Dan's Desk
From Triangle's CEO
Well, after disappointing our
loyal readers by not writing a Dan's Desk last month, I am back (I was on vacation in
California last time...).
I thought that I would make this DD (Dan's Desk) as practical and down-to-earth as possible,
so apologies if it is a bit dry. Hard to get very excited or colorful or even make bad
jokes about (ugh) distribution agreements. On the other hand, you wanted revenues, right?
So go get a drink of water and then read this dry stuff.
Distribution agreements. About 60% of the deals we do are distribution agreements, so I made
an informal survey of the distribution deals we have done and found out that there is
absolutely NO consistency at all in the basic terms of margins. We are in the Wild Wild
West of lawlessness when it comes to how to do it right. Let me give you some examples
and I would really like to hear your own comments and experiences, do's and donts. I promise
to use the good advice and print the rest :-)
Case 1 - software
Company licenses software at 50% of its price list, and the distributor can sell at any price he wants. In practice, he sells at 130% ~ 150%. The advantage of this is that the distributor's motivation is high, the need for reporting actual prices disappears and makes the relationship easier, and in fact the distributor's marketing expenses in Japan are higher than elsewhere.
Case 2 - software
Company and distributor split the actual invoice price in Japan 50%-50%. Obviously this creates commonality of interests, and in some cases indeed the costs to the foreign company of doing business in Japan are greater. (From a purely legal point of view, manufacturers are not allowed to dictate prices to distributors in Japan).
Case 2A - software
Company and distributor split the actual invoice price 50%-50%, but the foreign company is guaranteed a minimum transfer price which is currently (in a very competitive market) about 65% of the invoice price, but will definitely go down as the market changes. (Distributor plans to make profit on ancillary services as well).
Case 3 - software
Company licenses software at 60% of its price list, and the distributor can sell at any price he wants, which in practice may range from %110 ~ 150% of the WW price list. This is almost the same as Case 1, but makes the foreign company happier, and helps ameliorate conflicts of interest in Case 1.
Case 4 - mass product
Company sells at manufacturing cost plus predetermined margin, and distributor adds on a margin, totally determined by itself. The obvious advantage, again, is lack of hassle and reduced ongoing negotiations with the distributor, and the obvious disadvantage is that the foreign company may be leaving a lot of margin on the table.
Case 5 - capital equipment
Company sells at a fixed transfer price, targeted at 50% of expected invoice price, but in reality it is close to 40%.
Obviously there are a lot of other parameters involved, such as quantity commitments, prepayments, investments, NRE payments, etc. and these all influence the basic share of revenues.
Next time, in order to really add some spice to my Dan's Desk - a few tidbits on indemnification, product liability law, and some other delightful issues which have an impact on distribution agreements in Japan!
Enjoy, Dan
***TRIANGLE TECHNOLOGIES NEWS***
+CYOTA PROVIDES VERIFIED BY VISA TO CREDIT SAISON
Cyota, a leading payment security company, has been selected by Credit Saison, one of Japan's top five card issuers with over 10 million cardholders, to provide the Verified by Visa Internet payment security technology to its Visa card members. Credit Saison will be using the Japanese version of the software, offered and supported by Cyota's partner in Japan, Intelligent Wave Inc. (IWI). Triangle Technologies played a key role in developing Cyota's partnership agreement with IWI.
***ISRAEL-JAPAN NEWS***
+AMD, FUJITSU AND SAIFUN ANNOUNCE COLLABORATION
AMD, Fujitsu and Saifun Semiconductors announced a comprehensive collaboration under which the three companies have agreed to cross-license patents and technology, settle all pending litigation and collaborate in the development of future generations of non-volatile memory (NVM) technology. As part of the collaboration, AMD and Fujitsu will also take an equity stake in Saifun.
+AUDIOCODES IN ALLIANCE WITH OKI ELECTRIC
Israel’s AudioCodes and Oki Electric Industry Co. announced a strategic alliance to develop and market voice-over-IP solutions to the Japanese telecom carrier market. Under the agreement, Oki will incorporate AudioCodes' VoIP modules into its new VoIP gateway equipment.
+HITACHI PARTNERS WITH XACCT TECHNOLOGIES
XACCT Technologies, which provides network data management solutions for telecom service providers, has formed a strategic alliance with Hitachi of Japan. Under the terms of the agreement, Hitachi will provide pre- and post-sales support as well as integration assistance for XACCT's software solutions to its customers in the Japanese market.
+QUARK BIOTECH EXPANDS AGREEMENT WITH FUJISAWA
Drug development company Quark Biotech has extended its research collaboration with Fujisawa Pharmaceutical. Under the extended agreement, the two companies will broaden their research beyond target gene discovery and will also work on discovering drugs to treat strokes.
***BUSINESS NEWS***
+JAPAN’S BROADBAND USERS TO REACH 5 MILLION
The number of broadband service users in Japan is about to reach 5 million, according to the Public Management, Home Affairs, Posts and Telecommunications Ministry. Users of xDSL, CATV Internet and FTTH came to a total of 4,995,526 by the end of June.
+46 MILLION LOGGED ON IN JAPAN
A report compiled by Internet Association and Impress Corp. says the current number of Net users in Japan is 46 million, about 10 million less than the government's estimate. companies reported that Japan is second largest in the world in number of Net users after the United States, and 16th in ratio of Net users to population.
+JAPAN’S HANDSET SALES TO REACH 53 MILLION IN 2006
Demand for new cellphones in Japan is expected to soar to 53 million units in 2006 from 40.6 million last year, boosted by camera phones and 3G handsets, according to Gartner Japan. Gartner said camera-equipped phones and handsets for KDDI’s 3G standard will drive demand in 2002 and 2003. From 2005 onwards, however, demand for handsets for NTT DoCoMo W-CDMA would spur sales in Japan.
+CAMERA-CELLPHONES TO REACH 23 MILLION IN 2003
Shipments of mobile phones with cameras will surge from 6 million units in 2001 to 23 million units in 2003 in Japan, according to a survey conducted by Yano Research Institute. Mobile phones with cameras have become popular in Japan after J-Phone launch of its "sha-mail" service last year. Following J-Phone’s success, both KDDI and NTT DoCoMo launched their own mobile phones with cameras.
+KDDI, DOCOMO CONFIDENT OF 3G USERS TARGETS
Japan's dominant mobile phone operator, NTT DoCoMo, said it stands by its original target to acquire 1.38 million subscribers for its 3G service by next March despite a slow start. KDDI’s president, Tadashi Onodera, said that the company, Japan's no. 2 mobile operator, would comfortably meet its target of 7 million users for its new 3G wireless service by March 2003. Since the launch of its 3G service in April, KDDI has signed more than 1 million users.
+MOBILE GAME MARKET TO REACH $9.34B BY 2008
According to a study by Frost & Sullivan, the Japanese mobile game industry generated revenue totaling $436.4 million in 2001 and will grow steadily to $9.34 billion in 2008. The main driver for this growth is expected to be Web-based downloadable mobile gaming.
+JAPAN’S DATABASE SOFTWARE MARKET GROWS 5.9%
Gartner Japan has announced a positive Japanese market trend for database software in the year 2001, with total shipments reaching $1.4 billion, representing a year-on-year increase of 5.9 percent. UNIX database software has increased by 7.1 percent, while Windows Server operating system database software rose by 27.7 percent.
+JAPAN’S ERM MARKET VALUES AT $6.1 BILLION
Japan's Enterprise Resource Management (ERM) market, including investment for hardware, software, and IT services, reached $6.1 billion in 2001, according to a survey by IDC Japan. IDC predicts a smaller development for 2002, due to restrictions on investments by business sectors.
+JAPANESE GOVT. DROPS LICENSE REQUIREMENTS FOR RADIO WAVE CARDS
The Ministry of Posts and Telecommunications plans in early September to do away with the requirement that firms that issue non-contact smart cards get a radio-wave license. The ministry hopes the move will promote use of smart cards and make it easier for companies, especially small firms, to issue the cards.
+JAPAN’S ASP MARKET WORTH $310 MILLION IN 2001
Gartner Japan estimates value of Japan's ASP market in 2001 at roughly $310 million. The ASP market will experience an average annual growth rate of 46.2 percent to reach the market size of $2.1 billion by 2006, Gartner said.
+JAPANESE GOVT. PAYS $255 BILLION MEDICAL BILL
According to a new government report, the nation’s national health bill will reach $255 billion in 2002, due mainly to increasing costs of medical care for elderly. A bit over 1/3 of this amount was spent on people over 70 years old, amounting to $6,361 per person per year.
+AMAZON.CO.JP LOGS 1 MILLION SHOPPERS
Online retailer Amazon.com announced its Japanese site had attracted one million shoppers in record time. Amazon executives attributed this to a combination of customer experience, price, and selection, expecting Japan to become Amazon's largest income maker outside the U.S.
+GOLF COURSE DEFAULTS DOUBLE IN 2002
From January to June this year, over 51 golf course operators have gone bankrupt, more than all the defaults in 2001. According to Tokyo Shoko Research, almost half of defaulting operators had debts of $86 million or more, with one operator reporting debts of $1.4 billion.
***GENERAL TECHNOLOGY NEWS***
+NORTEL, KDDI COLLABORATE IN METRO NETWORK
KDDI has awarded an exclusive contract to Nortel Networks for expansion of its metro access network infrastructure. Under this contract, Nortel Networks will build new metro optical rings for KDDI in major cities across Japan, making the KDDI metro network the largest built in Japan by a single carrier. Oki Electric will provide installation and ongoing maintenance services.
+NEC SELLS WORLD’S SMALLEST 10Gbps MSA OPTICAL TRANSCEIVER MODULES
NEC Networks announced that it has released six 10Gbps optical transceiver modules which comply with the 300-pin Multi-Source Agreement (MSA). Designed for use in mid- to long-distance optical communications systems, the modules are 55% smaller in footprint than the company's predecessor products, and consume 40% less power.
+KDDI TECHNOLOGY TRANSMITS VIDEO DATA BETWEEN HOSPITALS
KDDI and KDDI R&D Laboratories have joined forces with Tokyo Medical and Dental University in successfully sending medical video data over a high-speed, fiber-optic network for telemedicine. Video images taken with an endoscope at Musashino Red Cross Hospital were transmitted to a university-affiliated hospital, where doctors made a diagnosis.
+KDDI IN HDTV OVER WLAN TRIALS
KDDI is experimenting with wireless LAN technologies that can deliver high-definition TV (HDTV) transmissions to PDAs and other mobile terminals. This is the latest in a series of efforts by the mobile operator to incorporate WLAN technology into its strategy.
+KDDI SERVICE TO TRACK WORKERS USING GPS
KDDI announced that in October it would launch a cellular phone service using GPS technology to track the location of company employees. The service, dubbed GPS MAP, enables a manager to view on a digital map the sites that sales staff has visited during the day and to make a log of the length of time that employees have been at specific places.
+JAPANESE CELLPHONES TO OFFER ATM ACCESS
Japan's convenience stories are about to become even more convenient,as NTT DoCoMo is set to offer the world's first service that lets people withdraw and deposit money at ATMs in convenience stores and supermarkets using cell phones instead of cash cards.
+HITACHI, NTT DOCOMO, SHARP TO DISTRIBUTE E-BOOKS
Hitachi Ltd. plans to provide its electronic book distribution service for PDAs in October jointly with NTT DoCoMo, Sharp and Digi-Book Japan. Hitachi will be responsible for managing the distribution and charging systems of the e-books, while NTT DoCoMo and Sharp will build their respective Web sites for distributing contents that can be accessed by their PDAs. Conversion of the contents into an XMDF format will be the responsibility of Digi-Book.
All rights reserved to Triangle Technologies Ltd. or to the providers of the information. The information is for individual use only. The material contained in this document and/or any portion of it is intended to be strictly informational. Triangle Technologies Ltd. makes no claims concerning the validity or exactness of the information provided herein, and will not be held liable for any use, interpretation, or other implementation of said information
Authorized by Ehud Nachmany - Marketing Communications Director
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