Japan Business Briefs: Sanyo,
Columbia, Hitachi Set Up JV
TOKYO -- Hitachi Ltd. (HIT
or 6501), Sanyo Electric Co. (SANYY or 6764) and Nippon Columbia Co. (J.NCL
or 6791) Monday set up a joint venture to provide contents services to
mobile phones. Hitachi holds a 46% stake in Super Contents Distributions
Ltd., while Toru Sanpei, a former executive of Hitachi and the newly appointed
president of the joint venture, owns 28%, Sanyo Electric has 19%, and Nippon
Columbia holds 7%.
* *
*
Sanyo Electric To Sell Optical-Disk
Digital Disk Camera
TOKYO -- Sanyo Electric Co. (SANYY
or 6764) said Monday that it will start selling in the domestic market
on Dec. 8 a new type of digital disk camera, the "IDC-1000Z," which stores
images on a magneto-optical disk. The camera will use a 5cm-size
magneto-optical disk, with a recording capacity of 730MB, that can save
up to two hours of moving images, or roughly 11,000 still images, Sanyo
said.
The new magneto-optical disk, called
"iDPHOTO disk," was jointly developed with Olympus Optical Co. (J.OLO or
7733) and Hitachi Maxell Ltd. (J.HMX
or 6810). The company also said
the camera can take still images at a resolution of 1.5 megapixels and
moving images at 30 frames per second, and can store this data at a speed
of 20Mbps. Sanyo expects to ship 10,000 units of the new digital
disk camera in the first month at a retail price of Y160,000 each.
"We also plan to sell the new iD PHOTO disk at a retail price of around
Y3,500 each," an official said at the company's press conference announcing
the product launch. Looking further ahead, the official added
that the company intends to sell its new digital disk camera in the overseas
markets after next spring.
* * *
S&P Rates Hitachi Capital
Long A+/Negative, A-1 Short
TOKYO -- Standard & Poor's
Corp. Monday assigned single-'A'-plus long-term and 'A-1' short-term ratings
to the newly-formed Japanese credit and leasing firm Hitachi Capital Corp.
Hitachi Capital was established Monday following the merger of Hitachi
Credit Corp. and Hitachi Leasing Ltd. The long-term rating outlook is negative,
S&P said.
The rating on Hitachi Capital is based on the company's improved market position and sound asset quality. The rating also takes into account implicit support from parent company Hitachi Ltd. (A+/Stable/A-1+) (HIT or 6501). Given Hitachi Capital's strategic importance to the Hitachi group - for which it conducts core financial services - the parent is expected to provide support to the company if required, the rating agency said. At the same time, Hitachi Capital's increased leverage and reduced profitability, which are at less favorable levels following the merger, are recognized as weak factors, the agency said. The negative outlook is based on what S&P expects to be an extremely challenging next few years for Hitachi Capital due to further balance sheet restructuring and an increasingly competitive domestic operating environment. However, the company's leading market position, expected support from the Hitachi group, and a management apparently committed to restoring a conservative debt and liquidity balance should be mitigating factors, the agency said.
Following the merger, Hitachi Capital is now the largest leasing company in Japan with Y2.4 trillion in assets and an 8% share of the market. The firm has a balanced business portfolio encompassing both individual and corporate financing, including leasing, sales finance, and various financial services. The asset quality of the new company remains sound despite the currently difficult operating environment, S&P said.
From Bloomberg
Hitachi Plans Sign Confidence
Rising, Tankan to Show
Tokyo, Oct. 2 (Bloomberg)
-- Hitachi Ltd. is racing to keep up with demand for computer memory chips
by building a 10 billion yen ($93 million) production line at its Kofu
factory, southwest of Tokyo. The line, part of Hitachi's record
204 billion yen investment in new equipment this fiscal year, will pump
out 3,000 large-scale integrated system chips a month from January. Even
that might not be enough to satisfy demand for chips used in cell phones
and other popular electronic appliances.
That kind of spending by Hitachi underscores the rising confidence Japanese firms have in the economy. The Bank of Japan's Tankan survey of businesses to be released tomorrow will probably show confidence rose to a three-year high in September, according to economists. Even with the added capacity, ``it will still be difficult to keep up with demand,'' said Yasushi Akao, semiconductor department manager at Hitachi, Japan's No. 3 chipmaker. ``Demand for mobile phones, especially, is still very high and will expand further.''
The Bank of Japan will release the Tankan business survey at 8:50 a.m., Japan time, Tuesday. The survey's key large manufacturers' sentiment index will rise to 7, from 3 in June, according to the median of 23 forecasts in a Bloomberg News survey. A positive reading shows more companies are upbeat than are downbeat about the economic outlook. The index returned to a positive reading in June, the first since September 1997. The benchmark Nikkei 225 stock index rose today, gaining 1 percent, after earlier falling to an 18-month low. The index has fallen 17.2 percent this year as investors fret a slowdown in U.S. growth will hurt Japanese exporters such as Sony Corp., and as technology stocks that drove gains last year -- such as Softbank Corp. and NTT Corp. -- fall from favor. The yen was recently trading at 108.20 to the dollar, from 108.43 late Friday. Bond yields held near a five-week low, as the decline in stocks and forecasts the economy is slowing underscore expectations the central bank will keep interest rates on hold.
The Tankan is considered the best gauge of business confidence in Japan. The BOJ canvasses about 9,000 companies, large and small, from automakers to shipbuilders to banks, for their view on current and future conditions and earnings prospects. An increase in September would be the seventh straight rise in business confidence. That's being fueled by the best profit growth in five years, which is giving companies the cash to spend on new factories, offices and equipment. Spending by large manufacturers is poised to rise at its fastest in about 10 years, economists said. The Tankan will probably show large manufacturers expect to increase capital spending 12.4 percent in the fiscal year to March 31, 2001, which would be the biggest reading in a September survey for 10 years.
Large companies, including non-manufactures, are expected to say they'll raise capital spending 5.3 percent this fiscal year. In the June Tankan, large companies said they'd raise spending 4.6 percent. ``The September Tankan should further support the view that the economy is approaching sustainable growth,'' Peter Morgan, a senior economist at HSBC Securities (Japan) Ltd. said in a report. Business confidence has been improving for 18 months as the economy clawed its way back from recession. Combined with a better outlook for spending on factories and equipment, rising confidence could encourage companies to pay workers more and, in turn, kick start consumer spending. Economic growth probably slowed to 0.3 percent in the three months ended Sept. 30, according to a Bloomberg survey last month, from 1 percent in the second quarter and 2.5 percent in the first. With the economy growing and the threat of deflation easing, the BOJ raised interest rates for the first time in a decade on Aug. 11. Economists don't expect another rate rise for a while.
``The BOJ isn't likely to change
its cautious attitude toward the next rate hike, even if the Tankan survey
reveals the expected improvement in business sentiment and prospects,''
said Masaaki Kanno, chief economist at J.P. Morgan Securities (Asia) Ltd.
``Central bankers are likely to want to keep an eye on the growing external
uncertainties.'' Some economists are concerned that as U.S.
growth slows, the yen will rise and export growth will slow. Large manufacturers
expect sales from exports to rise 2.3 percent this fiscal year.
Also, not every industry is being overwhelmed with demand. Confidence at
large non-manufacturers, such as retailers, is lagging. Economists expect
the index for large non-manufacturers to improve to minus 8 in September
from minus 12 in June.
* * *
FEDERAL REGULATORS are investigating
another brand of Firestone tires, used on Ford and GM sport-utility vehicles,
pickups and vans. Separately, Goodyear is developing and testing tires
on the expectation that it will snare a part of the business to supply
Ford's next generation of Explorers.
* * *
Equifax will spin off to shareholders
its credit-card and check processing business, in a bid to boost its stock
and to simplify its structure for investors.
* * *
Apple Computer's shares plunged
52% following Thursday's profit warning. Some analysts concluded that Apple
is continuing to lose ground in its educational segment.
* * *
Stocks skidded Friday after a profit
warning from Apple Computer reignited earnings jitters on the last trading
day of the quarter. The Dow industrials shed 173.14 points, or 1.6%, to
10650.92. The Nasdaq composite tumbled 105.57, or 2.8%, to 3672.75.
* * *
Boeing awarded its top officials
1.14 million shares valued at about $70 million when an incentive plan
was triggered by the firm's soaring stock price.
* * *
Consumer spending grew 0.6% in
August, outstripping the 0.4% rise in personal income. As a result, the
savings rate hit a new low of negative 0.4%.
* * *
Star Scientific is introducing
in parts of Virginia and Kentucky a cigarette that contains lower levels
of cancerous chemicals than regular cigarettes.
* * *
FleetBoston agreed to buy Summit
for $7 billion in stock, beefing up its Northeastern franchise by gaining
the No. 1 market share in New Jersey.
* * *
ASM Lithography agreed to buy U.S.
rival Silicon Valley Group for $1.6 billion in stock, creating the leading
provider of lithography equipment to the chip industry.
* * *
UAL said it expects to report a
loss for the third quarter and "probably" one for the fourth period, after
a summer of cancellations and labor strife.
* * *
Europe agreed to delay sanctions
against the U.S. in an export-subsidy dispute until after the U.S. elections
in November.
* * *
Mattel confirmed it is selling
Learning Co. to Gores Technology for no cash up front, although Mattel
will get a cut of any future Learning earnings.
* * *
Aventis agreed to pay for a multimillion-dollar
government effort to keep its variety of genetically modified corn from
tainting the U.S. food supply.
* * *
Intel said it canceled plans for
a new low-cost computer chip. Separately, computer makers said Intel also
is delaying the introduction of its next-generation processor, the Pentium
4.
* * *
EU officials vowed to improve the
decision-making process for euro countries after Denmark rejected adopting
the common currency.
* * *
Amtrak is expected to consolidate
its mail and express business into a new unit in an effort to accelerate
partnerships with other freight railroads.
* * *
* * *
Dutch Firm ASM Strikes Deal to
Buy Silicon Valley Group for $1.6 Billion
ASM Lithography Holding NV of the Netherlands has struck a deal to acquire U.S. rival Silicon Valley Group Inc. for $1.6 billion in stock, creating the No. 1 provider of lithography equipment to the semiconductor industry. Both boards have approved the transaction, and an announcement is expected Monday, company officials said. The deal will boost the Dutch company's share of the world-wide lithography-equipment market to 43%, up from 35%, causing it to overtake its two biggest rivals, Japan's Nikon Corp. and Canon Inc. Lithography systems are used to trace patterns of silicon wafers that eventually become the circuitry of semiconductor chips. These systems are considered crucial to chipmaking and can cost $7 million to $10 million each.
Under terms of the deal, ASM will offer 1.286 of its shares for each share of Silicon Valley. At 4 p.m. Friday in Nasdaq Stock Market trading, shares of ASM slipped $1.50 to $32.3125, while Silicon Valley's shares rose $3.4375 to $26.3125. Based on those prices, each Silicon Valley share will be valued at $41.55, a 58% premium to Friday's close and above Silicon Valley's 52-week-high, set in March, of $33.75. ASM is listed in Amsterdam and on the Nasdaq Stock Market. In an interview, Doug Dunn, ASM's chief executive, said the acquisition was driven by a need to bring together "the technical competence of the two companies" and to "enhance the speed of introduction for next-generation products."
A deal for Silicon Valley will give ASM a significant boost in capacity in the important U.S. market, allowing it to meet demand. Furthermore, ASM could see the move as a way to get major access to Intel Corp., Silicon Valley's biggest customer. Intel also owns convertible preferred securities in Silicon Valley, which makes automated wafer-processing equipment used in basic semiconductor manufacturing. As such, Silicon Valley's fortunes are viewed on Wall Street as closely tied to Intel, which recently said third-quarter revenue will be below expectations, causing widespread worry among investors about a potential slowdown in the demand for personal computers. Intel is believed to be in favor of the transaction. Mr. Dunn said he hasn't seen any evidence of slackening demand; rather, there is a "clamoring for new products," he noted.
The acquisition will also extend
ASM's product portfolio to include photoresistant track and thermal product
lines. ASM has been trying to crack the Japanese market, where Silicon
Valley has some important customers for its nonlithography divisions, such
as Toshiba Corp. Mr. Dunn said the new product lines would be a "natural
extension" for ASM. Silicon Valley is expected to function as a wholly
owned subsidiary of ASM. The transaction is expected to add immediately
to ASM's earnings and will be accounted for as a pooling of interests.
Mr. Dunn said he expects the acquisition to win antitrust clearance. No
layoffs are anticipated. ASM was spun off from Royal Philips Electronics
NV a few years ago and has since expanded rapidly to meet booming demand.
The company boasts a market capitalization of $13.5 billion and so far
has avoided major acquisitions, focusing on internal growth.
* * *
Apple Faces Concerns Over Growth
Beyond Its Traditional User Base
Apple Computer Inc., after losing more than half of its market value Friday, now faces troubling questions about growth beyond its traditional user base. The personal-computer maker, which had been riding an impressive turnaround with such snazzy machines as the iMac, said on Thursday that its fourth-quarter earnings would be far lower than expected. In prepared remarks, released after the market closed, Apple said it had experienced slowing sales across the board in its fiscal fourth quarter, particularly in September, and that it had failed to meet sales targets to schools and universities. Apple's timing was ominous, since it traditionally gets a boost in the back-to-school period and from consumer sales leading up to the Christmas holidays. Though the company gave little explanation for the sales shortfall, some analysts concluded that Apple is continuing to lose ground in the educational segment and, more broadly, has saturated the market of people who would consider a Macintosh. They expressed doubt that the company can reach beyond those users to reach a wider, more diverse customer base.
"Apple's comeback is over," said Don Young, an analyst at PaineWebber Inc. Added Tim Bajarin, president of consulting firm Creative Strategies LLC, "Apple has mined the potential new-user market for the first generation of iMacs and it seems that this particular audience will need something radically new to get them focused on buying an iMac in the future." An Apple spokeswoman declined to comment beyond the remarks it issued Thursday. Fred Anderson, its chief financial officer, announced then that the company would "provide lower growth targets for next quarter and the next fiscal year" and that guidance would only be given on Oct. 18, when the company formally announces its fiscal fourth-quarter results.
Apple's stock, which tumbled in
after-hours trading on Thursday, continued its fall on Friday and helped
push markets lower. At 4 p.m. Friday, the stock was at $25.75, down
$27.75, or 52%, from Thursday's 4 p.m. close. Trading volume was a massive
129.8 million shares, compared with a customary daily average of 5.2 million.
Among other PC makers, Gateway Inc. dropped $9 to $47, Dell Computer Corp.
fell $2.63 to end the day at $30.81, and Compaq Computer Corp. declined
$3.20 to $27.60. While many analysts lowered their ratings on Apple's
stock, Mr. Young and others concluded that the company was suffering from
unique problems beyond any general fluctuations in PC demand. "In
our opinion, investors shouldn't read this Apple blow-up as evidence that
PC demand is weak," wrote Steven Fortuna, an analyst at Merrill Lynch.
"Apple is, in many ways, a market unto itself."
* * *
Intel Drops Plans for New Chip,
Heightening Strategy Concerns
Intel Corp., adding to a string of embarrassing product delays and a revenue shortfall that have beset it this year, said it canceled plans for a new low-cost computer chip. And computer makers said Intel also is delaying the introduction of its next-generation processor, the Pentium 4. The two microchip problems add to a growing cloud of concern shadowing Intel and its stock price, which has tumbled 46% during the past five weeks. The world's largest chip maker, Intel is a technology-industry bellwether that until recently was lauded for its impeccable manufacturing and rigid adherence to testing and quality control. But the Santa Clara, Calif., company has delayed several chip rollouts and has had to recall others because of design flaws and problems in the group of semiconductors called the "chipset" that surrounds the processor.
The latest two setbacks show "their
internal system has broken down," said analyst Rick Whittington of BancAmerica
Securities. "They are now going for total quality control. They aren't
taking any chances."
Intel said Friday it scrapped a
new chip it code-named the Timna, which was to be a low-cost replacement
for the Celeron chip that powers many low-end PCs, because of excessive
delays in fixing a faulty part. Intel already had pushed its schedule for
selling the Timna back from the end of this year to the first quarter of
2001. Intel said it would have needed to delay the chip another month to
fix a glitch in the way it works with memory chips.
Meanwhile, officials at three PC makers said Friday that Intel told them it will delay introduction of the Pentium 4 by three weeks because of a malfunction in the way the chipset interacts with graphics cards. Intel says it will delay the rollout of the Pentium 4 -- the replacement for its flagship Pentium III -- from the end of this month to at least the week of Nov. 20 and perhaps later, these PC-company officials said. They said Intel told them it has fixed the problem, but delayed the launch to get new chipsets ready. An Intel spokesman declined to comment other than to reiterate the company's earlier statement that it expects to ship the product during the fourth quarter.
Intel admits it has had execution
issues this year that should never have happened. Chief Executive Craig
Barrett said Friday that the rising complexity of Intel's business, which
has changed from making one product for one market to making dozens of
products for many markets, as well as increasing competition from Advanced
Micro Devices Inc., has contributed to the missteps. Still, Mr. Barrett
defended the company's disclosure of even minor problems. "We try not to
hide stuff, we try to be forthright. We're the only outfit that publishes
every wart and pimple of our products," he said.
* * *
AOL-DoCoMo Alliance to Give Firms
Greater Access to U.S., Europe Markets
TOKYO -- As part of the broad agreement
announced last week between NTT DoCoMo Inc. and America Online Inc., the
two companies have begun laying the groundwork for expanding their relationship
to Europe and the U.S., a DoCoMo executive said. The companies announced
a broad agreement that includes a $100 million investment by DoCoMo into
AOL's Japan unit. The partnership will focus on developing Internet services
that can be accessed by both personal computers and cellular phones. For
instance, the work could include a travel service that would enable consumers
to research and book a trip via their PC then receive flight and hotel
confirmation via an Internet-capable cellular phone. The companies
dubbed such services, which combine fixed-line PC access to the Net and
wireless Net access, "fixed-wireless convergence."
DoCoMo's managing director, Kiyoyuki Tsujimura, said he expects AOL and DoCoMo will work with a joint venture DoCoMo announced with Dutch-controlled cellular provider KPN Mobile NV. Although he didn't disclose specifics, Mr. Tsujimura said the joint venture will build a European version of DoCoMo's popular i-mode mobile Internet service. At the same time, DoCoMo and AOL will explore ways to integrate AOL's fixed line business in Europe and the new joint venture's wireless service, he said. Mr. Tsujimura said AOL and DoCoMo will set up a fund of somewhere in the tens of millions of dollars to invest in technology and small companies in the wireless business. The partners expect to make investments of $1 million in each company, he said. The specific size of the fund hasn't been decided, he said.
The companies have already begun
talking about setting up a joint venture in the U.S., though nothing has
been decided. "We have a variety of entry plans into the U.S. market,"
he said. Those include taking an equity stake in a U.S. cellular operator,
setting up a joint venture with AOL or building a "portal" for wireless
services on top of a U.S. operator's network, he said. He emphasized
that DoCoMo isn't bound by the agreement to give AOL preference when building
services in the U.S. or Europe. "We are 100% free," he said.
* * *
Fujitsu Reorganizing LCD Production
In Japan, Taiwan
TOKYO (Nikkei)--Fujitsu Ltd. (6701)
plans to reorganize its business in LCD panels, focusing on high-value
new products in Japan and high-volume products in Taiwan, to cope with
plunging prices. Subsidiary Yonago Fujitsu Ltd. in Tottori Prefecture
makes 5.8-inch LCD panels for car navigation systems, and 12.1-inch, 15-inch
and 23.1-inch panels for computer monitors. A Taiwan outsourcing vendor
makes 15-inch and 17.4-inch LCD panels for Fujitsu.
Fifteen-inch displays are now the
big-volume product on the market, but margins have been squeezed, and Fujitsu
hopes to realize economies of scale by concentrating production in Taiwan.
Small screens for car navigation systems are selling only a few hundred
a month, so Fujitsu plans to leave that business. Total output at
Yonago will not decline. The firm will now produce the company's new 17-inch,
wide-screen XGA+ display. Production will be 50,000 screens a month. It
will also make 8.8-inch screens for the company's new Loox portable computer,
at a rate of 20,000 a month.
* * *
Time Warner's Open-Access Conditions
Draw Fire From Some Net Providers
NEW YORK -- Some Internet-service
providers are complaining that Time Warner Inc.'s pledge to provide open
access to its cable systems isn't as good as it sounds. "At first
blush, their proposal looks OK," said David Baker, vice president of EarthLink
Inc., the second-largest Internet-service provider in the nation. "But
they are proposing economic terms that would make it difficult, if not
impossible to make a profit."
Mr. Baker and other Internet-service
providers hope their complaints reach federal regulators, who are reviewing
America Online Inc.'s $117.8 billion merger with Time Warner. In February,
AOL and Time Warner promised to offer open access, but they haven't yet
spelled out the details of how and when it would work. Meanwhile, the Federal
Communications Commission is considering a national policy on "open access."
The issue revolves around whether Time Warner cable subscribers will be able to use Internet services other than the ones provided by Time Warner. As it stands now, Time Warner only offers its jointly owned service, called Road Runner, with AT&T Corp. If the proposed merger with AOL is approved, Time Warner eventually will offer AOL, which is the most popular service in the world, with 24 million subscribers. But the other Internet-service providers would like to be offered as well. Recently, Time Warner started negotiations to allow some services to be carried over its high-speed cable lines. Some of them are finding Time Warner's initial terms too harsh. The term sheet being distributed by Time Warner to some Internet-service providers asks the companies to turn over to Time Warner 75% of their monthly Internet access fees from customers. It also asks the companies to give Time Warner 25% of the revenue they earn from advertising and other services.
The term sheet also requires the
Internet-service providers to give Time Warner a spot on the start-up Web
page and gives Time Warner the right to approve the rest of the page.
Time Warner spokesman Ed Adler said it is too early to judge the outcome
of the company's negotiations with Internet-service providers. "Nothing
in our negotiations thus far should be taken as final propositions," he
said. "We are committed to continuing our conversations." But some
aren't convinced. "When I saw this proposal, my reaction was, 'Oh my God,
they want to own me,' " said Ray Williams, president of CyberZone Inc.,
an Internet-service provider with 5,000 subscribers in Marinette, Wis.
The negotiation with NorthNet Internet Provider LLC in Oshkosh, Wis., started
in March, when the small Internet-service provider first applied for access
to Time Warner's cable systems. The company received the term sheet last
month.
* * *
Toshiba Says Fully Meeting Sony's
PS2 Parts Requirements
TOKYO -- Toshiba Corp. (J.TOS or
6502) is meeting Sony Computer Entertainment Inc.'s requirements for supply
with respect to one of the key components for the Sony's "PlayStation 2"
game console, officials at Toshiba and Sony Computer Entertainment Inc.
said Monday. This comment comes after Sony Corp.'s (SNE or 6758)
U.S. unit Sony Computer Entertainment America Inc. said last week it had
to cut by half the number of PlayStation 2 machines it will ship at the
time of the North American launch of PS2 in late October due to component
shortages.
"After Sony's announcement, there
has been speculation that Toshiba is involved with the component shortages,
which is totally untrue," a Toshiba spokesman said. "The (shortage)
issue has nothing to do with Toshiba components, however we cannot comment
on which components we are short of," a Sony Computer Entertainment spokeswoman
in Tokyo said. Toshiba, jointly with Sony, is producing Sony-developed
large-scale integrated circuits called "emotion engines", a key component
for image control via the game console, at its Oita plant in southern Japan.
Last week, Sony Computer Entertainment America said it now plans to ship
500,000 units of PlayStation 2 for the Oct. 26 market launch, compared
with its original estimate of one million units.
* * *
Dow Jones
10650.92 -173.14 -1.60%
S&P 500
1436.51 -21.78 -1.49%
Nasdaq
3672.82 -105.50 -2.79%
Nikkei
15,902.51 +155.25
Yen to Dollar
108.21 - 24 +0.48
Hitachi Ltd. Ads
114.25 -0.19
Microsoft Corp.
60.31 -1.00
Motorola Inc.
28.94 +0.88
Hewlett-Packard Co.
97.00 -6.81
Texas Instruments
47.50 +0.50
AT & T Corp
29.00 +0.50
IBM
112.63 -2.62
Intel Corp.
41.56 -2.87
General Electric Co.
57.81 -1.00
Sony Corp. Ads
100.94 -3.50
Cisco Systems Inc.
55.25 -4.19
Nec Corp. Ads
111.38 -2.12
Matsushita Electric
262.63 +0.63
Unisys Corp.
11.25 +0.25
Ncr Corp.
37.69 +0.13
Philips Electronics N.v.
42.50 -1.37
Lucent Technologies
30.50 -0.62