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IRG Technology, Media and Telecommunications Weekly Market Review (Week of 21 – 27 Nov 2011)



         Tokyo Electric Power Co. (Tepco) raised 186.3 billion yen (US$2.4 billion) from the sale of its stake in KDDI Corp., its biggest disposal since saying it plans to offload assets to pay compensation for the Fukushima disaster. Tepco, which owned about 8 percent of KDDI, plans to book a 35.1 billion yen (US$452 million) loss on the transaction, it said in a statement. Tepco sold the stock back to KDDI on the Tokyo Stock Exchange Trading Network System at 521,000 yen (US$6,712) a share.  Tepco has been selling holdings since the March 11 earthquake and tsunami crippled its Fukushima Dai-Ichi nuclear station. Compensation may total 4.5 trillion yen (US$58 billion) in the first two years after the disaster, according to a report from a government panel. KDDI plans to raise as much as 201 billion yen (US$2.6 billion) from a sale of convertible bonds to buy back the shares held by Tepco. The zero-coupon notes may be exchanged for KDDI stock if shares rise above the conversion price set at 5 percent to 15 percent more than Nov 24th’s close, according to a person with direct knowledge of the matter. KDDI completed the buyback of 424,126 shares, paying about 221 billion yen (US$2.8 billion), it said in a statement


         Orders for Japanese semiconductor and LCD production equipment are expected to rise about 30 percent in the current quarter, compared with the July-September term, due to increased investment in chip miniaturization. The eight leading domestic suppliers are expected to field a combined 278-290 billion yen (about US$3.7 billion) in October-December orders, or 26-31 percent at least in the previous quarter. Chip and LCD makers had been holding off on production investments amid a slowdown in sales of personal computers and other electronics. Now, not only has chip-related investment turned a corner, but OEL (organic electro-luminescent) displays, hailed as a promising alternative to LCDs, are becoming a focus of spending. South Korean and Taiwanese chip and LCD manufacturers are in the vanguard of this investment. U.S. and Japanese rivals, meanwhile, are gradually shedding their reluctance toward new factory improvements.


         In an emerging legal battle between Japan's two leading mobile gaming platforms, Gree Inc. filed a lawsuit against its rival DeNA Co. seeking damages of at least 1.05 billion yen (US$13 million). Gree is accusing DeNA of pressuring game content developers and other business partners to refrain from working with Gree's mobile game service. Gree's lawsuit comes after Japan's Fair Trade Commission in June ordered DeNA to halt anticompetitive practices, claiming that the company has interfered with game developers' efforts to do business with Gree.


         Olympus Corp., the maker of cameras and medical equipment said it would meet a Dec. 14 deadline to produce its second-quarter results. Even if it meets the deadline, the exchange could still delist Olympus, depending on the scale of past misstatements or if a link were to be found to "yakuza" gangsters. A third-party panel appointed by Olympus to look into the accounting scam said last week that it had not yet found any evidence of involvement by organized crime. The panel's findings are due to be published in early December. 



         Despite sluggish demand in global TV markets, output of 3D TV panels is expected to increase during the fourth quarter, driven by fierce competition among 3D TV makers. According to DisplaySearch, production of liquid crystal display (LCD) panels equipped with 3D capabilities will jump 30 percent on-year in the last three months of 2011. The fourth-quarter growth pace of 3D TV panel output is forecast to be even larger than the previous quarter, it said. In the third quarter, 3D panel output rose 27 percent from one year ago. DisplaySearch attributed the increase in the 3D TV panel output to the heated competition between Samsung Electronics Co. and LG Electronics Inc.  Samsung is advancing its shutter glass technology for 3D TVs while LG is backing the film patterned retarder technology.

         Samsung Electronics Co., Ltd. acquired the Nexus division of ITC Nexus Holding Company (ITC), a provider of cardiac point-of-care testing solutions. Nexus develops, manufactures and markets the Cardiac STATus, DECISION Point and VYENT line of rapid test kits that aid in the diagnosis and monitoring of several cardiovascular diseases. Nexus will continue to operate from its San Diego, California headquarters and become part of Samsung's HME division which focuses on developing and bringing to market innovative technological solutions for the healthcare industry. As part of long-term will develop next-generation growth engines, Samsung announced last year its goal to invest 1.2 trillion won through 2020 in healthcare equipment. Its first major move into electronic diagnostics tools began early this year with the acquisition of a controlling stake in diagnostic ultrasound manufacturer Medison, now renamed Samsung Medison Co., Ltd. 


, Chinese online game developer and operator, said it will buy game information portal from Sohu for US$162.5 million in cash. As part of the deal, Sohu agreed not to compete with Changyou in the 17173 business for five years after the closing of the transaction, Changyou said
, said third-quarter profit increased by 12 percent to 410 million yuan ($64 million) and met the 410.1 million yuan (US$64.3 million) average of eight analysts’ estimates compiled by Bloomberg. Revenue increased by 11 percent to 1.6 billion yuan (US$251 million). Chinese exporters are paying 50 percent more this year to set up new online storefronts to market their products, after Alibaba increased prices to sustain revenue growth. Chief Executive Officer Jonathan Lu is boosting efforts to protect buyers, after the company said in February that some were defrauded by bogus vendors.

         At least 300 million people in China now have microblogging accounts, a state-run newspaper reported, as the country's fast-growing online population seeks to bypass tight media controls. After Chinese censors blocked Twitter in 2009, several homegrown versions known as Weibos emerged with enhanced services such as photo and video embedding, and proved wildly popular with web users.  The State Internet Information Office announced at a conference in the central city of Wuhan that the nation now had at least 300 million registered users of Weibos. The rise of the Weibos has exposed the difficulty of controlling access to information as more and more Chinese turn to microblogs to vent their anger over government corruption, scandals and disasters.

         A Chinese industry group of game developers is suing Baidu Inc. for at least 30 million yuan (US$4.7 million) for copyright infringement. Content Provider Union, which represents developers of games for mobile devices, has accused Baidu of providing unauthorized downloads for at least 350 games designed by member firms, said spokeswoman Tian Lifeng. Baidu, the nation's most popular search engine, rejected the allegations, only provides links to games present on third-party platforms. The case has been accepted by a local court in Beijing, according to Tian and a group statement.  All of the 25 firms involved in the case and represented by the industry group are small, domestic game developers.

         eBay Inc. acquired, a provider of online-prediction technology, to enhance customers' shopping and selling experience. Hunch can also be applied to other technology opportunities, including search, advertising and marketing initiatives, to offer better product and search results based on customers' tastes. eBay's marketplace segment has been the focus of a turnaround effort that included technology and fee changes last year, which have begun to bear fruit in recent quarters. The unit had lagged the wider online retailing industry, even as eBay's online payments unit, home of PayPal, thrived. The e-commerce operator had last month its third-quarter earnings rose 13 percent, as revenue grew 32 percent.


         ZTE Corp. will invest 2 billion yuan (US$314.6 million) in a facility in southwestern China that will support China Unicom (Hong Kong) Ltd.'s e-reading services, ZTE said. ZTE's base in the city of Changsha will develop products related to mobile reading, mobile video and electronic ads. ZTE will expand the center's staff to over 1,000 in three years from over 300 now, it said.

         ZTE Corp. expects revenue from its network equipment operations to continue growing at a double-digit rate next year, driven by the construction of high-speed fourth-generation networks. Fourth-generation technology enables faster data downloads and uploads on mobile devices compared with third-generation networks. Ye also said the company is still aiming to supply network equipment to the top four U.S. carriers, despite the political hurdles involved. ZTE is already offering either feature phones or wireless data cards to the top four U.S. carriers: Deutsche Telekom's T-Mobile USA, AT&T, Sprint Nextel, and Verizon Wireless, a joint venture between Verizon Communications and Vodafone Group PLC, but it still can't supply network equipment to the major American operators because of political reasons, company said earlier this year.

         China's fixed asset investment (FAI) in telecommunication industry plunged to 21.77 billion yuan (US$3.42 billion) in October from 38.12 billion yuan in September, or a sharp drop of 42.89 percent month on month, data released by the Ministry of Industry and Information Technology (MIIT) show. According to the MIIT, the industry's operating turnover stood at 92.85 billion yuan in October, down 2.16 percent month on month, with its operating turnover from main business totaling 84.52 billion yuan (US$13.3 billion). In the first ten months, the telecommunication sector's operating turnover totaled 971.91 billion yuan (US$152.5 billion), up 15.7 percent year on year, including main business operating turnover of 818.78 billion yuan (US$128.5 billion), up 9.9 percent year on year.

Mobile/ Wireless

      China is now the world's biggest smartphone market by volume, having taken the crown from the US in the third quarter, Strategy Analytics estimate. Smartphone shipments in China reached 24 million in the third quarter of the year. Smartphone shipments grew 58 percent quarter-on-quarter to 23.9 million units, while in the U.S. shipments fell by 7 percent to 23.3 million, Strategy Analytics announced. However, the U.S. remains the world's largest market by revenue. Growth in China was driven by an increasing availability of smartphones in retail channels, aggressive subsidizing of high-end models by the operators, and the arrival of many low-cost Android models from local players, Strategy Analytics said, highlighting ZTE in particular. China's smartphone market is led by Nokia, which claimed a 28.5 percent share in Q3, thanks to 6.8 million units shipped. Samsung is some way behind in second place, its 4.2 million shipments giving it a 17.6 percent share of the market.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.