is one of the epic making trend on the Internet access market.

And when it comes to the Yahoo! JAPAN users, we – based on the surveys and more than half of that Yahoo! JAPAN users mentioned that, they don’t switch from that feature phone to smartphone in the next two years. So, this is sort of a paradigm shift, this is not a temporary, but the permanent trend of shifting from the feature phone to the smartphone. This is the image of how the users take advantage the internet and this is the orange colored portion is that use case of the internet so that and feature phone and PCs and users hook up to the internet some of the occasionally and provide – when that shifted into the smartphone like this, and always permanently – again, access to the Internet with absolutely in time, this is that – the MH of the – reasons of the internet access by the users. So that is the surrounding environment and how we are tapping these opportunities.

This is the users increase ratio for different devices. Let’s say, PCs growth is one against the previous year, then what about other devices? As you can see, the feature phones are growing like this and smartphones are driving the market. So this is the trend of Yahoo! Japan’s content too. So that the overall page view by smartphones, almost 160 times if you set to the September 2008 as 100, so this is Yahoo! Japan’s homepage and for searches this is the growth. This is the news of the smartphones.

In Auctions, again, it is growing and Shopping is explosively increasing and here we – Knowledge Search, it’s again increasing, so it is not limited to the browsers, but also the applications also increasing for Yahoo! So the services, again, we became number one, so Yahoo! Japan users in PC start using the smartphones and then they get accustomed to our applications so that they also use our application on the smartphones, so closed application is important. About 80% of the smartphone users use Yahoo! Japan services at least once in a month. So that is the information that we got. So smartphone users are increasingly – increase the use of Yahoo! Japan, which means that we are going to increase the revenue for smartphones.

And this is the advertising revenues through smartphones and e-commerce also increases in the area of smartphones. So that for the future, our one of the biggest strategy is to be number one services on PC and PC users will buy smartphones at any time, so they would select Yahoo! Japan as their first browser.

And another one is for the development strategies, we used to set the PC as number one and number two for smartphones, but now we want to make smartphone as number one target and secondly PC as far as development anymore, smartphone first.

And another one is CMO: well, Chief Marketing Officer is usually abbreviation, but in our case, we call this Chief Mobile Officer. I’d say probably this is going to be the first title that we use at a Japanese corporation. PC applications must be also used for smartphone applications, but at the same time you must come up with mobile specific applications and in services, so this officer will really work on the mobile users.

The second one is about the synergy with SoftBank and smartphone internet businesses will be hinged on this synergy with SoftBank. SoftBank is number one carrier for smartphones and internet layers, we are number one. Therefore, we can have the integration of two different layers, so we can challenge many things. There are two things.

The first one is linkage of the services we are exploring the new services there. Another one is reinforcement of the marketing ability. Yahoo! Japan has been very strong in advertising services, we didn’t have much of it, we just had very great sales forces, but in the future we also want to come up with very attractive applications so that we can attract, so that we want to reinforce both sales services – sales representatives abilities and also the applications themselves. So we really want to reinforce the marketing ability.

So furthermore in the future, smartphone market will increase explosively, so we really want to reaccelerate revenue and profit growth there. Well, having said that, what would be the smartphone and smart internet index for us, one of the KPI. For the time being, we set DUB as very important key management index.

What’s DUB? Daily Unique Browsers; number of browsers which used to view Yahoo! Japan in a day. We used to look at unique users, so that the one which use company PC and also private PC and also smartphone, we count it as one use. But now, the one user will start having multi devices with him so that we really have to look at number of browsers that – which used to view Yahoo! Japan in a day, so we changed that index to DUB. So, DUB is the most suitable indicator for multi-device era. The DOC and also services and also other devices are all operating around this phenomena. So this is currently the ratio.

MUB, Monthly Unique Browsers are – excuse me, the DUB is divided by MUB. So that the DUB is about two and MUB is about 10. So for the future, the Japanese Internet users will be increasing, but not so dramatically. So, that MUB assets that we have to really convert it into the DUB, so that is the expansion or that will be the envelop that we can get.

So, what does it mean for the revenue? E-commerce and also the research-related advertisement is rather than unique users, we really have to look at the overall use of the users, which mean that we need to count browsers. So that the – our services are more related to the DUB rather than MUB. Therefore, we have to set the target to increase the DUB for revenue too. Then, one about current situation, 2010 April asset as a one unit and DUB grew by 17 times from then.

Now, let me talk about the business strategy. Now, it is moving towards the smartphones. We have to (inaudible) to the DUB and also we really have to reinforce the market ability there.

So for the corporate side, what do we do? So the ultimate speed and also the – another one is the human resource oriented strategies, the ultimate speed is the key word that we came out recently. The Yahoo! Japan, they may say that have slowed down a bit, maybe Yahoo! Japan became a big corporation that are some of the rumors here. So if it is true, then we really have to make it more faster, because we have to work on the smartphone devices, which means that the, let’s say, common sense or the success cases are not clearly there yet. Therefore we really have to look at outside of our company and try to understand the trend and then phenomena, and have to reflect that into our internal decision makings. So this cycle have to be accelerated.

Completely speaking, we decided to delegate authority much more quickly. In the past, when you create new services, we had almost eight approval processes in average. It’s good to have lots of voices from different departments so that quality becomes better, but the time consuming. Therefore, after April 1, we make it to two approval processes, so four times better time-wise, and we already implemented this process in different services. So now, we can make things in a day or so, so it’s a very small change, but I think can see some changes there.

As for the development of the project, we had planning, development, and maintenance; three departments were there, but sometimes there really have to have the adjustment and an harmonization among the three different businesses, but we decided to integrate all three departments into a one small business unit. So this small unit of businesses can decide everything about the applications and services. So last three weeks or so, we had been working on this.

And when it comes to strategy on human resources management, the key words that are there, so still – the many, many talented people that has enthusiasm and expertise on the smartphone and internet, so that we’d like to focus on the smartphone, it is also smartphone (inaudible) for this human resources management, so that our key word is focus, fast and fun; focus meaning that focus on their own specialty and expertise, we mean the smartphone. And then also someone, if we can execute all these plans and activity in the ultimate speed and then also those who can enjoy working. These are the three key words on the human resource management, focus, fast and fun.

And this is a photo, example photo of our spirited environment of the company, just like this. And we have some kick off meetings and well, all of this in place.

And in conclusion, we’re going to have – this is very good cycles of – now, first we’ll include that talented resources and then also we can double that speed off the successful cases and successful stories, otherwise we cannot double for all these our business performances. And so that if we can double our performance and also we can provide that also issues after the customer’s life and to double the speed and double the pace. So that we can have the growth of the bolster growth – of the revenue and profit. So these all that the figures it just are just real big because (inaudible) two that double the success, at least we have to try ten times as much as that ways in today. So this is the ideas.

And this is our new operating team to realize our strategy and our self and then also for the COO and Mr. Kentaro Kawabe is served as the COO and our CFO is Mr. Toshiki Oya and Mr. Shidachi of the Head of Business-Services business group and the Head of Consumer Business group Mr. Koji Sakamoto and Head of the operations, Mr. Tetsuya Nishimaki and Mr. Tanida, Head of R&D group, Chief Mobile Officer Mr. Shin Murakami.

These are all that new operating teams, with which we’ll like to realize our strategy and next of all and these are the candidates for the new director. I, myself would become the Representative Director and President and from (inaudible) Mr. Miyauchi and Mr. Imai will serve as the new directors from (inaudible) and also, and Mr. Timothy Morse will also – would become the new director.

And, in first half of FY 2012 and we think that this is a transition to a new business strategy. And this is just the transitional period and migration period we think that so that based on the orders to (inaudible) base success of that preceding get authorization, we will be succeeded into the new area. So and this is that the pattern migration zones, so that we need – we would be careful not to drop the baton. So that we can maintain the kind of business basis and on which, we would like to have the gross and revenue and profits. And what were in this migration zone, migration, transition period and we needed to solidify that the new strategy for the new era. So that’s why now we are formulating the new operating teams, and we would like to solidify these new organizations end of the first half of FY 2012 and getting into the second half of 2012, we would like to have the established organization, established team with established strategy.

And in conclusion, so far we have become number one in PC based business. Now, we would like to become also was that – the oldest multi devices in the smartphone market and also we would like to become the number one after this (inaudible). That’s all my presentation. Thank you very much. Thank you.

Question-and-Answer Session

(Operator Instructions)

Now, we would like to invite your question if that any. If you have any question, please raise your hand and I will you to the microphone, and would you please name your company and your name please. We have multiple questions and [very slowly] would you please make your question only one at a time. Would you please raise your hand if that any. Okay, please.

Unidentified Analyst

(Inaudible) thank you very much for the presentation. And my first question is about checking out the financial highlights and in the listing advertising at the front end of (Inaudible) agencies and by online you had growing that in the right end when it comes to fresh marketing portions and you have some declining the effects of this portions and that’s way that’s the agency – by the agency the advertising business by agency have been flat at a quite (Inaudible) we would like to go from this. This is my first question

Unidentified Company Representative

Yes when it comes this media listing business have been flat and BS listing have been growing substantially. This is there was also – when it come fresh marketing and this Internet information services category I mentioned this has the impact on both of these segments. And so basically you’re right, but when it comes this is a spectral (Inaudible) but country now we are still and promoting, we had a favorable business with some agencies.

We are hence doing some business in a local basis, but in the Q4 – and sponsored such business in the listing we have a little growth, but when it come to Interest Match business and there is still work in a proprietary phase. So still have a little bit decline year-on-year basis. So that Interest Match will grow after this (inaudible) we expect that, now, so for the other – listing in the other media, there’s no – after (inaudible) we expect that the advertising product with the smartphone will be released and we can vitalize the business and market, so we’re going to have a close relationship with other major ad agencies, so some kind of – all these tactics will be available for us after this. So, this quarter is flat, then we expect that will start to pick up again and after the next quarter (inaudible).

Unidentified Analyst

And my second question is that, so this is about the (inaudible) question that, you mentioned ultimate speed, a part of your strategy but when we look at a long term basis Yahoo! had been growing very substantially, but in the past few years, you failed to make some big change in the business.

So, now as the new President and CEO (inaudible) in the past few years, it was the speed was lacking or the – what about the challenge in the past few years for Yahoo! for making that kind of explosive change in the business?

Unidentified Company Representative

Well internally and – we mentioned that we are based on the PC, so that Windows 95 and (inaudible) and Yahoo! Inc is founded, Yahoo! Japan was (inaudible) business so (inaudible) successful based on that the PC and Internet continent (inaudible) explored, exhausted and explored all this – the PC and Internet, the continent already (inaudible). So, that’s why we think they would like to get into the new internet continents and that will be the smartphone and the other continents should be discovered, based on our current, a continental current business basis, when you used to jump from the current business basis to new one, sort of is this all worth and we’ll like to and break into this smartphone area and the smartphone domain, so that will be huge, we can have a huge potential. So while protecting our business on the PC, and we’d like to have more happy surprises for all the people and by looking into new area, for basically as a strategy.

And when you look all of their presentations that do you like to focus on the smartphone. So the smartphone is the key and a focus area for us. So that by with growing DUP for the smartphone users, you can reaccelerate the business, right? Yes, right. And the PC users are there but the PC users will also the [shift issued] as instead of using the smartphone, we’ll have some across users, across use cases. And then also some of the young and new users will use only smartphones, now we call the smartphone, smart (inaudible) so that kind of a new generation users will also come out on the market, so that we’ll like to cover both. So anyway and Internet access by a smartphone and that users and the frequency will rapidly grow, so that we’d like to focus on the fitness in that area.

Unidentified Analyst

Last question, the relation with SOFTBANK and I think two directors from SOFTBANK so that the relation with the share owners, I had a question is that you have synergy to be exploited with the SOFTBANK, but what about the Yahoo! Inc. itself? And also in just related to the use of cash and you have sublime cash, so you may be able to use it for the share buybacks for the future. While Yahoo! Japan didn’t really purchase or acquire no major companies, well, IDC was one, but my second question is that how are you planning to use the surplus cash that you have right now?

Manabu Miyasaka

So your relation with Yahoo! Inc. and also how to use the surplus cash. First of all, relation with Yahoo! Inc., as you know, trademarks and also technologies we have a very important strategic partnership, therefore we would like to maintain this partnerships. As for the use of the surplus of the cash, well, basically we need to accelerate the growth so we want to use it for that and we also want to return the value to the shareholders, so we have to really have a balance between the two. As for the merger and acquisitions, it doesn’t mean that we were not so active in the merger and acquisition activities. To accelerate the business growth, we will study the possibilities if it is necessary. Thank you.

Unidentified Analyst

Thank you. That’s all for me.

Manabu Miyasaka

Any other question?

Yoshitaka Nagao – Nomura Securities

Thank you very much for the presentation. I am Nagao from Nomura Securities. My first question is that you mentioned again and again that based on the device-base strategy isn’t one of the key area, but when it comes to quality of service and how to deal with the social networking, social networking is one also very important, the key area for Yahoo! Japan. So how do you plan to deal with that, the social networking, how you can take advantage of social network for the reacceleration of Yahoo! business? This is my question. And when it comes to the social networking is very important area for us and particularly in (inaudible) only few frequency users (inaudible) we’d like to shift into that more frequent users. So, the social network is very important for us, so that when they joined the social networking they tried to use it in – the internet on a daily basis. So, this is very important. So now we’re thinking about two things. One thing that, although we’ve been doing this also so far and we couldn’t have so much big success but we’d like to own and operate our social network – social [graph].

So, we would like to keep making the efforts to do this, and another thing is that, so far – we have some policy that – it’s not a policy but we didn’t use – we didn’t utilize the other computers and other companies social program so that, now it will be reported on the news but (inaudible) incorporated some of the comments from the – but this is now the new approach and we don’t have to (inaudible) in particular but would like to take advantage of the social [graph] of the other companies and like to grow, but at the same time, we also think about, owning and operating our own social network. This is the two approaches.

Manabu Miyasaka

Second question is about the (inaudible) smartphones. So I think we already turned the corner for the smartphone businesses, as I saw like (inaudible) and also social network (inaudible) and also social discoveries, interest sharing or content sharing (inaudible) commerce. I think you really have to think of the new types of the services. So, these services have not been on the Yahoo! Services. So, to come into the new world, what would be the driver for the DUB? Is that the new cycle of servicers or are you thinking of adjusting your existing services to the smartphones?

Manabu Miyasaka

Well, we have to work on both, existing service improvement and also new applications. Top 20 services of Yahoo! Japan shares about 80%. So those people will start using smartphones. So on the PC, they look at weather forecast, they will check in the weather forecast on the smartphones too. So any devices, the users will check the same information. So if we were strong at certain – or when we are strong at a certain application on a PC, we have to be strong in other devices.

However, the smartphones on social network, the speeds are different from that of PC. That we understand well. So we really have to come up with new type of applications and services for smartphones.

Unidentified Analyst

And my last question is just – I’m very sorry to make this question immediately after you became the President, that to accelerate the DUB or the recent new services, and in which exclusive timing you can have the results of this new strategy? When I look at this, your time plan and there is a miscue that the incremental extension of the (inaudible) the timing or plan, actually have to deliver the results based on this new strategy? On a middle term basis, and that we already have started internal discussions, but the middle term target and also we need to at least achieve this target, this is just an internal target, we can disclose about that, I’m very sorry. Thank you.

Manabu Miyasaka

We’ll do out best, that’s out answer. Any other question?

Unidentified Analyst

Thank you for your presentation. Goldman Sachs, my name is (inaudible). I have two questions. First one is about the competition. Your business sizes are different in many ways but monetization is actually e-commerce and also search engines, these two are the drivers for the monetization. So, some of your business indexes are increasing, but when you think of the Google and also Amazon’s business growth, they are growing even in PC side.

So, your competitors are increasing their revenues tremendously. I’m sure that you are taking also countermeasures against them. Well (inaudible) is also increasing their revenues. So to catch up with competitors, I’m sure that you have a vision too, so would you share your concrete idea, how to catch up with competitors?

Unidentified Company Representative

Okay, one-by-one please. As for competition, so I think that you are asking me about the competitive strategy. Yahoo! is very versatile search engine, display advertisement, media or video or e-commerce and auctions. We are really versatile, it’s almost like a [counter merit] of the Internet businesses. In each businesses, we have to set the competitors for each different competitive market. So that, that each business department that from April to June, that we are coming up is very complete tactics and strategies. I don’t think that there is one big vision to cover all. We really have to work on each business unit to work against the competitors, so that is the point that I can talk to you at this moment.

Unidentified Analyst

My second question is that you have some extraordinary profits and gains due to your business with the recruits, but there would be [recognizes] in the first quarter and after that?

Manabu Miyasaka

When it comes to business with Recruits and after April 2004 and we are jointly operating the business, the recruitment business. And now we discussed about what would be the future directions with our joint business with Recruits and we discussed based on the request from Recruits and we discussed (inaudible) about the way and concluded that the two parties will go to different way, separate way with each of their own, so this is a conclusion, so that why terminate the contract.

So when it comes to impact on the profit or loss statements, that this termination of this business is, this is Yahoo! Rikunabi, the joint business and that will be terminated on December 2012 and with specific timing that this will grew maybe which switches to their own proprietary service. And after the onward and we try to grow our own business as much possible, so we are still on a planning stage. So we have no idea about what specific impact on our bottom line.

So this means that after this December, you also saw we do these activities, so that you’re doing everything on your own, including sales activities. Yes, you have to – all these service will be terminated at the end of December 2012. This is what I meant. Okay, thank you very much. Thank you. Any other question?

Yosuke Tomimatsu – Merrill Lynch Securities

My name is Tomimatsu of Merrill Lynch. Three questions. First one is about smartphones. DUB increase and also revenue increase. In case of the PC, you can have information at one screen on the portal, but in case of smartphones, the user must go to the services directly so that the Yahoo! users are different in that sense. So how do you cope with that? And also Yahoo! usually have big screens so that users can actually see many advertisement, but it’s very difficult on the smartphones, and also you talked about the – changing the buttons like it takes six months, but the users are converting their feature phone to the smartphone so quickly and I think that the smartphone users must be familiarized with the advertisement of Yahoo! Why they have to take six months?

Manabu Miyasaka

Well, first of all, what about the type of businesses, what would be changes of the businesses for this month. So yes, the photo was one unique feature for the PC, but I think that the top page advertisement should be very strong. Otherwise, they usually do not go into the portal. Sometimes that the search engines is not easy to use or cannot really use the news, then they do not go into the portal. Therefore, that the each service must be very strong. And of course competitors are different for this matter for us, but the each services must be strong and then powerful.

And as for the advertisement that you really have the good exposure of the advertisement, even for this matter for us. It is too challenging. So far we haven’t done much, but we really want to work on step-by-step and want to accelerate, accommodate the need of this matter for the advertisement exposure.

Second question about the, why six months? Well, six months is a maximum period. So we really want to shorten the time period as short as possible. It doesn’t have to six months.

Unidentified Analyst

My second question is that – you mentioned synergy with the (inaudible) banks so that’s (inaudible) you just met this month on this number one, because it has owns iPhone business. So that they went – the iPhone business, the Apple is taking a message another sort of a while taking a message, so you have to have some difficulty to control your own business, where there is iPhone based business.

And when it comes to synergy with (inaudible) bank and now you mentioned about the multi-carriers multi – iPhone based is saying that multi-carrier based businesses, so that we’re not trying to go to the directions to have a simple multi-carriers. So that by having your (inaudible) there would be some risk for you to loosing that data business where there an iPhone or where there’d be other carriers, or another kind of a relationship. So those who think that the – this is about – my question about this relationship with your other carriers with SoftBank?

Manabu Miyasaka

Yes, we don’t have any idea about this multi-carrier base business, we’re going to have a business with any carrier and we’d like to provide the best services than any carrier. So – but when it comes to the SoftBank customers and we’re going to provide some kind of extra, or for example, that is more usable for the SoftBank users. So this is the synergy we like to take advantage of.

Unidentified Analyst

And how about the alliance with iPhones?

Manabu Miyasaka

You mentioned iPhone, yes, I understand, iPhone is very, very strong brand, but also there a lot of access and we’re expecting Android rather for iPhone and also – I cannot mention the datas, but the iPhone – we can jointly do something with the device, and in all the other areas, we can work together with the other carriers and devices.

Unidentified Analyst

Third question. At the first conference, you mentioned that the negotiation with Yahoo! Incorporated has been stalled. I think that is the word that you mentioned. So it’s stalled means suspended or what do you mean by the word stalled? And what about the benefit for the existing shareholders, I’m sure that you try to maximize the benefit for the shareholders, but what are you actually appealing to the Yahoo! Inc.

Manabu Miyasaka

At the press conference, I said that the – well, as for the Yahoo! Inc. relation, at this moment, we do not have any concrete negotiations or any discussion with Yahoo! Inc. They have 33% of the shares, which is one-third, very important amount of the shares. So, of course, we don’t want that shares to be held by someone we don’t want to, so that’s why we have been talking about the share buybacks too. So, when the negotiation is concluded and it will be successful, but at this moment we have not settled that negotiation, that’s why we suspended the discussion for now.

So, we really have to maximize the value for the shareholders, we have to think of the share prices, so thinking of these different factors we will be making a progress there. As for the negotiations, well, it’s up to the counter part but if they are ready to talk to us, then we want to make a progress there and what we can do at this moment, we continue to work on it. Thank you.

Unidentified Company Representative

(Inaudible)

Manabu Miyasaka

Thank you.

Unidentified Company Representative

(Inaudible)

Unidentified Company Representative

Thank you, very much. Okay. We have any other question? Okay. Please. (inaudible) Securities. I have two questions. My first question is that, you mentioned earlier that in the first half, now this is the migration and transitional period, but you, still you wanted to keep growing (inaudible) but after this the result of the first half, okay and based on the result of the first half, I think you have concluded that you are going to accept some of the suspension of the growth for making the investment for the future. So in case that kind of a strategy comes out after the first half, it can be possible that you switch to the strategy from the growth strategy to that kind of investment and the future-based strategy, and it’d be possible.

Manabu Miyasaka

Well, the investment for growth should be made more aggressively but we have no idea that this kind of aggressive investment will hamper the kind the growth or the profits and the revenues, but anyway we have to consider that and consider that very well.

Unidentified Analyst

But my concerning question about this is that when you look at the Q1, it seems like that the extension, incremental extension from the current strategy and the current direction, but when I look at that, you [go to] this 7% for the revenue, and 6% for the growth on the profit, so that’s why you already have started conserving some kind of investment, starting from this Q1, so am I correct?

Manabu Miyasaka

Well, when it comes to that, this is also due to that incremental headcounts, the resources, because we are going to recruit new graduates in this Q1, so there is not any specific investments would made in this Q1, okay.

Unidentified Analyst

Second question, to implement, to realize the growth that you’re thinking right now, even in the Internet market, I’m sure that you are recruiting the top notch human resources, but you’re planning to expand the human resources to increase the businesses. If it’s so, I think that the competitors are also recruiting very capable human resources. So for the mid-to-long term financial burden for the recruitment, what do you think of that part?

Unidentified Company Representative

Well, human resources, we have to have good people. We have to train. We have to maintain the employment. So three peers for our recruitment. So, I’m sure that it is true for any businesses, it is not just for our company. So, first of all, recruitment of the capable people, we want to make our (inaudible) to do so.

Unidentified Analyst

Well, are you planning to increase the headcount in the future?

Unidentified Company Representative

Yes, we need to recruit the people for the necessary areas, but the productivity per person. I think there are still rules to improve the productivity at any time. So, expanding the headcounts is one way, but it’s not just that but also, it is – we are living in IT market, so that we have to increase the productivity per person. So we work on the both sides.

Unidentified Analyst

Okay, thank you very much.

Unidentified Company Representative

Do we have anyone?

Unidentified Analyst

Thank you very much for the presentation. I’m (inaudible) from UBS Securities. I have two questions. My first question is, so data question I’m sorry, but you mentioned in your presentation that DUB is that importance to [KPI] and you were going to focus on smartphone, that’s the key message today but, after you achieve this (inaudible) DUB you mentioned and what would the target and the image of that – the size of the revenue, (inaudible) in advertising business or the consumer (inaudible) and the major part of our revenue sources, and now, what does management think about – what will be the basic business model and framework of the revenue sources in the future?

Unidentified Company Representative

Okay and first of all the country and (inaudible) and advertising and (inaudible) display advertising and some research advertising. There are several sub categories (inaudible) business and the information businesses and this is a part of advertising and e-commerce and membership subscriptions and digital contents. These are the major segments of Yahoo! Japan business and now we think all these areas are promising in the future, so that now we will have a idea that focus only in that kind of (inaudible) but we’d like to grow the older business segments but now, we’re discussing is that now, whether working on the Internet in the past 15 to 16 years and services and gaining ground and in some services declined and now the key commerce and digital contents and gaming and (inaudible). So it maybe likely we’re going to have another brand new business model and a brand new area in the Internet, will it be promising, (inaudible) all these potential areas.

Unidentified Company Representative

(inaudible)

Manabu Miyasaka

Another question, I think previous questions were very similar to this (inaudible) we couldn’t get a very clear answer. So I wanted to ask you one more time, you really want to reaccelerate the growth of the sales. And I think you are really determined to do it. So please give us the – some kind of a target, doesn’t have to be clear, but at least minimum target.

Unidentified Company Representative

Well, we do our best. Well, as soon as possible, as much as possible is our target. We can’t really give you very concrete number here, so please monitor our performance closely. Thank you.

Unidentified Analyst

Thank you very much.

Oliver Matthew – Mizuho SA

I’m Oliver Matther from Mizuho SA. And related to the previous question, after this onward, and internet advertisement market in the next one or two years, how long you will keep growing, this is market per se. And when it comes to market share of Yahoo! Japan, how much of market share you can gain or you will lose the market share and same is true also for the e-commerce, what would be the trend and your future trend of the e-commerce market in one or two years and how much market share can you expect to gain in the e-commerce market or you will lose?

Manabu Miyasaka

Okay, thank you very much. And in advertising and e-commerce market, now, you’re asking about the market prospects of the e-commerce and advertising, we think that it will – these two areas will keep growing and there is no – any factor that will state a declining so dramatically. So regardless of any macroeconomic situation, so that it is growing market trend, how we can gain the market share. And when it comes to, first of all, advertising and now that the search engine rated on 2000 had been growing and then also we’d like to get up to a good start for the smartphone market, these are the case. And also when it comes to e-commerce and now auction and the shopping will be the key area for us to be good and gaining the market share, and obviously we then try to challenge the new ways to selling our business. This is our idea.

Unidentified Analyst

Well, my Japanese is rather poor, so how much percentage do you expect to grow, the Internet advertisement market and also e-commerce market, how much do you think you can grow?

Manabu Miyasaka

Approximately I would say two digit growth is my hope, overall [pie], overall market. We can acquire new businesses from new industries, so I think that it will grow that much. But this is overall market trend, so we can’t go into the detail.

Unidentified Analyst

Okay. Thank you very much.

Manabu Miyasaka

Do you have any other question if please?

Unidentified Analyst

I’m [Andrew from Deutsche Bank Securities]. I have two questions. And my first question is that now you are shifting from the PC to the smartphone as for example, when it comes to logging the information and you are going to handle a lot more, the location-based information data, and now you have been doing business on the Yahoo! a lot but in the new discussion in the past three months and now you have concluded that are you going to change the direction in this area, in the business in the future? And therefore the second question…

Manabu Miyasaka

Would you please make the question one by one please? Okay. Now this is related with response to the previous question, but when it comes to Internet market, and this local advertising market and it then will be about the size of a ¥2 trillion and this local advertising potential market, we have targeted this area, but so far we have failed to fully cultivate this area. But now that we can have the smartphone business and that we can break it into this local advertising and the local community advertising businesses. So and when it comes to that local or that kind of specific services, we are still considering how we can adopting the current business to the smartphone services.

Unidentified Analyst

Second question, you created new position called CMO, this is like horizontally collected title, so what type of functions does CMO has? And what type of organization does he or she have? And also what type of revenue or services coming out from that division?

Manabu Miyasaka

Well, let me simply explain and after that [Murakami] can follow. CMO is also working as the Information System Director too. So smartphones and then smartpad businesses, actually the business style itself has to be mobile, so smartphones and smartpad should be used daily in the business lifestyle. So I’m asking [Murakami] to mobilize all the type of the devices in our company. Then, you have to come up with the good environment for that. Do you have any additional information there?

Shin Murakami

Well, thank you. My name is Murakami. I am serving as the CMO, two initials for CMO. As Miyasaka said that the – our work style itself should be mobile based. We are the company creating the application and services for the Internet. So we have to really immersed into the mobile services and really feel and experienced by ourselves. So we really love the Internet, we really enjoy using it. And we came up with the services that we really enjoyed and that’s why, that has been popular with the users. And we want to do the same thing for this smartphone.

So first of all, so this is have to be based on mobile and also environment have to be mobile-based. And Miyasaka gave me the missions for that. So I myself is a CMO reporting directly to the CEO and at the same time serving as the head of the information business system, working under Miyasaka – excuse me (inaudible). So that the even though I am called the CMO, that we are working basically on the services by us towards the mobile devices.

Unidentified Company Representative

Okay, thank you very much. Do you have any other question? Okay, all right. Okay, thank you very much. There are no questions, so that we’re going to the end of today’s guidance meeting. Thank you very much for joining us today. Thank you.

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