December 6 ,1999
Net profits?
Different paths, same goal Major electronics makers are staking claims on the Web, trying to coat themselves in the sheen of that magical word: Internet
KAZUNARI YOKOTA
Staff writer
Major Japanese electronics manufacturers have at least one trait in common: They have all become obsessed with the Internet during the last year or so. More of their funds are being sucked into cyberspace without the promise of profit,yet they believe with the faith of the converted that their future hinges on their performance on the World Wide Web.
Fujitsu leads the way among the major Japanese makers, but its rivals are buoyed by the knowledge that this Internet age is just dawning, and anything can happen.
The approach to the Internet among Japan's manufacturers is as varied as the companies themselves. Some, like Sony Corp. and Matsushita Electric Industrial Co., look to TV as the window onto the Web, others are investing in virtual cities and trying to lure retailers to hawk their goods there, and still others wait and watch, hoping it's not too late to make their presence felt on the Internet.
Key players include NEC Corp., which is following closely on Fujitsu's heels, and some would say, mimicking its rival in an attempt to keep pace, and Hitachi Ltd., which was late to join the race, announcing that it will start Internet-based services next year.
The pressure to have a presence in cyberspace is partly driven by investors who seem to see alchemic properties in the Internet. Witness the 135% rise in Fujitsu's stock price over the course of 1999.
"Companies have to include the Internet in their business strategies, or their business will be negatively affected," said Kazu Saito, senior analyst at MultiMedia Research Institute.
Said Tatsuya Mizuno, senior credit officer at Moody's Japan: "The current situation is just as it should be at the dawn of Internet business. At the start of any new industry, strong expectations are needed to gather people and money."
NEC announced in its restructuring plan in September that - like Fujitsu - it would place the Internet at the center of its business strategy by expanding its Internet service provider Biglobe, which has 2.7 million users. NEC hopes to attract more than 10 million users by 2002.
"We will concentrate all of our business resources on the Internet," said Koji Nishigaki, president of NEC.
The company announced several alliances with American companies in October. It plans to include Biglobe as part of Intel Corp.'s Intel Online Service, scheduled to start in the first half of 2000. The two companies plan to jointly provide large-scale platforms for developing electronic-business solutions for other companies. NEC also tied up with Hewlett-Packard Co., Oracle Corp. and both of their Japanese subsidiaries to develop and provide Internet solutions. The three Japan-based companies will set up the Internet Business Solution Center to help companies efficiently and effectively use the Internet.
"NEC is actively linking up with U.S. companies to ensure that its services are global, but it is still not up to par right now. It has to make the best use of the alliances when domestic and overseas business is combined in the future," said Mami Indo, senior analyst at Daiwa Institute of Research.
But she added that NEC has yet to differentiate itself from Fujitsu. "The strategy with Biglobe is not that different from the @nifty strategy," she said, referring to Fujitsu's wholly owned Internet service provider.
Said Mizuno of Moody's: "NEC has a strong base in communications, information and semiconductors. It has to create a good business model to make the best use of these."
Trailing Fujitsu's @nifty and NEC's Biglobe in third place among Japanese Internet service providers is So-net, run by Sony Communication Network Corp., a subsidiary of Sony Corp. The provider has become popular with young Japanese women because of the characters - called Post-pets - it uses to deliver e-mail. Users have soared from 390,000 last year to 740,000 this year.
The Sony group is banking on TV to increasingly become a medium for downloading games, music and other software as well as eventually become a common gateway to the Internet. Sony plans to release the home-game machine PlayStation2 in Japan on March 4, 2000, which will be able to download software via a cable connection. The company expects to sell 1 million units of the game in the first two days.
Sega Enterprises Ltd.'s 128-bit home-game system Dreamcast, released in November 1998, was the first game system that could be connected to cyberspace through its modem.
PlayStation2 is to use the standard iEEE 1394 platform, which is expected to make it compatible with most future home-electronics products and personal computers. "We are going to be TV-friendly," said Ken Kutaragi, president of Sony Computer Entertainment Inc.
Sony is targeting 2001 for setting up a large-scale high-speed communication system through cable networks, which are still not very developed in Japan. As home-game machines are connected to televisions, cable connections will be the best communication format, the company believes.
Rival Matsushita is one major maker that has yet to make a clear indication of what its plans for the Internet are. Yet it is too powerful to be ruled out of the race at this early stage.
Saito of MultiMedia Research Institute said: "It is unclear whether Ma-tsushita will use some sort of box or the cellular phone to connect TV to the Internet. But with its brand name, Matsushita is strong enough to change the race in the next two or three years."
Matsushita operates the Hi-ho Internet service provider, which has about 250,000 users. Matsushita also produces a total of about 10 million laptop computers and cell phones a year.
As a home-electronics company, Ma-tsushita is experimenting with hooking all sorts of household appliances up to the Internet. In January, the company opened a test facility for its Home Information Infrastructure concept in Tokyo. The facility demonstrates the company's idea of having refrigerators, microwaves and other appliances online so they can be manipulated from remote sites.
Other rivals include AOL Japan Inc., the subsidiary of America Online Inc., which has been distributing free CD-ROMs to get more Japanese World Wide Web surfers to go online. AOL, the only foreign-affiliated Internet service provider, now has 370,000 users. But it also has the ignominious title of the Internet service provider that is seeing the most defections among its users, according to Nikkei Net Navi, an Internet magazine published by Nikkei BP.
And of course, any discussion of the Internet in Japan would be incomplete without mentioning Softbank Corp. and its high-profile leader Masayoshi Son.
Son, president and chief executive officer of Softbank, is the most aggressive player in the Internet business in Japan. The Softbank group is setting up numerous joint ventures in fields ranging from toys, books and music to auto parts.
Softbank is a force the major manufacturers can't avoid if they want to be successful on the Internet; in the future they will likely either do business together or butt heads.
|
