A week in tech, January 30 - February 5

A roundup of all the latest tech news.

ò Sony Ericsson Mobile Communications announced that it will get its GSM (Global System for Mobile Communications) mobile phones made in India by contract manufacturers, starting with entry-level color phones and mid-level phones with music. The company said the annual production of its phones in the country is to reach 10 million by 2009. The phones will be made by the local operations of Hon Hai Precision Industry, which uses the brand name Foxconn, and Flextronics. These companies already make phones for Sony Ericsson in other locations. Contract manufacturers meet about two-thirds of Sony EricssonÆs phone production worldwide. Sony Ericsson joins a number of mobile manufacturers, including Nokia, which are manufacturing in India or contracting Indian manufacturers, to meet the countryÆs booming demand for mobile phones.

Media, Entertainment and Gaming
ò Industry sources are saying that Sony may slash prices of its flagship console as market reports show that PlayStation 3 sales trail Nintendo's Wii by about two-to-one. SonyÆs spokesperson said that the price cut would not make any significant dent on the companyÆs target to break even in the games division next fiscal year. A price cut is expected to win market share and boost sales to help the PlayStation 3, which retails for about twice the price of Nintendo's Wii,

ò Matsushita Electric reported a 60 percent rise in profit for the latest quarter, with the company ascribing the growth to solid demand for its flat-panel television sets and digital cameras countering pressures brought about by plunging electronics prices. The Japanese electronics company posted a group net profit for the October-December quarter of Ñ78.7 billion ($649.6 million), up from Ñ49.3 billion ($407 million) the same period a year ago. Matsushita said its quarterly sales posted a slight 2 percent rise to Ñ2.4 trillion ($19.8 billion). Matsushita's robust results contrast sharply with those of its rival Sony Corp, which registered a 5 percent decline drop in quarterly earnings, a performance largely attributable to start-up costs for the PlayStation 3 video-game console. The two companies compete in many product categories, including television sets, camcorders and digital cameras. Matsushita, however, pulled out of game machines years ago. Matsushita raised its profit forecast for the fiscal year to Ñ205 billion ($1.6 billion) from the earlier forecast of Ñ190 billion ($1.5 billion). In fiscal 2005, it earned Ñ154.4 billion ($1.2 billion), with the company revising guidance upward for full-year sales to Ñ9 trillion ($74.2 billion) from Ñ8.9 trillion ($33.4 billion).

ò Toshiba announced that its net profits more than tripled to Ñ72.5 billion ($598.4 million) in the third quarter of the fiscal year from Ñ21.9 billion ($180.7 million) a year earlier. The company ascribed the performance to strong sales of electronic goods and the acquisition of US nuclear power plant company Westinghouse. Toshiba, however, disclosed that its operating profit declined by 12.2 percent to Ñ55.9 billion ($461.4 million), explaining the drop to the ôdeteriorationö in the semiconductor market. It posted a 13.3 percent rise in its sales to Ñ1.7 trillion ($14 billion). Toshiba said it looks to net profits for the full financial year to March of Ñ120 billion ($990.5 million), up from an earlier projection of Ñ110 billion ($908 million). Toshiba, however, revised down its operating income to Ñ250 billion ($2 billion) from Ñ270 billion ($2.2 billion), citing the price declines in NAND flash memories as the reason.

ò Industry sources named Texas Pacific Group, European investment fund Permira and CCMP Capital Asia as among potential bidders for Victor Co. of Japan, which makes JVC brand electronics. The names are added to the list, which includes Kenwood and Funai Electric. Sources also said that Matsushita Electric Industrial closed applications for bids to its Victor subsidiary on February 1. Victor executives are also said to be considering a management buyout of the company in cooperation with US investment fund Cerberus Group. Matsushita, which holds 52 percent of Victor, is expected to decide on whom to sell its stake to this month.

ò Nomura Holdings, one of Japan's biggest securities companies, announced that it has paid $1.2 billion to acquire US electronic stockbroker Instinet from majority-owner Silver Lake Partners, a California-based private equity firm that bought a majority stake in Instinet from the Nasdaq Stock Market in December 2005 for $208 million. Nomura said the acquisition is part of the companyÆs bid to strengthen its business in the high-tech trading systems, which is becoming popular with hedge funds and other institutional investors. The deal expands Nomura's overseas reach and gives it access to Instinet's 1,500 clients worldwide and the ability to trade on more than 50 securities markets in the United States, Europe and Asia.

ò Following the move of KT Corp, the countryÆs largest broadband operator, to cut its ties with Netpia, the multi-language domain service provider announced plans to revamp its businesses. Netpia offers a service, which allows users from many nationalities to access websites using their native language in the address bar. With the development, KT's 6.4 million broadband subscribers are predicted to be at a loss when they use Korean characters in the address box. Netpia said it would first introduce an IP address-based Google business model, which enables users to find various search results even when they type in not-so-specific nouns in search boxes. The company also said it will shortly release an "intelligent toolbar wizard" and "smart short messaging system" into the market. Netpia recently joined forces with LG Dacom so that LG Powercomm broadband users can be directed to websites by typing in Korean. The company has also added Mexico and Thailand to its native language service list as it partnered with Mexico's Telmex and Thailand's Mappointasia. The company revealed plans to expand the number of service countries to 25, including Greece, Malaysia, Taiwan and Bangladesh by the end of this year. In South Korea, 61 Internet service providers or ISPs, 60 system operators and about 1,800 public institutes or companies support the Netpia system. KT, on the other hand, said it will offer a new keyword-based search service, along with its affiliate KTH and DigitalNames.

ò Analysts are noting how internet sites dedicated to audio-visual files dubbed user created content (UCC) are attracting amateur video creators with lucrative rewards both at home and abroad. PixCow, a Korean venture start-up, said it will provide a total of W30 million ($32,000) to those who upload home-made video clips to its website. Earlier,YouTube co-founder Chad Hurley also announced at the World Economic Forum in Davos, Switzerland that it plans to share revenues with UCC creators even as no details were released as to how the popular video-sharing website will make money to carve up revenues, thus spawning a controversy on possible business models. In South Korea, Pandora TV, the countryÆs equivalent of YouTube, earns money via advertisements at the beginning and end of a UCC clip. Pandora TV, which runs the country's most-visited UCC site with roughly 600,000 videos, started offering 10 percent of ads sales to UCC makers last month. Pandora TV projects the number of views for streaming will be around 3 billion this year and UCC producers expect to get W3 billion ($3.1 million) from Pandora TV in return for providing video files.

ò Online lecturing, first introduced in the late 1990s, is now considered one of the major forms of private education for South Korea's primary and secondary students. In 2004, the government attempted to provide free internet service through the public Educational Broadcasting System (EBS). However, the result was to further fuel the online education market, as the government's entry into the field seemed to signal the efficacy of online education. Now, large private firms such as SK and KT have even joined the market, making the competition even fiercer. In addition, the business models found within internet education have become more diverse; for example, a service launched in December of last year provided lectures for free, but made profits through advertising and textbook sales. As a result, those internet-based educational program suppliers, which had initially aimed their product at saving private educational costs for parents and narrowing the education gap between rich and poor, have increased online tuition fees to the level of their offline counterparts. Observers note the fact that the internet education giant Megastudy occupies a market share of more than 70 percent in the for-pay Internet education market, is raising concerns about monopolistic abuses in the business.

ò Cyworld, the largest on-line community website in South Korea, announced that it has begun operations in Taiwan and expects its user base to jump to 500,000 members this year, under Cyworld Taiwan. Cyworld in South Korea is operated by SK Communications, a subsidiary of SK Telecom, and Cyworld Taiwan is a joint venture founded in March 2006 by SK Communications and Hong Kong-based Cherrypicks. For operations in Taiwan, Cyworld Taiwan said it will duplicate the operating model used in South Korea with adjustments to meet local demand and use Cyworld's unique SNS (social networking service) marketing strategy.

ò According to the Ministry of Information and Communication, the number of internet users in South Korea rose more than one million in 2006, with people in their 40s and 50s leading the gain. The report stated that there were 34.1 million internet users as of the end of December, up 1.1 million from a year earlier, which means that 74.8 percent of the nation's population over age 6 lives in an Internet-connected environment. The biannual report is based on a survey of 25,727 people taken in December. The findings showed that almost all people in their 20s and 30s log onto the internet, with the internet penetration rates for the two age groups reaching 98.9 percent and 94.6 percent, respectively. Leading the yearly increase, the internet penetration rate for those in their 40s rose 6.2 percentage points to 74.9 percent and that for people in their 50s went up 7.2 percentage points to 42.9 percent. By gender, male users outnumbered females 18.5 million to 15.6 million. The average time spent on the internet was 13.7 hours a week, with most users browsing for data and information, using communications services, and other leisure activities.

ò Industry sources said that websites selling foreign goods to South Korean consumers are prospering on the strong won against foreign currencies. Reports show that sales have increased by double digits in major online shopping brokerage sites last year such as Wizwid and Bidbuy, with the largest beneficiary of the strong won being shops dealing in Japanese goods. Bidbuy, which sells Japanese electronics and clothing in partnership with Yahoo Japan, reported its monthly sales doubling over the past 12 months, with some W10 billion ($10.6 million) of goods being traded in January. Wizwid, the largest overseas shopping site in South Korea, also said it is expecting around W55 billion ($58.3 million) of net revenue from last year, a 35 percent increase from 2005. SK Group, a major conglomerate, established Wizwid in 2001. KT, the telephone network giant, also entered the market by opening overseas shopping malls NjoyNY.com and NjoyMilan.com, which are dedicated to American and European goods, respectively.

ò Industry sources indicate that with the number of mobile phone users in South Korea topping a record 40 million, mobile carriers are pushed to look for new revenue sources. SK Telecom, KTF and LG Telecom, the nation's three mobile operators, reported that slightly over 40 million South Koreans had registered mobile phones. Market leader SK had 20.1 million subscribers, accounting for more than 50 percent, followed by 12.8 million for KTF and 6.9 million for LG Telecom. It is the first time numbers have breached the 40-million mark since South Korea introduced analogue-type mobile phones in 1984. The figure was also reached 10 years after the country switched to the CDMA6 system. According to each mobile operator, voice communications remain the No. 1 revenue source for their business, with the growth of data services remaining in a slump. Responding to the market, which is estimated at around W17 trillion ($18.2 billion), it is facing saturation, the three mobile companies have been busy upgrading their networks to enable customers to use faster and more seamless data services. SK Telecom and KTF are stepping up their investment in establishing a nationwide network for HSDPA, designed for faster transmission of large-sized data files. Mobile companies are reportedly eyeing foreign countries to expand their revenue sources. SK Telecom, for example, is running a service in Vietnam, attracting more than 1 million subscribers in the emerging market.

Media, Entertainment and Gaming
ò Market sources said that Damoim has attracted additional investment worth some W3 billion ($3.1 million) from SM Entertainment, which invests through a paid-in capital increase, raising its share rate from 56 percent to 65 percent. With the move, analysts see SM Entertainment having a synergy affect from the combination of entertainment contents and movie platform, as well as new profit models with subsidiary companies, video karaoke manufacturer SM Bravo, video contents company Bitwin and Damoim.

ò Analysts note that Taiwan is emerging as a new leading market for South Korean games, with games from South Korea seen as sweeping almost all genres including casual, action and racing as well as MMORPG in Taiwan. An overseas marketing manager notes how Taiwan is even more similar to Japan and South Korea than China. NEXON Corporation, already popular in South Korea and China, has recently begun service in Taiwan. Its online action game, Dungeon & Fighter, which was developed by NEOPLE Co., LTD and published by Samsung Electronics, is being launched by WEBZEN Taiwan Inc. Earlier NEXON took over 15 percent of Gamania Digital Entertainment Co., LTD, the biggest game company in Taiwan, to reinforce the local marketing. NEXON said it is to begin local marketing in earnest through inclusive cooperation with Gamania. Rohan of YNK KOREA sold more than 100,000 copies on the first day of open service indicating its popularity. Besides, X&B Online published by KTH, Hell Gate: London published by Hanbit Soft and Dekaron of GAMEHI Inc. are about to launch in Taiwan.

ò LG Telecom reported a 10.4 percent rise in sales in 2006, to W2.9 trillion ($3 billion), with its operating profit posting 15.7 percent growth, to W416 billion ($441.1 million). The company, however, declared a 4.1 percent decline in its net income to W238 billion ($212.4 million) due to an increase in corporate tax. The mobile communications company said its fourth-quarter operating profits jumped 34 percent from a year earlier due to an increase in the number of new subscribers. The company said that its total subscribers exceeded 7 million.

ò Dynasty Gaming, a Canadian internet gaming firm and software developer announced that is has entered into an agreement with Sohu.com for the launching of an online mahjong game for mainland internet users. Under the deal, Dynasty's cashless Mahjong Mania betting game would be distributed and marketed over Sohu's dedicated entertainment and gaming channel. Earlier in March last year, Toronto-listed Dynasty signed a letter of intent with Stanley Ho to form Ho Majiang, a joint venture that would hold exclusive rights to develop the mahjong game in China via prepaid card wagering and would eventually seek a listing in Hong Kong. Loss-making Dynasty has yet to launch the game in the mainland. The company in recent months has reached a series of marketing and distribution agreements for Mahjong Mania in the country. DynastyÆs partner firms include Britain's Betex, which helps manage the mainland government-run sports lottery in Guangdong, Guizhou and Hebei, and prepaid card retailer Beijing Junnet Science and Technology.

Media, Entertainment and Gaming
ò Shanda Interactive Entertainment, a leading interactive entertainment media company in China, announced that it has entered into an exclusive agreement with leading South Korean online game developer Actoz Soft, for the license to operate the popular massive multiplayer online game LaTale in mainland China. The game is expected to enter close-beta testing in China in February 2007. LaTale is a cartoon-style side-scrolling game with a compelling storyline, rich scenes and effects as well as an advanced avatar system. The game was well received by Korean users upon its commercial launch in South Korea in July 2006 under a free-to-play model. LaTale has also been licensed by an operator in Japan and is scheduled to enter open-beta testing in March 2007.

ò China's Ministry of Information Industry announced that in its recent 3G standard test, it issued the first double module and double number readiness network access license to ZTE. According to the ministry, the company won the license because it has developed a type of mobile phone that supports both double module and double readiness functions, enabling two numbers from two different networks to be ready for use at the same time.

ò Market sources said that China Mobile, the country's largest mobile operator, is offering its users in Guangdong free incoming calls while charging more on outgoing calls to maintain its revenue. The free incoming call plan has been seen as negative for the mobile operator even as shares in China Mobile went up following the report. Guangdong Mobile, a subsidiary of China Mobile, launched the new package with a basic monthly tariff of Rmb50 ($6.4). The package does not include any free minutes, but under the so-called "calling party pays" pricing mechanism, Guangdong Mobile's users would not be charged receiving calls from either mobile or fixed-line phones. In a separate development, Guangdong Unicom, a China Unicom unit, also planned to launch its free incoming call package for GSM and CDMA users next month. Senior officials at the Ministry of Information Industry, the mainlandÆs telecommunications regulator, support the free incoming call pricing mechanism.

ò TCL announced its launching of an LCD television chip production line in Guangdong Province. The new production line, which features TCL's self-developed technology and devices, is reportedly the first in the world that has transformed artificial testing to automatic testing. TCL expects that with its launch, the production efficiency at TCL will be increased by 1.5 to 2.5 times and exceed the international average level. According to an official of TCL Multimedia China, it was the dramatic sales of TCL LCD televisions that prompted them to initiate this new production line, which he says has also demonstrated TCL's innovation capacity and competitiveness in the market. A significant factor in TCL's new production line is that it has adopted an automatic Functional Circuit Tester, which is rare in China and advanced throughout the world.

ò Computime Group, an electronic control and automation devices maker that listed in Hong Kong in October last year, is to maintain 15 percent to 25 percent annual turnover growth in the next few years on European demand for its Salus products. The Salus brand of switches and thermostats, which the group began producing in 2004, recorded triple-digit growth in the six months to September last year, accounting for less than 1 percent of total sales. Shenzhen-based Computime, which competes with London-listed Invensys and New York-listed Honeywell, said Salus products, now being sold only in Britain, would soon become available in Germany and France and later throughout Europe. The company said that product sales in Europe would represent about 30 percent of revenue for the year to March, compared with 15 percent a year ago. In January, the firm reported 15.7 percent revenue growth to HK$1 billion ($129 million) for the six months to September last year, boosted by demand for its appliance control products, the second-largest contributor. The company said its net profit went up 12.3 percent to HK$73.9 million ($9.4 million) in the first half from a year earlier.

ò Semiconductor Manufacturing International Corporation (SMIC) announced its consolidated results of operations for the three months ended December 31, 2006, with its sales increased by 4 percent in the fourth quarter of 2006 to $383.8 million from $368.9 million in the third quarter. The company reported an increase in capacity to 182,250 8-inch equivalent wafers per month and a utilisation rate of 86.6 percent in the fourth quarter of 2006.The company posted a net income of $1.2 million in the fourth quarter of 2006, compared to a net loss of $15 million in the fourth quarter of 2005 and a net loss of $35.1 million in the third quarter of 2006. SMIC posted record revenues of $1.4 billion in 2006, which represented a 25 percent increase year over year, with gross profit of 68 percent year over year to $150.7 million dollars. For the first quarter of 2007, SMIC said it is expecting more than 17 percent of its total wafer revenue to come from 90nm sales.

ò Sohu.com announced that it has entered into agreements with Vision Huaqing Development Company to purchase new office space in Beijing for $35.3 million. With the deal, Sohu.com will occupy floors 7 through 15 of the Vision International Center. The premises consist of approximately 18,265 square meters, with Sohu.com required to pay the purchase price within five business days after the effective date of the agreements. The purchase price will be paid from available cash on hand.

ò Advanced Semiconductor Engineering (ASE) and NXP Semiconductors announced the signing of a memorandum of understanding to set up a joint venture in China that would focus on semiconductor testing and packaging. Under the agreement, the Taiwan-based ASE would hold 60 percent of the venture in the eastern Jiangsu province, with NXP taking the remaining 40 percent, in a filing to the Taiwan Stock Exchange. NXP is formerly Philips Semiconductors, a unit of Royal Philips Electronics of the Netherlands. Terms of the agreement are subject to final negotiations between the two companies and regulatory approval. No financial details were disclosed. With the understanding, NXP will contribute its existing testing and packaging operations as its initial investment in the joint venture. The tie-up will not affect the Dutch company's other testing and packaging sites in Asia and Europe.

Media, Entertainment and Gaming
ò Yorkey Optical International disclosed that its gross margin would stay above 30 percent this year as the company tries to boost sales and net profit. Yorkey supplies Nikon, Olympus and Canon with phone and camera parts. Taiwan-based Yorkey is looking to benefit from increased demand for digital cameras as new products such as Apple's iPhone boost consumer interest. The firm does not yet supply Apple, which will target 1 percent of the mobile phone market next year after its iPhones go on sale this year. Global demand for digital cameras surged to about 90 million units last year from 70 million in 2004, said International Data Corp. Yorkey's first-half turnover posted a 10 percent increase to US$34.5 million last year as more digital camera makers than usual delayed making contracts until the second half, a period of highest demand. The firm, which raised HK$400 million ($51.2 million) in February last year before listing in Hong Kong, posted a 3.7 percent gain in first-half net profit to US$10.3 million, as interest income rose about US$2 million. Digital camera components accounted for about 63 percent of first-half sales with the rest contributed by camera phones, printers, computer peripherals, traditional film cameras and telescopes. Yorkey said it will invest $10 million this year to further boost capacity.

Hong Kong
Telecommunicationsò Market sources indicate that Hutchison Telecommunications International, a subsidiary of Hutchison Whampoa, is leaning favourably to potential bids from Reliance Communications and Vodafone Group for its Indian unit. The same sources said that Hutchison Telecom was waiting for Vodafone, the world's largest mobile-telephone company, to submit a final bid structure before they make a general call for offers. Vodafone is expected to complete due diligence on the deal next week. Vodafone planned to submit a bid for Hutchison Essar in a few weeks. A Westhall Capital analyst was quoted as saying that an acquisition of Hutchison Essar by Vodafone at less than $20 billion was "very positive". Hutchison Telecom has 67 percent of Hutchison Essar, India's fourth-largest mobile-telephone company by subscribers. Essar Group, an Indian conglomerate whose businesses range from shipping to energy and telecommunications, holds the remainder. In a related development, Hinduja Group, an Indian conglomerate active in the oil, media and banking sectors, has also indicated interest in Hutchison's stake in the mobile firm. The company denied Indian media reports yesterday that it had withdrawn from the process.

ò According to a survey made by Hutchison Telecom, mobile-phone users in Hong Kong prefer to watch their favorite television programs while they are on the go. The city's largest 3G service provider recently launched a 3 Home TV service for subscribers, as telecommunications operators and content providers look to mobile television services to boost data revenue. Hutchison's service differs from offerings by other operators as it allows subscribers to choose what they want to watch through the use of a set-top box, called a Sling Box, offered by US-based Sling Media. The device gives 3G mobile-phone users access to their home television set, pay-television set-top box or computer. Hutchison said it will share the revenue from the service with its content or technology partners, as it claims also that the move to being a platform for content providers can boost efficiency.

ò SingaporeÆs Creative Technology indicated a return to profitability after a few quarters of poor results, with a net profit of $92 million in the second quarter to December, compared to the net loss of $21 million the company posted in the previous quarter. The company, however, ascribed the results mainly to a settlement payout of $100 million from rival Apple, which contributed $82 million to the bottom line and boosted revenues to $434 million for a 76 percent increase on the previous quarter. The company said there are plans to slash about 6 percent of its 5,000-strong workforce and close unprofitable operations. Outside of the Apple windfall, the settlement has made the rivals into partners, opening a revenue stream for Creative as a made-for-iPod supplier of accessories such as speakers and headphones. Observers also see Creative entering into supplier deals with other technology players such as Microsoft and Samsung.

ò SingTelÆs Australian subsidiary Optus announced that it will spend A$800 million ($619.6 million) on a 3G mobile network in a bid to challenge TelstraÆs dominance in rural and regional Australia. Optus top official said the network would reach about 96 percent of the population of Australia. At present, distances make investment in telecommunications an expensive proposition. The network, which is expected to be operating in large regional centers by the end of the year, leveled the competitive playing field between Optus and Telstra. Telstra, which launched its expanded 3G network, known as next G, in 2006, dismissed the threat from Optus, saying its service was faster, reached more people and had superior content.

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