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IRG Technology, Media and Telecommunications Weekly Market Review (Week of 4 – 10 Jan 2010)

         Panasonic Corp. aims to generate 3 trillion yen (US$32 billion) in annual revenue from its battery and other energy businesses within a decade as the markets for electric cars and solar power expand. Panasonic will invest about 100 billion yen (US$1.1 billion) in Sanyo Electric Co.’s solar-cell operations over six years. Panasonic last month completed its US$4.3 billion purchase of a controlling stake in Sanyo as it shifts focus to solar-panels and energy-storage devices to drive growth. It also will boost sales of energy-saving home appliances. Panasonic expects to achieve an operating profit margin and a return on equity of at least 10 percent by the year ending March 2019. The company shall recover next fiscal year from back-to-back annual losses after it cut more than 29,000 jobs and reduced costs by 200 billion yen (US$2.2 billion).
         According to business newspaper Nikkei, Elpida Memory is seen returning to profits in the current fiscal year for the first time in three years, with rival Toshiba's chip division also recovering to break even. Rising demand for high-tech products, such as flat panel televisions, personal computers and mobile phones, has led to higher semiconductor prices, helping recoup earnings at chipmakers. Elpida is now likely to post an operating profit of about 50 billion yen (US$535 million) for the second half of the year ending in March and a profit for the full year. The company incurred an operating loss of 41.4 billion yen (US$447.2 million) in the first half of the year.
Media, Entertainment and Gaming
         Sony Corp. will start selling 3-D televisions and Blu-ray disc players this summer, part of a plan by Chief Executive Officer Howard Stringer to go “all out” to seize control of the market. The company will sell nine 3-D models of Bravia televisions and a Blu-ray player in mid-2010. Stringer is betting that 3-D products will generate more than 1 trillion yen (US$11 billion) in the year ending March 2013, not counting content. Samsung will sell similar products this year. Samsung will begin selling 3-D TVs and Blu-ray players starting this year.
         The Japanese market for game hardware and software shrank 6.9 per cent to 542.6 billion yen (US$5.9 billion), according to Enterbrain Inc. Sales continued to decline since marking an all-time high in 2007 on the success of Nintendo's DS hand-held system. Hardware sales fell 13.6 per cent to 216.4 billion yen (US$2.3 billion). New hits were few, with the latest installments in popular series accounting for more than half of total sales. In the past, a relative lack of alternatives to dedicated game systems meant that sales recovered whenever a new console was launched. But this has changed with the explosion in games for cellular phones. People can now download games to their handsets for free or up to several hundred yen, and a framework now exists under which start-ups can develop games for Apple's iPhone or mobile-phone-based social networking services.
         Softbank Mobile Corp. maintained its top position in subscriptions among mobile phone operators in Japan for the second straight year in 2009, according to the Telecommunications Carriers Association. Softbank attracted subscribers thanks to Apple's iPhone it exclusively sells in Japan as well as new handset models released in June, analysts said. Softbank posted a net subscription increase of 1,667,400 last year, followed by NTT Docomo at 1,281,000, Emobile at 1,001,000, and KDDI at 842,800. The total of all cellphone carriers' contracts stood at 110.62 million at the end of 2009, up 4.5 percent over a year earlier.
         NTT Communications (NTT Com) plans to launch online educational services in Japan following its acquisition of a 29.7 percent stake in goFluent Group, a provider of online English-language instruction. Through the capital alliance, NTT Com intends to launch educational services in Japan that will combine the company's visual communication and other ICT solutions with goFluent's online English-training know-how. Specific services will include the online provision of English training for enterprises as well as individual customers of internet services offered by the NTT Com group, such as the OCN-brand service. Customers also will be targeted in collaboration with NTT Com's parent company, Nippon Telegraph and Telephone (NYSE:NTT).
         Experian has acquired a controlling stake in A-Care Systems, Inc., a Japanese e-mail marketing firm. Financial terms of the acquisition were not disclosed. The 88.5% stake acquired by the information services firm will allow it to incorporate A-Care into its Experian CheetahMail e-mail operations. The acquisition gives ExperianCheetahMail additional operations in the mobile marketing communications field.
         Toshiba believes 2010 will be the year of ultramobile PCs, just as 2009 was the year of netbooks. During 2009, sales of netbooks drove the PC market growth, as it targeted a segment of users that were looking for an economic and mobile solution, according to the company.
         The Samsung Group said that it has appointed the vice president of Samsung Mobile Display Co. to lead its Japanese unit. Yun Jin-hyuk, 56, the newly appointed head of Samsung Japan Corp., previously served as executive director of the Japanese division after working for 10 years starting in 1984 at Samsung Electronics Co.'s branch office in Tokyo.
Data Centers
         The Japanese market for data centre services is expected to grow to JPY 1.32 trillion (US$14.5 billion) in 2013, growing by 70 percent from 2008, according to IDC Japan. The research forecasts a growing trend to shift in-house server rooms and computer centers to data centers to reduce costs and increase system stability
      Samsung Electronics Co. turned to a profit in the fourth quarter from a loss a year earlier after prices increased and demand for televisions rose. Operating profit was about 3.7 trillion won (US$3.3 billion), plus or minus 200 billion won (US$148 million), compared with a loss of 740 billion won (US$660 million) a year earlier. Macquarie and CLSA Asia-Pacific Markets raised their share price estimates on Samsung this week, citing higher earnings prospects. The preliminary figures disclosed today are consolidated, meaning they include earnings from overseas affiliates. Revenue was between 38 trillion won (US$33.7 billion) and 40 trillion won (US$35.5 billion), Samsung said. The company began providing quarterly guidance in July. No breakdown was given of expected earnings among the company’s divisions.
      LG Electronics Inc. aims to increase global sales by around 10 percent this year to 59 trillion won (US$52 billion) as the South Korean consumer electronics maker moves to boost revenue from new businesses such as solar cells. The company will spend 3.6 trillion won (US$3.2 billion) on new investments this year, mostly in research and development, and facilities. The country's second-largest consumer electronics maker by revenue after Samsung Electronics Co. has been diversifying into new areas in a move to boost slowing growth. In October 2008, the electronics maker said it would invest a total of 220.2 billion won (US$195 million) by the end of 2010 to build two production lines producing solar cells and modules.
      Creditors of Hynix Semiconductor will encourage South Korean companies to make bids for a controlling stake in the chipmaker, according to some bank officials. The stake is estimated to be worth 3.58 trillion won (US$3.04 billion). The previous attempt to sell the stake fell through as Hyosung Group, the sole bidder for Hynix, dropped its bid in November.
Media, Gaming and Entertainment
      Korea's Game Big 3 aims to achieve revenue of 1 trillion won (US$888.9 million) that would make them equivalent to the world's top 10. Nexon, which generated revenue of 450.8 billion won (US$400.9 million) in 2008, is predicted to achieve revenue of 700 billion won (US$622.6 million) in 2009. NC Soft will generate revenue of 600 billion won (US$533.7 million), much higher than last year's 346.6 billion won (US$308.3 million). In NHN, revenue also grew by 25 percent to 650 billion (US$578.2 million). This growth is likely to continue this year. These companies are adding new games to their game portfolio and restructuring the global operations. By the end of 2007, these companies generated revenue of 300 billion won (US$266.8 million), respectively. However, in just two years, these companies raised the revenue twice prompting market watchers to believe that revenues may reach 1 trillion won (US$888.9 million).
         Baidu would set up a new company and enter the online video market. Baidu will take a controlling stake in the new company. The new company has obtained US$60 million from a U.S. private equity fund, and will start operation in March 2010. CCTV established a national Internet TV station, Shanda Interactive Entertainment Ltd. acquired, and kicked off another round of financing. A famous IT commentator points out that Baidu has considerable traffics and aims to turn them into profits through diversifying its operations.
         Baidu had several executive-level personnel changes, including the resignation of its chief operating officer. Peng Ye stepped down for personal reasons. The company appointed Haoyu Shen as senior vice president and Zhan Wang as vice president. They had been vice president of business operations and senior director of business products, respectively. Baidu, which has a commanding share of the Internet-search market in China, said in October its third-quarter earnings jumped 42 percent as it saw increased ad revenue from large customers, but the company projected fourth-quarter revenue much lower than Wall Street expected at the time.
         China was expected to top a Web shopper base of 100 million in 2009, 28.2% of the nation's Web users shopped on the Web, according to Analysys International, a leading advisor about the technology, media, and telecommunications (TMT) industries in China. The Chinese Web shopping retail sale will account for 3.5% of the overall market. China had had a Web user base of 360 million by the end of November 2009, with a 20.8% rise year on year, according to a media report by China's largest national television network China Central Television. The Ministry of Industry and Information Technology of China said that China saw its total broadband access user base top 100 million for the first time in October 2009. Chinese basic telecommunications carriers achieved a net broadband access user increase of 18.008 million in the first ten months of the year, and their broadband access user base climbed to 101 million.
         China Mobile Ltd. has no plans to acquire Tecent Holdings Ltd. China Mobile spokeswoman Rainie Lei said recent media reports that China Mobile is in talks with Tencent is groundless. Tencent led China's instant messaging market with its average daily users reaching 137.5 million. China Mobile launched its own instant messaging service, Fetion, in 2006, to attract more subscribers as part of an effort to increase its revenue. Fetion ranked the third among instant message programs after Tencent and Microsoft Corp.'s MSN. As well as the instant messaging service QQ, Tencent also operates various online platforms, including Web portal, games portal QQ Game, and a mobile portal.
         Huawei Technologies Co. expects contract sales this year to increase to US$36 billion from more than US$30 billion in 2009 in a sign that demand for network equipment continues to pick up as the global economy recovers. The company said in an e-mail that its unaudited revenue in 2009 amounted to US$21.5 billion, up 17% from US$18.3 billion in 2008. But the growth was much slower than the 43% it saw in 2008. The company will release its audited figures in its annual report slated to be released in March. Contracts are recognized as revenue when projects are completed. Despite the slower growth in revenue, Huawei has still fared better than some of its Western rivals even amid the global economic crisis.
         China Mobile Ltd saw its 3G service users increase to total more than 5 million by the end of 2009, sources reported. China Mobile offers 266 telecom terminal devices, including 80 mobile phone models, said sources. The telecom giant has completed the construction of the third phase of its 3G network, which cost 58 billion yuan (US$8.5 billion), and now has more than 100,000 base stations. Its network, which is based on the home-grown TD-SCDMA standard, covers more than 70% of Chinese cities. China's top three telecom operators, China Mobile, China Unicom (Hong Kong) Ltd and China Telecom Corp Ltd, invested 80 billion yuan (US$11.7 billion) in the telecom industry in the first half of 2009 to boost their 3G networks. China Mobile had entered into an agreement to buy a 12% stake in Far EasTone Telecommunication for US$528 million. It was said that the deal would be approved early this year. In June, Taiwanese authorities opened up the island to mainland investors, relaxing investment rules in 100 categories including manufacturing, services and infrastructure.
         The release of 3G licenses in China is spurring a wireless data boom, with national revenues from such services rising by 18.9 percent in 2009 and nearly doubling from 2008 to 2013, according to a study by iSuppli. As the one-year anniversary of the issuance of 3G licenses in China approaches, wireless data revenue, including both messaging and non-messaging service, is set to rise to US$19.3 billion in 2009, up from US$16.3 billion in 2008. By 2013, data revenue will surge to US$31.5 billion, increasing at a CAGR of 14.1 percent from US$16.3 billion in 2008. Non-messaging revenues are expected to exceed messaging revenues as carriers expand mainstream adoption of 3G services and reach US$20 billion in 2013, up by a factor of three from US$6.8 billion in 2008.
         China Mobile has invested about 80 billion yuan (US$11.7 billion) in TD-SCDMA by the end of 2009 and has signed regional agreements to spend a total of 300 billion yuan (US$43.9 billion) on the TD-SCDMA industry. China's three telecom operators had invested a combined 102.3 billion yuan (US$14.9 billion) in 3G by the end of October. China Mobile has more than 5 million TD-SCDMA subscribers as at December 31.
Alternative Energy
      Renesola failed to have local government approval for the acquisition of Dynamic Green Energy (DGE). ReneSola would instead acquire 100 percent of Dynamic Green Energy in exchange for 26.79 million newly issued ReneSola ordinary shares and US$10 million in a convertible promissory note.
      CDC Software Corp.made a bid to Chordiant Software, in which it holds approximately 1.3 percent equity interest, to acquire all outstanding shares of the company for a consideration of US$105.1 million in cash and shares. The company estimates its organic license revenue in the fourth quarter of 2009 will hit US$9.8 million, compared with an average of US$7.5 million in the first three quarters of 2009, the company reported January 5. CDC Software expects to generate an additional US$600,000 in license sales from its three recent acquisitions completed in the fourth quarter of 2009. The company had raised its full year 2009 profit guidance but kept its revenue guidance unchanged at between US$197 million and US$200 million.

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