Terrie's Take 680 -- Is Sony Turning into a Medical Company? Ebiz news from Japan.

Mon Oct 1 07:57:07 JST 2012

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, September 30, 2012, Issue No. 680

+++ INDEX

- What's New -- Is Sony Turning into a Medical Company?
- News -- Signs of a pending recession?
- Upcoming Events
- Corrections/Feedback -- Fujitsu service problems
- Travel Picks -- Kinosaki, Hyogo and Canal City, Hakata
- News Credits

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+++ WHAT'S NEW

Did anybody else notice that just as Sony did their JPY50bn
buy-in to Olympus, and which was plastered all over the
papers, they quietly sold off their chemicals business to
the Development Bank of Japan (DBJ) at the same time? And
that coincidentally, the chemicals assets were worth
JPY57.2bn? The conclusions we draw from this remarkable
timing and similarity of valuations of the two transactions
is that firstly Sony doesn't have an extra JPY50bn in the
coffers to spare on an act of largesse with Olympus, and
secondly, probably Sony's involvement with Olympus is not
Sony's choice alone. Rather, we think that the nation's
erstwhile bureaucrats are cooking up an asset shell game to
keep Japan's tech companies Japanese.

The chemicals business that Sony sold is not critical to
their operation, and so the sale wasn't unreasonable in and
of itself. Apparently the subsidiary makes optical film and
adhesive materials. However, one wonders why the DBJ is
buying the asset, and not the INCJ or one of the other
organs the government might usually use for such an
investment? Our guess is that using the bank means that
there is no need for the same level of due diligence that
would normally come from using a regular investment
vehicle, and thus the deal could get done quickly and
quietly.

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[...Article continues]

Actually, it's fun to speculate what the DBJ will do with
its new asset. Our guess is that it will either be
repackaged and sold off to one of the leading plastics
producing firms in a few months, after the dust has
settled, or, more likely it will simply continue serving
Sony, with the DBJ holding on to it for 5 years or so
until Sony can buy it back again. You can do that kind of
thing with a bank when it is government controlled and
doesn't have any oversight from the FSA... Nothing
particularly wrong with this, just interesting to see
Japan Inc. at work at such an obvious level.

Going back to Sony, they have been making a few
organizational realignments recently which make us think
that finally the senior management are making some
meaningful decisions. For a start, the company has taken
over control of its publicly listed subsidiary So-Net and
thereby So-Net's own collection of blooming and profitable
investments. Amongst the two that stand out are an 11.75%
stake in games company DeNA, where the investment is now
worth about JPY32bn, and a 55.9% stake in online medical
business M3, which is now worth JPY120bn to Sony. Once you
see the value of these two firms' shares, plus the
operating assets of So-Net itself, you can see that for
JPY61.1bn Sony got a pretty sweet deal buying up So-Net's
shares and taking the company private again. Wonder what
the other shareholders thought about this? They don't seem
to have put up much of a fight over it...

So is Sony re-inventing itself as a medical technology
company as is being suggested in the media? It wouldn't be
such a stretch of the imagination, especially after seeing
the successful turn-around of Fujifilm which headed down a
similar path (but with pharmaceuticals). Both companies
appear to have come to the conclusion that there is a
future in the old and sick. In getting its hands on M3,
Sony now has access to 220,000 doctors in Japan, and thanks
to M3's own mini-M&A program over the last 18 months,
access to about 1m doctors and other medical personnel in
the UK, Russia, and the USA. Indeed, M3 says that it now
has one of the largest medical subscriber bases in the
world.

The way things are going, if Sony does focus its ambitions
in medical then it will once again be confronted by the
fundamental clash in its corporate culture: hardware
versus software. In the past, apart from games, it has
struggled to bring synergy from its otherwise strategically
sound acquisitions. Maybe with medical equipment and
services, the company will be able to make a breakthrough
and realize the real potential of its investments. For
example, one of M3's assets is an outsourced clinical
trial services business, the acquisition of which we
reported back in July (http://bit.ly/SWCcWJ). We can
see how combining diagnostics based on endoscopic imaging
with online services might create a radical improvement in
medical skills allocation and cost control. It's also a
service that could be delivered internationally, especially
to third world countries, since surgical techniques tend to
be more standardized that some other areas of medical
practice.

Then of course, thinking even further ahead, what if they
try to gamify online medical services...?

The Sony investment in Olympus has been good for Olympus,
even though back in July they appeared to baulk when Sony
demanded a board seat and a joint venture in surgical
endoscopes. Olympus' capital ratio will lift from a low of
2.2% in June to 10% after the Sony investment and this fact
has caused a number of foreign investment funds to up their
stakes in the company again. But perhaps most importantly
for Japan Inc., Olympus has escaped the clutches of TPG and
several other foreign funds, and so as far as the
bureaucrats are concerned it's a case of "mission
accomplished" -- Japanese high-tech remains Japanese.

...The information janitors/

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+++ NEWS

- Signs of a pending recession?
- Recruit buys major US jobs site network
- Indian generic drugs firm on a roll
- Maybe Hon Hai doesn't need Sharp so badly after all
- Japan Inc. helps out Mitsubishi

=> Signs of a pending recession?

A joint Dow Jones Nikkei survey of economists has found
that industrial production fell by a much higher rate than
expected in August. The fall was 1.3%, versus the 0.4%
predicted earlier. Coming on top of a 0.3% fall in consumer
prices, it appears that deflation is still alive and well
in Japan, and the country is probably on the verge of a
recession. On seeing the fall in industrial production,
METI issued a downgrade on its own assessment for Japan
for the second time this year. The dispute with China is
considered to be partly to blame for the industrial
production fall, and economists are saying that if the spat
is not resolved soon, the Japanese economy will take an
even bigger hit in coming months. (Source: TT commentary
from marketwatch.com, Sep 28, 2012)

http://on.mktw.net/P3vYsJ

=> Recruit buys major US jobs site network

Recruit has acquired the US' largest job site network,
Indeed Company, for an undisclosed amount but which is
rumored to be up to US$1bn. In buying Indeed, Recruit gets
550 more employees, a network of job sites in 50 countries,
and a subsidiary whose sales have been reportedly doubling
every year for the last 3 years. ***Ed: Indeed is an
amazing story, with the site being launched in 2004 with
funding of just US$5m, and surpassing Monster.com for
traffic last year. The company's business model has been to
offer compelling tools and prices to partner media firms
all over the world, and aggregate and redistribute jobs
over its network. Simple formula, hard to do, brilliantly
executed.** (Source: TT commentary from reuters.com, Sep
28, 2012)

http://reut.rs/W2fYqz

=> Indian generic drugs firm on a roll

Mumbai-based generic drugs maker Lupin is reportedly
seeking to double its current US$250m sales of generic
drugs in Japan over the next five years. The company
reckons that there are at least US$10bn of patented drugs
where the patents are expiring during the same period, and
where it can snag a significant share of the resulting
generics sales. Lupin earns about 12% of its revenue in
Japan, its third largest market after the USA and India.
The company sells through two 100%-owned subsidiaries:
Kyowa Pharmaceutical Industry and I'rom Pharmaceuticals.
(Source: TT commentary from indiatimes.com, Sep 30,
2012)

http://bit.ly/Sc2ny8

=> Maybe Hon Hai doesn't need Sharp so badly after all

In a move that might spell more trouble for Sharp in the
next couple of years, Hon Hai (Foxconn) has purchased NEC's
portfolio of LCD panel patents for JPY9.45bn. Although the
patents are not manufacturing know-how, they could indicate
that Chairman Terry Gou is planning to exert more influence
on the tech world through enforcement of the patents.
***Ed: Gou's strategy so far seems to be to align himself
with Japanese firms for the missing know-how, countering
Korean dominance in the LCD and general electronic
components field, so perhaps the patents will become a
stick to go with the carrot? He's a sharp businessman, so
there must be something amongst this patent portfolio that
caught his attention.** (Source: TT commentary from
wsj.com, Sep 28, 2012)

http://online.wsj.com/article/BT-CO-20120928-704843.html

=> Japan Inc. helps out Mitsubishi

In what appears to be an act of government favoritism, the
Japan Aerospace Exploration Agency (JAXA) has passed the
commercial rights to launch its H-2B rocket to Mitsubishi
Heavy Industries (MHI). What this means is that not only is
MHI now able to recruit its own customers globally but it
can also bill JAXA for JAXA's own launch services from the
next mission. The powerful H-2B rocket can lift up to 8
tons into orbit and is considered quite reliable. If MHI
can get launch costs down it may become a viable contender
for international customers -- something the Japanese
government would dearly like to see after the nation's
biggest commercial satellite operator, SkyPerfect JSat,
signed multiple launch agreements with the Arianespace
consortium in Europe earlier this month. (Source: TT
commentary from spacenews.com, Sep 28, 2012)

http://www.spacenews.com/launch/120928-japan-privatizes-h2b.html

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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+++ CANDIDATE ROUND UP/VACANCIES

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***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

No events this week.

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors at terrie.com.

=> In TT-679 we highlighted a new global outsourcing
service by Fujitsu. Although the service itself seems just
what the doctor ordered for Japanese companies looking to
expand abroad, perhaps as our reader suggests, Fujitsu
needs to have its delivery team catch up with the
Marketing one.

*** Reader Comments:

As part of my international business development and
operations work I do quite a bit of customization of CRM
software (SalesForce.com) for clients. I see Fujitsu email
addresses on many tech support responses at the standard
service level. Whereas a few years ago SalesForce had great
support in email and on the phone, it has recently become
completely worthless. It seems the service contract is
delivered by Fujitsu staff based somewhere in Central
America.

Are they bilingual? Well, I often couldn't understand what
they were saying, so I asked them to email the answer to
me. That didn't help much, and in the end they didn't know
much. As an example, it took three escalations to get to a
decent answer, and weeks went by in a world where immediate
service counts. Notably, in Q1 this year, SalesForce
stopped inbound phone support. So now the situation is that
if I log a case they will call me back in a few days… but
unfortunately the knowledge and language problems are just
as serious as ever.

So, I'd say if this is any example, Fujitsu is not
providing a service of value.

The upside is that everyone else has noticed the same
thing, and it's driven users to the forum boards on the
web. As a result, SalesForce's quality and response times
are better, but Fujitsu doesn't seem to be involved. The
answers are quite good, and often quite fast.

Fujitsu would do better to invest in automated response AI
systems.

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> Kinosaki Hot Springs, Hyogo

The idea of ambling around in your birthday suit in front
of friends might not be your cup of tea, but indulge me for
a second please. It is autumn, and on a cold clear night
you’re sitting in a luxuriously comfortable 40+ degree
bath, staring dreamily at the stars. A couple of old blokes
chattering away in the corner, cheery-eyed and relaxed.
Surrounded by rocks, greenery, and a colorful blanket of
illuminated autumn leaves. A faint trickle of a waterfall
in the background.

Kinosaki is famous for its invigorating hot springs
(onsen), and has seven sotoyu (public hot spring bath
facilities). Most folk put on a yukata (a casual cotton
kimono) and geta (wooden sandals) and meander around town
visiting the different baths. There is a ticket called
Yumepa that allows you to enjoy the seven sotoyu baths
unlimited times between 2pm and 10am the next day. What I
like most is that Kinosaki looks and feels very different
to the more modern cities, and that’s its main allure. You
really feel like you have gone back in time to see some of
the old Japan. The town itself has a very nostalgic and
ambient atmosphere. Wonderful traditional Japanese
architecture is ever-present in the design of the hot
springs, souvenir shops and restaurants. Cherry blossom
trees and weeping willows also adorn the Otani-gawa river,
adding to the charm.

http://japantourist.jp/view/kinosaki-hot-springs

=> Canal City, Hakata
Much more than just another shopping centre

Fukuoka's Canal City is a large shopping complex
conveniently situated between Tenjin (downtown area),
Nakasu (entertainment district) and Hakata (originally a
port city). There are around 250 shops and restaurants, a
cinema, a theatre, amusement facilities, a game centre and
2 high-class hotels. A city within a city.

The first time I strolled around Canal City, I couldn't
really grasp what it was all about. The futuristic design
of the buildings make them look almost as if they come out
of a Star Wars film. Though initially seeming painted in a
somewhat bizarre mix of colors, the choice of color is
actually that traditionally used for kimonos. Apparently,
the concept of Canal City is a "city theater", with the
"people" as the actors. The Sun Plaza Stage located in the
center juts out onto the canal, flanked by a vibrant wall
of balconies. The 5 main areas (Sea Court, Earth Walk, Sun
Plaza Stage, Moon Walk, Star Court) along the canal are set
out in order, traditional to modern themes. The Sun Plaza
Stage even has a range of performances and music shows on
most days.

http://japantourist.jp/view/canal-city

***------------------------****-------------------------***

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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