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

• • •

Hardware

  • Sony Corp. (NYSE:SNE) has raised its stake in a shrinking music-recording industry, perhaps with a view beyond just selling CDs to a future where songs will play an important role across its various media and devices. Sony, with interests from mobile telephones to movies to video games, agreed to buy Bertelsmann's 50 percent stake in Sony BMG, ending a four-year venture that struggled amid sharply declining industry-wide CD sales. The sale for about $900 million had been expected since Bertelsmann chief executive Hartmut Ostrowski said divisions not meeting their targets would be sold. The company gets $300 million in cash on Sony BMG's balance sheet, valuing the deal at about $1.2 billion, although the value to Bertelsmann including tax breaks is higher. Retail music shipments in the U.S. fell to about $10.4 billion last year from a peak of $14.6 billion in 1999.
  • Sony Corp. plans to invest 40 billion yen ($369.9 million) to raise its monthly lithium ion battery output capacity to 74 million units by the end of 2010 from roughly 41 million units now. Over the three years through fiscal 2010, the electronics giant will invest to build an electrode factory at Sony Energy Device Corp.'s Motomiya Technology Center in Fukushima Prefecture and to add battery cell production lines at the subsidiary's Tochigi Technology Center in Tochigi Prefecture. The stepped-up investment is aimed at tapping growing demand for lithium ion batteries for use in cordless power tools, shavers and other small consumer electronics products. At present, roughly 50 percent of Sony's lithium ion batteries are used in cellular phones, with slightly more than 20 percent supplied for use in notebook computers.
  • Fujitsu (OTCPK:FJTSY) is in talks with German business software maker SAP (NYSE:SAP) on expanding cooperation in Asia. Fujitsu, which competes with IBM (NYSE:IBM) and EDS (NASDAQ:EDS), is looking for new revenue streams in its IT services business while trimming costs in its PC, hard drive and semiconductor businesses.
  • Nikon Corp. plans to build two factories in Japan for roughly 35 billion yen ($319.9 million) to boost production of its next-generation semiconductor steppers. One of the new buildings will be at the company's site in Kumagaya, Saitama Prefecture. The other will be constructed at Tochigi Nikon Precision Co., a Nikon production unit in Otawara, Tochigi Prefecture. The two new facilities will have a combined floor space of around 16,000 sq. meters. They are scheduled to start operating in December 2009, boosting Nikon's monthly output capacity for next-generation steppers from the current level of about 40 units to roughly 90 units by around fiscal 2010. The factories will manufacture ArF immersion scanners, which are used to fabricate DRAMs with 50nm or narrower line widths and flash memory chips with 40nm or smaller line widths. The scanners feature functions that improve chip yields and productivity.

Semiconductor/Solar Cell

  • Elpida Memory Inc, the third largest maker of PC memory in the world, plans to set up a joint venture with Suzhou Venture Group Co Ltd [SVG] to produce DRAM in Suzhou to meet growing DRAM demand in the Chinese market. The new venture, with a total cost of about $5 billion and covering an area of 320,000 square meters, will be set up in the Suzhou Industrial Park by the end of 2008. It will build a 300-mm wafer fabrication facility, which is designed to have an initial production capacity of 40,000 wafers a month when it becomes operational in the first quarter of 2010. The capacity is expected to be doubled at a later time. Elpida's 50-nm DRAM process technology will be used at the beginning and migration to 40-nm will take place as soon as the process is ready. Elpida will purchase all the products of the fab.
  • Sanyo Electric (OTC:SANYY) aimed to boost its solar cell output capacity more than 10-fold to 4 gigawatts a year by 2020, or about 10 percent of the global market. Demand for renewable energy such as solar cells is growing fast due to higher oil prices and concern about climate change. Solar cell production capacity at Sanyo, which competes with Sharp (OTCPK:SHCAY), Q-Cells and Suntech Power Holdings (NYSE:STP), came to 260 megawatts in the year that ended in March. Sanyo, which had a global market share of 4.4 percent last year, said in November it planned to invest 80 billion yen ($739 million) in its solar business over the three years to March 2011 to bring its annual output capacity to 650 megawatts.

Telecommunications

  • Softbank (SFBTF.PK) avoids setting profit targets due to market volatility. The company’s net profit slipped nearly a quarter in its first fiscal quarter ended June as handset sales dropped and as a higher tax burden blocked out efforts to cut costs. Net profit for the quarter tumbled to 19.37 billion yen ($176 million) from 25.13 billion yen ($228 million) in the same period a year earlier. Softbank said that in the same period a year earlier, net profit was boosted by one-time gains due to the reversal of unused provisions.
  • NTT Docomo (NYSE:DCM) will stop accepting applications for its 2G mova mobile phone service nationwide on November 30. The company will waive the normal charge of 2,100 yen ($19.10) for any mova user who transfers to a FOMA subscription beginning August 8. Given that mova subscribers have been steadily migrating to Docomo's popular 3G services, FOMA, the company has decided to eventually discontinue mova and concentrate on FOMA. The timing of the mova service's actual termination will be decided depending on market factors such as how fast mova users continue to migrate to FOMA.
  • KDDI Corp. saw the smallest net increase in number of subscriptions among Japan's top four mobile phone operators in July for the second consecutive month, while Softbank Mobile Corp. maintained the top spot for the 15th month in a row. KDDI posted a net gain -- new contracts minus cancellations of 17,000 subscribers to its ''au'' service in the month. The company had led the field for some time after the introduction in October 2006 of the number portability system enabling cellphone users to switch service providers while retaining their phone numbers. Under the number portability system, KDDI had the first-ever net decrease, of some 1,200 subscriptions, in the month.
  • NTT posted a 24 percent rise in quarterly profit on gains at its mobile and system integrator units, and stood by its full-year outlook. NTT, like rival KDDI Corp is struggling to improve its sluggish fixed-line operations, but its mobile phone unit NTT DoCoMo lifted its profits after it slashed incentives on handsets. NTT DoCoMo generates some 70 percent of the parent's operating profit. NTT said its operating profit came to 372.06 billion yen ($3.43 billion) in the April-June quarter, up from 299.23 billion yen ($2.7 billion) a year earlier.

Media, Entertainment and Gaming

  • Moody's Investors Service says the industry outlook for Japan's consumer game software sector is positive as the launch of new consoles since late-2006 drives growth, and while activity has peaked domestically, it will remain strong overseas. By contrast, the rating outlook is stable with no major rating actions expected over the coming 12 months as Moody expects rated companies will minimize fluctuations in both revenue and earnings. The Moody's comments were contained in a just-released report on the prospects for the sector, based on expectations for its credit conditions over the next 12-18 months. The report said that consoles are currently driving software market growth globally and domestically, a trend that Moody's expects will continue.
Source: Japanese Tech Stock Weekly Summary (8/4-8/10)