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

September 2002 - Volume V, Issue IX

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

Dan's Desk

From Triangle's CEO

+HITACHI: THE ELEPHANT LEARNS TO DANCE (THE HORA)

A previous colleague of mine at HBS, Professor Rosabeth Moss Kanter, wrote a book called “When Elephants Learn to Dance”. She was referring to mammoth companies (a mammoth is a 20,000 year old frozen elephant) learning to be nimble, flexible, innovative. Well I am quite happy to begin this Dan's Desk by announcing a deal with a Japanese elephant that Triangle Technologies advised on: Hitachi invested an undisclosed amount in Voltaire, a pioneer in Infiniband technologies, as part of a more global strategic cooperation program. The investment was led by Hitachi's internal venture capital arm called the CVC division; CVC stands for "corporate venture catalyst". CVC has made other Israel-related investments, including in the VC fund Vertex, and in security start-up Sanctum. According to what I have read, Hitachi (not CVC, which is a window to the mammoth Hitachi group) has also formed an alliance with Xacct (billing technologies), and Hitachi affiliates have invested in Bug-Life (Hitachi-CSK fund); are representing Accord/Polycom (Hitachi High Technologies) in Japan; have invested in Aprion (Hitachi Koki - machinery); and formed a new Japanese kids’ portal in cooperation with Alfy, the Israeli kids' portal.

Clearly, this mammoth has learned to mambo. But it is not just with Israeli debka dancers. Take a look at this list from 2001/2:

Wow. Until recently I always mentioned Fujitsu as the most internationally innovative of the pacific rim pachyderms - it bought Amdahl and ICL quite a while back - but I can see that Hitachi is really on the move. I expect to see much more in the future.

In other news: mark your calendar and get ready for Triangle Technologies’ Second Annual Japan Seminar. The tentative date is December 16th and if the date changes due to speakers from Japan, it will still be held +/- a few days. So be ready! Last year we had a great audience - 145 people from 65 companies - and great feedback about the seminar content.

Dan

***TRIANGLE TECHNOLOGIES NEWS***

VOLTAIRE TO COOPERATE WITH HITACHI ON INFINIBAND

Voltaire, the leader in intelligent InfiniBand connectivity, will co-operate with Hitachi to define a set of solutions that will improve connectivity in the storage and server environment. Recognizing Voltaire’s leadership in the InfiniBand industry and the synergy effects with its solutions business, Hitachi is also making a strategic investment in Voltaire. Triangle Technologies advised Voltaire on the agreement.

***ISRAEL-JAPAN NEWS***

+MIDBAR SURPASSES 10 MILLION PROTECTED CDS IN JAPAN

Midbar announced that more than 30 million CDs worldwide are protected by Cactus Data Shield (CDS) technology. This includes more than 10 million CDs protected in the Japanese market. Midbar also announced that its CDS processor is now installed in 23 manufacturing plants globally.

+JAPAN'S FUSION COMMUNICATIONS DEPLOYS XACCT N2B PLATFORM

XACCT Technologies announced that Fusion Communications Corp., a provider of VoIP service in the Asia-Pacific region, has deployed XACCT's real-time N2B software platform to implement value-based pricing models for their services.

+VIRYANET ALLIES WITH JAPAN’S HITACHI SYSTEMS & SERVICES

Workforce management software developer ViryaNet (Nasdaq: VRYA) today announced a strategic partnership with Hitachi Systems & Services. Under the terms of the relationship, Hitachi Systems & Services will sell ViryaNet's Service Hub and suite of applications in its core markets in Japan.

+JSAT OF JAPAN WILL USE GILAT’S VSAT THROUGHOUT JAPAN

Gilat Satellite Networks (Nasdaq: GILTF) announced that it had been selected by JSAT Corp., Asia’s largest satellite operator, to install a two-way satellite communications network in Japan. JSAT intends to use Gilat’s VSAT technology to provide shared-hub services to companies in a variety of industries throughout Japan.

+JVC USES OPLUS TECHNOLOGIES’ CHIP IN NEW PLASMA DISPLAYS

Oplus Technologies, which provides systems-on-chip and software solutions for digital displays, announced that JVC was using its Rembrandt-1 multimedia display processor to power its recently released GM-P420 42-inch series Plasma monitors. The Rembrandt-1 chip produces a high-quality image from a wide range of video HDTV and PC input sources.

***BUSINESS NEWS***

+FULL RECOVERY OF IT SPENDING IN H2’03

IDC Japan recently released its forecast for the domestic sector-to-sector IT market, stating that domestic IT spending came to roughly $105 billion in 2001, marking a 0.4% drop from last year, due to the slowing economy seen in the second half of 2001. IDC forecasts that the Japanese IT market will grow by 1.3% in 2002, while trends in the manufacturing, banking, government, and telecommunications sectors will revitalize spending in the second half of 2003.

+WLAN GAINING POPULARITY IN CORPORATE SECTOR

Gartner Japan claimed 44.5% of Japanese corporations have introduced WLAN services. Among these, merely 5.9% of the companies introduced the system in every part of their companies, and the remaining 38.6% introduced the system in limited facilities, such as meeting rooms. A significant portion of respondents claimed they would like to use WLAN outside their offices in various locations.

+XDSL SUBSCRIBERS NEAR 4 MlLLION

According to the preliminary figure announced by the Ministry of Public Management, Home Affairs, Posts and Telecommunications, the number of xDSL subscribers in Japan reached 3,915,740 at the end of August, representing an increase of about 310,000 compared to July. Since January 2002, the number of xDSL subscribers has increased by an average monthly rate of 300,000.

+DSL DRIVES NET USAGE

According to a July 2002 survey from Nikkei NetBusiness magazine, nearly 40% of Japanese Internet users have ADSL connections - up from roughly 20% in December 2001. The survey also determined that 25.2% of respondents use the Internet in 2002 four times as much as they did before they switched to ADSL.

+YAHOO! BB SUBSCRIBERS TOP 20% OF DSL POPULATION

Softbank Corp. announced that the total number of subscribers to its Yahoo! BB service increased by 119,000 in July to reach 779,000. This figure represents almost 20% of Japan’s xDSL subscriber base.

+IC CARD MARKET TO DOUBLE IN 2002

Yano Research Institute estimates that the number of IC-based credit and other cards to be issued in fiscal year 2002 will be 36.54 million, almost twice as many as the 18.93 million issued in 2001. This figure is expected to grow to 375.4 million units in 2005 and 752.7 million in 2010.

+CAMERA PHONES TAKE UP 22% MARKET SHARE

According to the Communications and Information Network Association of Japan, at least 22% of all cell phones owned in Japan can take, send and receive photos. Wireless operator J-Phone said the number of users of its camera-equipped phones had exceeded 6 million, growing by 88% since January and totaling nearly half of its subscriber base, in the latest sign of strong photo-phone demand. NTT DoCoMo said it had shipped more than 1 million camera-equipped mobile phones since launching them in June.

+NEW FEATURES SPICE UP CELLPHONE MARKET

Combined domestic shipments of cellular phones rose to 3.67 million units in July, according to the Japan Electronics and Information Technology Industries Association. Demand for camera-equipped handsets remains strong, spurring competition in the market and contributing to the first rise in shipments in 14 months. From September, KDDI Corp. will offer 3G handsets that can send 15-second video clips, while DoCoMo will unveil 3G phones that can run three times as long as conventional models on a battery.

+MORE THAN 1,000 MONTHLY KLEZ VIRUS INCIDENTS IN LAST 5 MONTHS

The Security Center of the IT Promotion Agency (IPA/ISEC), which receives reports of computer virus incidents, issued a virus report for the month of August 2002, reporting that the W32/Klez virus is spreading, with more than 1,000 monthly incidents reported for the past five consecutive months.

***GENERAL TECHNOLOGY NEWS***

+IPV6 EXPECTED TO BE WIDESPREAD IN 2004

A Japanese government group, an advisory body of the Ministry of Public Management, Home Affairs, Posts and Telecommunications, has released a report on the migration scenario from IPv4 to IPv6. The group expects IPv6 will be in a take-off phase from 2002 through 2003, and will become popular in 2004, when the adoption rate will catch up with the market’s technical readiness.

+DOCOMO PHONES TAKE ADVANTAGE OF ANTI-SPAM LAWS

NTT DoCoMo and its eight regional subsidiaries announced a new feature that will enable i-mode users to block spam mail as the result of anti-spam legislation that took effect last July. The new law requires that the subject line of spam mails begin with the Japanese phrase mishodaku kokoku ("unsolicited advertisement") and a special mark; spam mails can be thus filtered out.

+FUJI PHOTO FILM DEVELOPS PLASTIC FIBER FOR BROADBAND

Fuji Photo Film said it had developed a new type of plastic optical fiber that enables high-speed and low-cost data transmissions for household broadband networks as well as industrial uses. According to the company, the new 500-micron plastic optical fiber enables gigabit-level signal transmission at a lower cost and with a higher heat resistance than conventional glass fibers.

+JAPANESE CREDIT CARDS TO CARRY CONTACTLESS CASH

The Edy electronic money system created by BitWallet, a 25-member consortium headed by Sony and NTT DoCoMo, is to be adopted by seven of Japan's major banks and credit card companies for use with their credit cards. The move is expected to result in the Edy contactless cash system becoming an industry standard. BitWallet expects to circulate 8.5 million Edy-embedded cards by the end of 2003, and hopes about one-third of them will be issued by these seven companies.

+JR EAST TO COMBINE IC TICKET, CREDIT CARD

East Japan Railway will combine its prepaid Suica train pass and VIEW credit card, enabling users to ride trains and shop with the same. As a first step, JR East will next March add a credit card function to its Suica card, a noncontact IC ticket that is placed over a ticket gate sensor.

+TOYOTA, HONDA TO COMPETE IN INTERNET-EQUIPPED CARS

Toyota Motor and Honda Motor will provide information services for drivers through the Internet, beginning this autumn. Toyota announced that it would initiate an information service called "G-BOOK," in which music, electronic-commerce and other contents are distributed to car-navigation systems, using KDDI’s 3G network. Honda revealed its "InterNavi Premium Club" service, in which it will distribute nationwide traffic information, news and other contents by connecting the mobile phone or PHS to the car-navigation systems.