Japanese Tech Stock Weekly Summary (7/28-8/3)

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Includes: DCM, MC-OLD, MSBHY, NTDOY, SHCAY, SNE, TOSBF
by: IRG Ltd

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

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Hardware

  • Mitsubishi Electric Corp. (OTCPK:MSBHY) said fiscal first-quarter profit rose 19 percent, helped by sales of audio-visual products. Net income increased to 55.3 billion yen (US$512 million) in the three months ended June 30, from 46.5 billion yen (US$432 million) a year earlier. Sales gained 0.7 percent to 879 billion yen (US$8.2 billion).
  • Sharp (OTCPK:SHCAY) posted a 14 percent fall in quarterly profit, hit by slower mobile phone sales, but it stood by its annual outlook that falls slightly short of market expectations. Operating profit came to 36.4 billion yen (US$337.5 million), down from 42.3 billion yen (US$390 million) a year earlier. Sharp suffered from a slowdown in demand for its mobile phones, one of its key growth drivers a year ago, although it enjoyed strong shipments of LCD panels to other TV makers as flat TVs continued to sell well worldwide. For the full year to March next year, the supplier of Aquos brand LCD TVs kept its operating profit forecast of 195 billion yen (US$1.8 billion), up 6.2 per cent on the year and narrowly missing a consensus of 197.3 billion yen (US$1.8 billion) in a poll of 18 analysts by Reuters Estimates.
  • Sony (NYSE:SNE) issued a profit warning after its earnings almost halved while Toshiba (OTCPK:TOSBF) plunged into the red as both companies felt the pain from a price war, a stronger yen and an economic slowdown. This year is shaping up to be a tougher one for Japan's consumer electronics makers compared with last year, when many leading companies enjoyed double or even triple digit growth in earnings. Sony Corp.'s net profit fell 47.4 percent to 35 billion yen (US$326 million) in the three months to June as operating profit fell 39.5 percent to 73.4 billion yen (US$682 million). Sony has endured a difficult few years in the face of tough competition from rival products such as Apple's (NASDAQ:AAPL) iPod and Nintendo's (OTCPK:NTDOY) Wii.
  • Sony posted a bigger-than-expected 47 percent fall in quarterly profit and cut its outlook, hurt by its struggling mobile phone joint venture with Sweden's Ericsson (NASDAQ:ERIC). Rival Matsushita (MC-OLD) nearly doubled its profit on rising flat TV sales. Sony lowered its group net profit forecast for the year to March by 17 percent, citing the slump at Sony Ericsson and weakening prospects for its electronics division as rivals try to undercut its Cyber-shot digital cameras and Vaio PCs on price. Matsushita Electric Industrial, the maker of Panasonic products, in contrast, kept its outlook above market expectations as it cashes in on strong demand for its Viera flat TVs.
  • Toshiba Corp expects prices for NAND flash memory chips to fall 15 percent in the second quarter to September from the previous quarter. Toshiba, the world's No. 2 maker of NAND behind South Korea's Samsung Electronics, is battling chronic price falls that have taken its share price down 29 percent since a peak in early June. NAND is used in digital music players, cameras and  mobile phones.
  • NEC Electronics Corp. said it aims for an operating profit of more than 3 billion yen (US$27.8 million) in April-September, and that it aims to attain a net profit for the full year. NEC Electronics, which is 70 percent owned by electronics group NEC Corp., kept its official six-month operating profit forecast unchanged at 3 billion yen, from 1.9 billion yen the previous year. The company, which makes chips for Nintendo's game console Wii and for Toyota Motor's (NYSE:TM) Lexus luxury car, kept its full-year forecast for zero net profit and a 10 billion yen operating profit, which are both above market estimates.
  • Matsushita Electric Industrial Co. reported a 48 percent gain in quarterly profit on brisk flat television sales, and stood by its annual outlook that exceeds market expectations. Operating profit at Matsushita, the world's No.1 plasma TV maker ahead of Samsung Electronics Co Ltd and LG Electronics Inc totaled 109.6 billion yen (US$1.02 billion) in April-June, up from 73.9 billion yen a year earlier. Its newly launched 46-inch high-definition plasma TVs drew strong demand ahead of the Beijing Olympic Games, helping Matsushita overcome the negative effects of a firmer yen and soaring raw materials prices. Matsushita, which offers Viera flat TVs and Lumix digital cameras, kept unchanged its operating profit forecast of 560 billion yen (US$5.2 billion) for the year to March, which is above a consensus of 548.1 billion yen (US$5.1 billion).

Telecommunications

  • A new installment scheme for handset purchases enabled Japanese mobile operators to maintain profitability, despite competition. NTT DoCoMo Inc. (NYSE:DCM) said its group net profit in the April-June quarter soared 41 percent on year as operating expenses and cancellation rates fell. The reduction in costs resulting from a new installment scheme for handset purchases allowed the company to maintain profitability even as it struggles to maintain market share against nimble competitors. Japan's top mobile communication carrier said its group net profit climbed to 173.5 billion yen (US$2 billion) from 122.8 billion yen (US$1.2 billion) a year earlier, beating the 170.9 billion yen (US$2 billion) consensus of 16 analysts' forecasts surveyed by Thomson Reuters' data arm, Thomson Financial. Group revenue fell 1.1 percent to 1.2 trillion yen (US$11 billion).
  • KDDI Corp. will terminate its seven-decades-old operator-assisted international call service on March 31, 2010. KDDI has decided to end the service as the number of users has plunged as more people opt to direct dial numbers. When the service commenced in 1934, people could only make overseas calls through operators. The number of users reached a peak of 11.83 million in fiscal 1987 but fell to 10,000 in fiscal 2007.

Media, Entertainment and Gaming

  • Nintendo's quarterly profit rose 31.5 percent on the runaway success of its Wii game console, but the Japanese video game maker kept its annual outlook that falls well short of market expectations. April-June operating profit at Nintendo, which is waging a three-way battle with Microsoft (NASDAQ:MSFT) and Sony in the global video game industry, rose to 119.2 billion yen (US$1.10 billion) from 90.63billion yen (US$842 million) a year earlier. Nintendo's Wii, competing with Sony's PlayStation 3 and Microsoft's Xbox 360, has enjoyed brisk demand thanks to its easy-to-learn motion-sensing controller, low price and innovative titles such as the “Wii Fit” exercise game.
  • Nintendo Co. and 54 game software makers filed a lawsuit against distributors of devices that allow unauthorized copies of games to be played on the DS portable game console. The lawsuit, filed with the Tokyo District Court, seeks an injunction on the importation and sale of R4 Revolution For DS and similar products by five foreign-affiliated firms operating in Tokyo. Known colloquially as "majicon," the devices are essentially adapters that connect to the DS, enabling memory cards containing pirated games to be loaded. Besides Nintendo, plaintiffs include such game industry heavyweights as Capcom Co. and Square Enix Co.