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A monthly review of the latest developments in Japan’s IT, telecom, and life sciences sectors

February 2006 - Volume IX, Issue II

Triangle Technologies is the leading Japan Israel business development and investment advisory firm
www.triangletech.com

Dan's Desk

From Triangle's CEO

How To Set Up Your Japanese Subsidiary

Dear friends - hope you all are well. Japan keeps getting stronger. We recently closed a few small investment deals, a few very nice software agreements (one a major OEM deal), and are working on some strategic IP sales that should close soon, as well as a major round of investment for a client.

We recently were helping a client plan the structure and strategy of establishing direct presence in Japan, because, lo and behold, they already have $3 mio in bookings for 2006. Here are some thoughts I had that might be useful:

1. You can get to $3-$4 mio in sales in Japan without direct presence (if you use Triangle, of course!)

2. When you can see $3 mio in sales around the corner, that is the time to start establishing your Japan sales, marketing, and support organization. If you want to break the $3 mio barrier and KEEP GROWING, you MUST have direct presence, starting small and growing the organization.

3. You must have clear financial objectives in order to determine how much investment you should make. In steady state, 10% of WW revenues from Japan is normal. In some cases, when there is a great fit with the market, 15%-20% is possible. Profit contribution is usually much greater,proportionately, at least in the early years. Think of where you will be 2/3/5 years from now and how Japan could fit in. I know this is hard for Israeli start ups, but it gives you some guidelines.

4. In the *final* analysis, your direct KK (Japanese sub) will have the following functions:

5. Of COURSE you don't need all of these at once! But you do need to know where you are going, and you will need at least a small 8-10 person organization to get to $10 million. The above will cost you $2 mio per year when all is said and done.

6. Don't expect one person to take on more than 2 of these roles, if even that. Japanese tend to specialize. Furthermore, they are used to working in teams, and often feel uncomfortable working alone.

7. Don't expect the first hire to be the country manager, unless you are willing to pay $200K in salary, and then you will need a secretary, office, etc. So the real expense of starting with a CM is closer to $400-$500 in the first year. You need to include frequent travel, etc. One of the key talents a CM has is recruiting excellent people, so if you start with a CM, you will very soon thereafter be hiring other people.

8. In addition, you will need to very heavily support the Japan office from the beginning, frequently sending people. Eventually, as part of the 8-10 person organization, you will certainly need to relocate a member of your staff to Japan for a 2+ year rotation. This is critical for reaching and breaking the $10 mio barrier.

9. So how to start without breaking the bank? That is the $64 question!
Certainly two functions need to be in place early on: channel development, and post sales support. Depending on your business model, OEM or strategic sales may replace channel development. But don't expect these people to become CM! And don't expect the director of channels to be able to do business development or pre-sales support, unless you are VERY lucky. And don't expect the director of channel sales to become director of marketing.

10. Triangle Technologies can help - we can help you hire the single most important person, and add synergy to his activities by providing business development, channel development, and in some cases, strategic sales. Think about it - 1+1 can equal 3 in this case. And the person then does not need to operate in a vacuum, but can be part of a virtual team including a Triangle staff member who is an expert, and who knows the Israeli or American venture culture.

Anyway, these are some thoughts - best and good luck out there!

Dan

***TRIANGLE TECHNOLOGIES NEWS***

No official news this time.

ISRAEL-JAPAN NEWS

No official news this time.

***BUSINESS NEWS***

+TOSHIBA TO ACQUIRE WESTINGHOUSE

(Kyodo, Feb 7th) – Toshiba Corp has signed an agreement with British Nuclear Fuels PLC to acquire the British firm's U.S. nuclear power plant arm, Westinghouse Electric Co. The acquisition, valued at $5.4 billion. This is positioning the company as a global competitor with world-class capabilities in the two most important standards for nuclear power systems — the boiling water reactor and the pressurized water reactor.

+CONSUMER CONFIDENCE UP 3%

(www.forbes.com, Feb 9) - Japan consumer confidence index rose from 46.5 to 49.5 from December to January this year, indicating that the public is starting to agree with the government that the economy is improving. While the number is still less than 50 -- the median above which most Japanese think conditions are improving, this is nevertheless the highest rate of confidence since 1991.

+TOKYO ELECTRIC POWER TO CUT CHARGES

(Kyodo, February 23) - Tokyo Electric Power Co said it will lower electricity charges for households and other small-lot users by an average 4.01%, effective in April. Monthly power rates for an average household of parents and two children will be lowered by 263 yen to 6,269 yen,

***TECHNOLOGY NEWS***

+BROADCASTING SUPER BOWL IN HIGH-DEFINITION VIA IP NETWORK

(JCN Networks, Feb 8) - Nippon Television Network Corporation (NTV) and NTT Communications Corporation (NTT Com) have succeeded in using an Internet-protocol (IP) transmission for a delayed high-definition (HD) broadcast in Japan of NFL Super Bowl XL. The trial broadcast was fed from the U.S. at a transmission rate of approximately 70Mbps (MPEG2-TS) through NTT Com's Global Super Link, a global Ethernet transmission service, and was publicly broadcast via NTV's digital terrestrial broadcasting channel.

+8-MEGAPIXEL HIGH-RESOLUTION ROBOTICS TECHNOLOGY

(JCN, February 8th) - The National Institute of Information and Communications Technology (NICT) and Victor Company of Japan (JVC) have co-developed a network robot vision system that achieves a vision resolution of 8 megapixels, close to the limit of the human vision. The system consists of a high-resolution robot camera and network humanoid robot. The CSMO sensor is about 1/18 the weight and 1/19 the size of its predecessor with the same resolution the company developed in 2002. The robot has humanoid arms and hands with five fingers with probing capability. A person wearing data gloves embedded with join bending sensors can manipulate the robot's arms and fingers via a network. The robotics technology is expected to be used for telemedicine and nursing care applications.

+ POINTING BASED SEARCH SOLUTION FOR MOBILE PHONES

(www.directionsmag.com, February 03) - Users can point mobile phones towards virtually any business location, billboard or geographical area to access information. GeoVector Corporation of California and Japan’s Mapion, owned by CyberMap Japan announced the immediate availability of Mapion Local Search for mobile phones in Japan. This is similar to using a mouse to click on a computer screen to access information, users can now “Click on the Real World®” using their mobile phone). The service, initially launched over the KDDI network and available for users to download on W21S phones (CDMA with aided GPS and an integrated compass), will be available to a variety of additional models this winter.

+M5 ROCKET LIFTS OFF, PUTS SATELLITE INTO ORBIT

(Kyodo, February 22) - A Japanese-developed M5 rocket lifted off from the Uchinoura Space Center in Kimotsuki, Kagoshima Prefecture in southwestern Japan early Wednesday and successfully put into orbit the infrared ray astronomical satellite Astro-F, the Japan Aerospace Exploration Agency said. The launch of M5 marks the third rocket launch in about a month, which is unprecedented in Japan. In addition to the satellite, the M5 carries a tiny satellite made by the students of the Tokyo Institute of Technology, and experimental equipment for a solar sailor being developed by the agency, also known as JAXA.

+DELAY OF LAUNCH OF 3G FOMA HANDSET MADE BY NOKIA

(JCN, Feb 23) - NTT DoCoMo announced that it will postpone the launch of the NM850iG, a 3G FOMA handset made by Nokia which had been scheduled for launch on February 24. The dual-mode handset supports World Wing, DoCoMo's international roaming service, and is used on both W-CDMA and GPRS networks. The product will be open-priced and sold at the authorized DoCoMo shops across Japan.

+NEW NANO-ALLOYED POLYESTER FILM

(JCN, Feb 13) - Toray Industries has developed a plant-derived, nano-alloyed polyester film Leveraging the company's proprietary precise polymerization and nanostructure control technologies, the newly-developed material excels in heat-resistance, durability, flexibility, moldability, transparency and chemical resistance. Toray envisions applications in a wide range of industries, particularly the construction, consumer electronics and automobile industries.

***LIFE SCIENCES AND ENVIRONMENT NEWS***

COWS SUSPECTED OF HAVING MAD COW

(The Associated Press, February) 45 cows at a farm in Hokkaido are suspected of having mad cow disease and will be destroyed. One cow died last month, Japan's 22nd mad cow case. Following the death, the Hokkaido government banned the farm from moving any of its more than 400 cows. The announcement came a month after Japan halted all imports of U.S. beef following the discovery of backbones in a shipment of American veal. The dead Hokkaido cow was fed with meat-and-bone meal. After confirming its first case of mad cow disease in 2001, Japan began testing every domestically slaughtered cow entering the market and banned the use of meat-and-bone meal made from ruminant animal parts because of the possibility they could transmit the disease.

+NTT TO TEST FETAL TELEMEDICINE TECHNOLOGY

(Kyodo, February 21) - Nippon Telegraph and Telephone Corp said it will test the feasibility of transmitting digitalized medical images of fetuses between Japan and the United States, using its ultrahigh-speed experimental network. Although prenatal treatment is increasingly significant, the number of fetal medicine specialists in Japan is still small, compared with European countries, the United States and Canada, and pregnant women with diseased fetuses are occasionally unable to receive adequate prenatal care and management, NTT said, explaining the background of the experiment.

+FUJITA DEVELOPS CLOSED DESALINATION SYSTEM FOR REFUSE INCINERATION ASH

(JCN, Feb 9) - Fujita has developed a closed system for desalinating refuse incineration ash in collaboration with Asahi Kasei Engineering (AEC). Based on an efficient desalination and washing technology co-developed by the two companies, the new system can recycle water used in the desalination process. Subsequently it does not release any calcium chloride-containing water so that it can reduce the environmental burdens associated with the discharged water. Going forward, Fujita plans to promote desalination and washing systems to waste disposal companies, local authorities and cement manufacturers with a view to creating a recycling society. Currently, Japan reuses about 7 million tons per year of refuse incineration ash as a raw cement material.

+JAPAN MAKING SYNTHETIC TAMIFLU

(ASSOCIATED PRESS and www.jpost.com, Feb 25) - Researchers from University of Tokyo have developed a way to make Tamiflu, the anti-viral drug believed to counter bird flu in humans, without using a scarce botanical ingredient used by Swiss drug maker Roche. Tamiflu uses Shikimic acid derived from the Chinese anise fruit, which is sold dried as a popular spice and medicinal herb. Experts believe Tamiflu - technically known as oseltamivir - would be the best defense in the initial phases of any global influenza pandemic, and governments and companies have been stockpiling it because of fears about bird flu.