Friday, October 6 6:10 PM SGT
INTERVIEW:Yozan Finds Strong Demand For 3G Phone Product
By Kanji Ishibashi
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--Demand for Yozan Inc.'s (J.YZN or 6830) next-generation mobile phone system device exceeds its supply capabilities, so the Japanese venture company is only selling its products to a select number of clients, Yozan's president and chief executive officer said.
The product, called 3GPP solution package, enables users to cut the time and costs needed to develop application software for the next-generation mobile phone system, president Sunao Takatori said in an interview with Dow Jones Newswires.
This system is known in wider context as the third generation partnership project, or 3GPP.
Beginning next year, NTT DoCoMo Inc. (J.NTX or 9437) plans to launch its own commercial mobile phone services using the wide-band code division multiple access (W-CDMA) method, one of the international formats in 3GPP.
Since there's not much time left before the commercial launch of 3G mobile phone services, Yozan has received many inquiries about its package product, but wants to limit its customer base, Takatori said.
"Basically, we are selling our products to companies with which we can maintain a long-term business relationship," he said.
The package product sells for between Y300 million and Y500 million, and comes with a 3GPP development mother machine, necessary software, testing equipment and maintenance support.
On the mother machine - which looks like a gigantic phone with many slots on exposed system boards - vendors can carry out various simulations as they develop software applications, he said.
"We expect to be able to sell the solution package to three foreign companies this fiscal year" ending March 2001, Takatori said. "If our support capability allows, we want to sell the product to two more customers in the year."
Yozan is trying to sell the product to companies with which it doesn't have overlapping businesses, he added.
To Ship Samples Of 3GPP Chips
Another product that Yozan plans to sell soon is a newly-developed integrated circuit, a key chip device for 3G mobile phone terminals.
The company plans to start shipping the samples to 3GPP mother machine users by March, Takatori said, adding that he expects those vendors to eventually buy the IC.
Takatori said the company will be as picky about choosing its clients for chips as it is for its solution package products.
If Yozan isn't careful about who it supplies with its new chips, major Japanese electronics makers could buy the products solely to save time in creating their own similar products, he said.
"They may be interested in buying our chips to hedge against possible risks involving bug problems at the time of the initial market launch of 3G phones," the president said.
But after the bugs are smoothed out, giant Japanese makers may try to produce their own chips, he said.
"Unlike foreign companies, big Japanese makers tend to prefer doing everything by themselves," he said, adding that in the long term Japanese makers don't want to depend on a small venture like Yozan for key ICs.
Established in 1990, Yozan made a strong debut on Japan's over-the-counter market on Sept. 1.
Yozan's shares first changed hands at Y16 million, four times their pre-market price of Y4 million.
The stock has continued to fare well, reflecting investors' expectations that Yozan will see strong growth in the 3G mobile phone business. The issue had a three-for-one split in late September, and closed up 3.9% at Y7.9 million Friday.
Yozan's total market capitalization reached Y252.1 billion at the end of September, making it the ninth largest issue in capitalization on the over-the-counter market, according to a survey conducted by Ichiyoshi Securities Co. (J.ISC or 8624).
Takatori called the rapid share price surge "a little bit scary, because we don't want our shareholders to lose money."
The share rise isn't entirely surprising, though, considering that Yozan expects its earnings to sharply improve.
Citing stronger sales of its 3GPP solution package products, Yozan said last week it now expects a pretax profit of Y24 million during the fiscal half ended Sept. 30. Previously, the company had estimated a Y464 million loss. The company also raised its fiscal half sales outlook to Y1.48 billion from Y783 million.
However, Takatori said Yozan will leave intact for now its earnings forecasts for the full year ending March 2001.
"It's not the right time yet for an earnings outlook revision. We can't revise the estimates until we are absolutely sure of them, after completing the delivery of products," he said.
Currently, Yozan projects a pretax profit of Y114 million and a net profit of Y68 million with sales of Y2.74 billion.
Takatori also said Yozan expects to be able to erase its end-March accumulated loss of about Y61 million within the current fiscal year.
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