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To: Christopher Gates who wrote (17543)	5/18/1998 6:49:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 25960

Chris -- After the annual meeting adjourned, I introduced myself to William Angus and asked what signs in Japan would tell us the crisis was easing and he said, "PC sales." He indicated it wasn't enough for the government to ease taxes as Japanese were likely to sock the money into savings accounts, but, once you saw these same citizens spending money on new computer appliances, the economy would feed itself. Check this out: PC sales rise in Japan: nikkeibp.asiabiztech.com. May 18, 1998 (TOKYO) -- Sales of personal computers in the third week of April (April 20-26) posted a 7.9 percent week-on-week increase in terms of units, and a 6.7 percent increase in value, according to statistics compiled by GfK Japan Ltd. GfK Japan is an information service company that handles point- of-sales data of shops that sell home electric appliances. Sales in the third week of April were up 19.9 percent from the corresponding period of last year (April 21-27, 1997) in terms of units, and up 8.8 percent in value. (See table.) The unit-based data posted a week-on-week increase for the first time in four weeks. This indicates that PC sales are picking up. Sales of desktop models are brisk, posting higher week-on-week growth than the notebook type. The brisk growth is attributable to purchases of desktop type PCs by many beginners at the start of the new fiscal year. The average sales price dropped 2,435 yen from the previous week's 228,450 yen (US$1,700). The average price declined for four consecutive weeks, since the fourth week of March. GfK Japan said the downturn is expected to continue for some time under the current set of conditions in which the prices of current models will be cut when the new models for the summer season are introduced. Attention is now focusing on whether the sagging PC prices will push up demand. GfK Japan's data is from about 2,000 outlets of 41 firms. The company selected the 41 firms in 1996 and has been releasing their data since then. GfK Japan covers a greater number of outlets with combined unit- based sales accounting for about 10 percent of Japan's PC shipments and about 25 percent of total retail sales. The following graphs are available through Nikkei Market Access in Japanese only: - Trends in the number of all types of PCs sold in a week. - Trends in the sales amount of all types of PCs sold in a week. - Trends in average sales price of all types of PCs sold in a week. - Trends in the number of desktop PCs sold in a week. - Trends in the sales amount of desktop PCs in a week. - Trends in the average sales price of desktop PCs in a week. - Trends in the number of notebook PCs sold in a week. - Trends in the sales amount of notebook PCs in a week. - Trends in the average sales price of notebook PCs in a week. Table: PC sales in the third week of April 1998 (Source: GfK Japan) "Year-before weekly comparison" in the Table means the comparison with April 21-27, 1997>>> I'm faxing a copy to Marie Burke right now, asking her to show it to Mr. Angus. Later -- Pat

To: Christopher Gates who wrote (17543)	5/18/1998 7:32:00 PM
From: pat mudge	Respond to of 25960

Another PC sales forecast from Japan. Note the survey was done in December of '97 and the press release I posted earlier gave data from the third week of April '98, showing sales (in value) were up 6.7% year over year. Considering the following report estimates an increase in client PC sales of 3% for the entire year (see chart), this is either an aberrance or a very good omen. I suspect it would be smart to wait for a few successive weeks of upward sales before breaking out the Champagne. Later -- Pat nikkeibp.asiabiztech.com <<< Japan's Computer Market to Grow 7 Pct. in FY98: Nikkei Computer May 18, 1998 (TOKYO) -- Japan's computer market is expected to register a 7 percent increase in sales in fiscal 1998 (April 1998 through March 1999), and an 8 percent to 9 percent increase after fiscal 1999, according to Nikkei Computer magazine. The market is expected to grow to the level of 19 trillion yen (US$140 billion) by fiscal 2000, Nikkei Computer said in its outlook on Japan's computer market. The market outlook during fiscal 1998 and fiscal 2000 (See table 1 and table 2.) was analyzed by Nikkei Computer based on interviews with computer makers, system integrators and research companies, and takes into account statistical materials published by the Ministry of International Trade and Industry (MITI), the Japan Electronic Industry Development Association (JEIDA), the Japan Personal Computer Software Association and other organizations. Expanding PC Market Led by Businesses In fiscal 1997 software sales declined 2 percent to 5.41 trillion yen (US$40 billion) compared with a year earlier due mainly to sluggish personal computer sales. However, in fiscal 1998 the software market is likely to grow about 3 percent. A 5 percent to 7 percent growth is expected in fiscal 1999, and the computer hardware market is projected to grow to a 6 trillion yen business by fiscal 2000. This is because personal computers and PC servers are projected to be driving forces in the market after fiscal 1998. Many industry sources have said that the depressed economy has a positive effect on the computer market. Indeed, demand for personal computers among businesses still remains strong. A survey conducted via email in December 1997 by "Nikkei Market Access," a membership-based information service, provided such evidence. There were two main types of responses to the question about personal computers planned to be acquired in fiscal 1998. Those responses were "the same level as in fiscal 1997" and "a higher level than in fiscal 1997." If small and midsize businesses and small office home office (SOHO) markets are also included, the market is projected to expand even more. However, the consumer market is expected to remain sluggish. Surveys indicating consumers' dwindling desires to purchase personal computers have been seen since the latter half of 1997. Personal computer makers have been placing great expectations on Intel Corp.'s low-priced Celeron microprocessor and Microsoft Corp.'s Windows 98. Yet, a rapid revival of the consumer market in fiscal 1998 cannot be expected because individual users in Japan are not motivated by low prices of PCs alone. In addition, Windows 98 does not have as strong an impact as did the debut of Windows 95. Sales of PC Servers to Expand at 20 Percent Level in FY98 The market for servers is growing at a 26 percent pace a year. The PC server market is expected to secure the second position in the server market following mainframes, by maintaining a high growth rate of 20 percent after fiscal 1999. Strong demand for servers used for such information-related systems as email and the Internet is forecast. The improved performance level of PC servers is expected to contribute to expanded use of servers for business applications. Such leading office computer makers as NEC Corp. and Fujitsu Ltd. have been stepping up sales promotions of office-type PC servers. Small and midsize businesses will likely soon move to replace their office computers with PC servers. However, numerous obstacles need to be overcome. Vendors must provide better support for users. Secondly, is the issue of the stability of Windows NT. JRI Systems Solution Ltd. pointed out in Nikkei Computer that continuous operation of Windows NT for a long period can result in unstable operations. Meanwhile, the UNIX server sector, which will see its low-end model area assaulted by PC servers, will shift its focus to mainframes and high-end office computer markets. Nikkei Computer forecast that the market in fiscal 1998 will increase 15 percent to 450 billion yen (US$3.4 billion). Continued Declines in Office Computer and Mainframe Sales Nikkei Computer projects that in fiscal 1998 the market of office computers will decline 3 percent to 300 billion yen (US$2.2 billion) reflecting the adverse effects of the increase in PC servers and UNIX servers. The office computer market is likely to maintain a level of 270 billion yen (US$2.0 billion) in fiscal 2000 due mainly to the high reliability of the systems and efforts by computer makers to build in such new functions as Java execution environments and Web server tasks. In fiscal 1998, the mainframe market, which holds the next largest share after the PC market, is forecast to decline by 4 percent to 1.75 trillion yen (US$13 billion). A decline of 4 percent is expected after fiscal 1999 because the speed of the improved performance-to-cost ratio far exceeds that of increased demand for mainframes. The PC workstation market is likely to see significant growth. In fiscal 1997, the market registered only 30 billion yen (US$220 million), yet it has been forecast to grow to as much as 160 billion yen (US$1.2 billion) in fiscal 2000, taking full advantage of low prices and strong applications for personal computers. The PC workstation market is expected to grow in such areas as Web content creation, financial businesses and construction-related computer-aided design (CAD). On the contrary, UNIX workstations will encounter a tough environment. A gradual decline of 3 percent to 5 percent after fiscal 1998 is forecast and the market will likely decline to the level of 340 billion yen (US$2.5 billion) by 2000. ERPs to See a Rapid Increase Among Software Products Nikkei Computer has projected a 16 percent increase to 1.54 trillion yen (US$11 billion) for the software products market in fiscal 1998. It also has projected a 17 percent-18 percent rate of increase after fiscal 1999 and it said the market will reach a level of 2 trillion yen by fiscal 2000. Despite the effects of the sluggish economy, numerous issues need to be dealt with in the development of information systems. For example, measures against intensified competition among businesses, Year 2000 issues and the establishment of global standards are just a few of the major issues. In fiscal 1998, among software products, significant increases are expected to be seen in business application products including Enterprise Resource Planning (ERP) packages and in such communications products as email and groupware, which are introduced by small and midsize businesses. The ERP package market, in particular, has attracted attention. Gartner Group Japan K.K.'s Dataquest estimated that the ERP package market reached 36 billion yen (US$270 million) in fiscal 1997 (based on vendor shipments). It projects that the market will see an average increase of 36 percent after fiscal 1998 and that it will grow to a market size of 170 billion yen (US$1.3 billion) by fiscal 2002. Expectations For Outsourcing in the Service Market The service market can be classified into information service and hardware maintenance service. The driving force of the information service market is software development service centered around the development of applications on a commissioned basis. A 9 percent increase to 7.61 trillion yen (US$57 billion) in fiscal 1998 and a growth rate of 9-10 percent from fiscal 1999 are projected. Full-fledged outsourcing will have a favorable effect on the information service market. Outsourcing has significant potential as seen in the statistics prepared by MITI. Specifically, labor costs account for almost 17 percent of information systems budgets of Japanese businesses. In addition to the existing commission-based mainframe operation services, outsourcing services will spread to the inter-business cooperation sector. Table 1: Size of the Hardware Market, 1997-2000 (unit: billion yen) Nikkei Computer estimates. Items in parentheses indicate comparisons with a year earlier (percent) Table 2: Sizes of the Software Product and Service Market, 1997-2000 (unit: billion yen) Nikkei Computer estimates. Items in parentheses indicate comparisons with a year earlier (percent). >>>>