Toyota's crown prince enters - a super hero story

As was expected, Nikkei reports that Mr. Akio Toyoda, the crown prince of the founder's family, is to take the company's president position in June this year.

Here is the photo of Akio Toyoda:  New York Times
Here is the news report:  Market Wach

Even the invincible Toyota is hard hit by the global recession, and is expecting an operating loss at the end of this fiscal year (March 09), the first time in their corporate history.

Now, there have been much speculation in the Japanese blogosphere that they are just "playing dead", to avoid becoming a target of bashing while US car manufacturers are in deep trouble, and to make it easier to cut people.

Now that Akio is in position, I am feeling more and more that the speculation is not totally groundless. 

It is funny to see that the largest company in Japan is the "family business".  The founder's family is such a sacred thing for all Toyota people, especially the "direct family line" (founder Kiichiro, his first son Shoichiro, and his first son Akio).  Each time the direct line member takes the helm, the media refer to it as "taisei hokan" ("handing back the helm"), the historical termused when Tokugawa Shogunate returned the country's governance to the Emperor in 1864.   Akio has been carefully groomed just like the first son of an Emperor.  It is unthinkable to put the precious crown prince into a risk.  It is reasonable to assume that the company's executives somehow KNOW that they are OK.  Maybe they are scripting a super hero story, that Akio comes in during the worst of time, and will turn the company around.

So if you still have some money to invest, buy Toyota share.  I am pretty sure that they are TOTALLY OK.

Michi

Sony's biggest miscalculation about Blu-ray

Bad news about Sony keep on coming.

Sony to layoff 16,000 ZD Net

And bad publicity about Blue-ray keeps on on coming as well.

How can we expect Blue-ray to succeed - CNET

Inthe past, Sony was successful in transitioning users from VHS to DVD, by combining DVD player with PS2.  It was a great "killing two birds with one stone" strategy, as it also helped their game business as well.  But looks like that same strategy did not work for Blu-ray+PS3 combo after all.  Why was that?

The transition from analog to digital brings along a drastic cost reduction (=higher margin) for all the providing parties involved, and a drastic utility increase (=better quality) for users.  DVD is much cheaper to produce than VHS tapes, cheaper to transport, takes up much less space in the store, and harder to break.  It means both publishers and sales channel enjoy less direct and indirect cost and much higher margin.  At the same time, consumers enjoy better video/sound quality, and don't even mind to pay MORE money, even though the actual COST is cheaper.  That makes the margin even more attractive to the providing parties.  I am not sure if the rights holders (movie studios) enjoyed higher royalty or not, but anyway, pretty much everyone was happy.

This phenomenon is called "dominant choice" in microeconomic terms.  It was also applicable for "record to CD",  and "analog cellphone to digital" transition.  Those are the cases of gold mine to be exploited.

Now if you look at the transition from DVD to Blu-ray, you can see that the formula does not work.  Blue-ray probably is more costly to produce.  The transport and inventory cost would be the same for the sales channel.  And the benefit for the consumer is rather small, if not zero, hearing from all the opinions on the Net.  So basically, there is no added value to be distributed among all the parties involved.

As long as Sony was aware of it and was realistic that the transition would take much longer because of Blue-ray's "non-dominant" status, the current crisis would not have been this severe.  Sony's biggest miscalculation here, I believe, is that they were trapped in the past success and had an illusion that they could repeat it again.

Michi

Nintendo and Hatena come up with a cloudish service for DSi

Nintendo and their neighbor in Kyoto, Hatena, who provides blog and other web-based services, jointly announced the new service "Ugoku Memo-Cho" (moving memo) today.  With this service, you write/draw doodles or edit photo on DSi, enjoy it on its "Ugo Memo Theater" and share it on Hatena service "Ugo Memo Hatena".

CNET Japan article

Ugoku Memo-Cho website

UgoMemo photos

Sharing photos or drawings on the Web is nothing new, but it is considered significant as it involves Nintendo's hugely popular portable game machine, and integrates with Hatena's cloud on the back-end.

Nintendo's creator Yoshiaki Koizumi states that they chose to work with Hatena, because "it takes a special skill sets to maintain the User Generated Contents (UCG) site, and we don't have that skill.  We rely on Hatena on that part."

Hatena's founder and president Junya Kondo explains that Hatena's motivation to work with Nintendo is "to expand our user community to non-traditional PC users", as Hatena, despite its cult-like status in Japaenese Web community, is often criticized as "pegeon hole" of Web geeks.  Hatena's community is not exactly kids-friendly, so they are planning to employ various filter technology to adjust the contents to younger and wider audience of Nintendo DSi.

The service is provided for free to the user, and Hatena maintains the back-end server.

Personally I am a heavy user of Hatena Diary (blog service) and Hatena Bookmark ("Digg" of Japan) - actually one of the better-known writers on their blog, so I hope Hatena does well in this new attempt.  They are both from Kyoto, the ancient capital of 1000 years with a pride, and Kyoto people often feels Tokyo as their "rival".  It is nice to see some "diversity" in otherwise pretty homogeneous Japan.

Mich

Panasonic-Sanyo merger FINALLY goes through

As reported earlier, Panasonic's attempt to acquire Sanyo had been stalled due to the objection by Goldman Sachs, but it finally goes through today.  The total deal size will be at least 560 bil. yen, or up to 800 bil. yen, depending on the final result of the planned TOB.

Goldman changed their mind to accept the price of 131 yen per share.  According to Nikkei, in earlier stage of negotiations, major investors (Goldman, Mitsui Sumitomo Bank, Daiwa SMBC) were asking for more than 200yen, and Panasonic offered 120 yen.  When Pana raised the price to 131 yen, both Mitsui Sumitomo and Daiwa accepted, but not Goldman.

Newspapers report that given the overall financial crisis, Goldman decided that it is a better deal to accept it and cash Sanyo out, rather than sitting on it till it dies.  Strategically, merger with Pana makes a lot of sense - or at least MORE sense than being held by financial investors at the current structure.

I guess the yen-dollar exchange rate which reached to 87 yen per dollar migh have helped.  In dollar terms, capital gains for Goldman probably is not too bad at this moment.

Anyhow, Pana is scheduled to open TOB next February, and hope to complete the acquisition in spring 2009.

So after all, the famously savvy Osaka merchant wins in this battle.

Panasonic is not exactly a cool fashionable brand, but they have a steady strategy and will likely be one of the "remaining" brands at the other end of this consolidation stage in Japanese electronics industry.  I wish they started 10 years earlier - I wonder if it is the case of "better late than never", or "too little, too late".

Michi

SPAM goes to Japan - not mail, but meat

For whatever reason, Hormel Foods is starting to sell SPAM for the first time in Japan.

IT Media 12/11

It refers that SPAM has been sold in Okinawa for a long time, and for most of non-Okinawan Japanese, SPAM has been only known as a part of Okinawa cuisine.

Some commenters mention "SPAM Nigiri", rice ball with a grilled/sliced spam on top, which is popular in Okinawa, as well as in Hawaii.  Here in Northern California, Japanese supermarket sells SPAM nigiri at lunch deli corner.

With the original SPAM absent in the food market, the term "SPAM" is only known as "junk mail" in Japan.  Richard Bross, president of Hormel International, states on that fact, "Laughed at or ridiculed, as long as the name SPAM is mentioned, I don't mind."

Itochu, one of the major trading houses in Japan, is the distribution partner in Japan for SPAM.

Michi

Panasonic and Sanyo - separated at birth, but...

Panasonic's attempt to acquire Sanyo (minus mobile phone handset division, which was already sold to Kyocera) continues.

After Pana's intention was announced, Goldman Sachs, one of Sanyo's investors, declined their offer.  This week, Pana raised the offer price to 130 yen per share, but Goldman again declined it today, citing that Sanyo's current share price is 169 yen as of Wednesday.  Nikkei reports that Pana can gather more than 51% without Goldman's accord, so Pana is heading that direction.

Panasonic and Sanyo are not only neighbors - their headquarters in Osaka are less than 2km apart - but also Sanyo's founder used to work closely with Pana's founder Konosuke Matsushita.

Pana's main strategic motivation of this acquisition is reported as Sanyo's solar battery division, which has the top level market share in the world.  It is important in their energy and environment strategy.

So the combination is in many ways natural, so I believe that sooner or later, it will go through.

People in Osaka is historically known for the city of merchants, and Pana is known as a savvy merchant.  I imagine they know what they are doing.

Michi Kaifu

De-Japanized Wii

Nintendo Wii finally arrived in my home beginning of the month. As many of you probably know, this is pretty fun and addictive even for "non-gamers" like me. It’s been giving me sore muscles.

Although I was quite familiar with this kind of sensor based immersive controller technology, I am still surprised by the well-made and cleverly inclusive software.

Especially Wii Fit is a fascinating application. The first set of default programs may not be the most effective workout, but it has certainly brought enjoyment of games into fitness and showed lots of potential for third party development. I could not believe that it turned even my super lazy husband into a daily exerciser.

But what struck me most was the global nature of these games.

There are some Japanese cartoon like emotion expressions and other Japanese things in the games, but the language and context seem quite natural or at least “not odd” in US version. The encouraging training method is rather “western” to me.

With 2 out of 3 game console companies being Japanese, it may be granted that these companies know plenty about attracting gamers outside of Japan. And I am sure they have long history of doing business that way. But knowing how many of even the most prestigious Japanese companies screw up at crossing the border in any significance, it seems remarkable to me.

With regards to globalizing software, lots of people know that mere translation of language would not be enough and many other cultural things have to be localized.  I don’t think companies like Nintendo have huge product development organizations outside of Japan (as many complains “everything gets decided in Japan”), and wonder what kind of teams and processes they employed to embrace the global view.

It could be that entertainment like music, game, and movie have certain commonality and easier to get across, but there might also be some secrets these companies have obtained over the years that others could learn from.

Yuki

Gphone vs. iPhone - the concept behind Android

I got hold of the first Android phone - T-Mobile G1 - last night in San Francisco, where the "pre-sale" was held from 6pm.

Without too much going into the technical details, here is my impression about G1.

1. Form factor:  I am in strong belief that the form factor is the #1 key for success for mass-oriented mobile phone.  With Andy Rubin, former Danger guy, in the helm, G1 definitely has inherited the cool "smell" of Sidekick that appeals to the young folks.  (Although the hardware is made by HTC, I heard from the industry source that Google had a lot to say about the hardware design.)  It was much sleeker than I thought, and feel how the screen opens up - a bit to the side and up - is "Sidekick"-like "fun" factor.
2. Cloud factor:  Smartphone market is exploding this year, and with the entry of Apple and Google, the main focus of smartphone market is how it relates to "cloud computing".  In that sense, iPhone is "Web1.0" handset whereas Android is "Web2.0".  iPhone is basically a beautiful "viewer" of the contents, including iTunes contents and website.  With iPhone, you can buy the professionally made contents and see it on the phone, whereas with G1, the screen is much smaller and less beautiful, Android market is not developed yet, YouTube doesn't work very well, but it is much easier to input text and make phone calls.  It is very true to the basic "mobile phone" function, which may also be the DNA of Sidekick.  It also is still "work in process", as open source OS, so it may get better over the years, but at this moment, iPhone looks much more "complete product".  With all its power and shortcomings combined, G1 is the "Web2.0" type handset.

I will probably come up with other stuff, but here is my brief impression about G1.

Michi

Japanese media misreported suspense of mark to market accounting

On October 17th, Japan's leading business newspaper Nihon Keizai Shinbun (so called "Nikkei") reported that the US, EU and Japan are going to suspend mark-to-market accounting. I read this news on Nikkei Net (online version newspaper) and was unpleasantly surprised . As far as I know, none of the countries has plan to "suspend" mark to market accounting so far.

Under this troubled market, accounting standard boards in the US, EU and Japan have announced interpretations regarding application of mark to market accounting on hard to value assets. The main purpose of the interpretations is to remind financial institutions that they don't need to use fire sale prices when evaluating their hard to price assets. It actually gave banks more leeway on mark to market. However, it did not mean to suspend mark to market accounting.

In fact, Accounting Standard Board of Japan (ASBJ) immediately announced that it was misinformation due to the misunderstanding of ASBJ's recent press release. Nikkei kept silent on it.

I was wondering why Nikkei made such a big mess. I could not believe that it was just a simple mistake... I've been carefully reading Japan and US news regarding subprime crisis and noticed that Japanese media is more aggressive in blaming mark to market accounting than US media.

Interestingly, subprime crisis did not affect much on Japanese financial industries as they did not bet too much on mortgage backed securities and other exotic financial instruments. However, some Japanese financial firms are facing trouble in maintaining capital adequacy ratios and Japanese media is insisting mark to market rule is making troubles. Why?

The real issue to Japanese firms is mark to market accounting on publicly traded stocks, not on hard to value assets. Unlikely the US or other countries, Japan has business practices mutual share holding between enterprises ("Kabushiki Mochiai"). It's been considered as a heritage of the past. During Japanese financial crisis era around 2000, many companies sold shares to mitigate the effect from troubled stock market. As a result, the ratio of mutual share holding dropped to 8.6% in 2003, compared to 32.9% in 1990.

However, the ratio of mutual share holding has been increased since 2004 as Japanese company started protecting from hostile take over. The idea was to hold shares among friendly companies and avoid unknown parties to take majority of shares. The ratio of mutual share holding was 12% in 2006, and appears to be higher in 2007/2008.

In response, recent sharp drop in stock market hit Japanese companies significantly. Of course, publicly traded stocks are to be valued at the price as of balance sheet date, and then, Japanese banks started warring about impairment of their assets.

US and EU rules ease mark to market accounting on hard to value assets but publicly traded stocks. And there is no good reason to stop valuing the assets which have certain market value. This is not saving anything...is resulting "cheating" investors.

Think hard about real problem...is real problem that mark-to-market accounting is dragging down financial institutions and world economy? Nope. Shouldn't get away from real problm that many banks made poor decisions and lost credibility with investors.

You've got a meltdown and should deal with it, without cheating investors anymore.

Yoko

Blog Action Day entry - Poverty in the middle class, Korean story

It is Action Day today!  So I will write "not exactly it, but related to it" entry today.

I have been interested in what is going on in Korean economy recently.  Everyone in the world is suffering from the financial crisis, but according to Japanese "2-Channel" bulletin board, the crisis in Korea is much deeper than the rest of the world.  I usually don't read this type of info on the mainstream media (as Korea draws small attention from the US press, and Japanese press is "sensitive" about whatever related to Korea), so I would like to know if this is true...  if anybody knows, please let me know.

Korean economy in general has not been doing great these days, and its currency has been quite volatile.  (The 2-Channel theory says it is because Korean Won has been a target by vulture funds.)  The external trade balance turned to deficit last year, although 70% of its economy is dependent to external trade.  Because of its dependency, if Won becomes too high, export suffers, so the Korean central bank intervened many times to sustain the currency, spending lots of their dollar reserves.

Then came September 2008, the due date of money they borrowed from IMF during the crisis 10 years ago.  They have to pay back in dollars, but the country did not have dollars, especially with cheaper Won - meaning they need more Won to pay back the same amount of dollars.  It drew down all their foreign currency reserves but still not enough, so they had to even take out money from people's pension funds and sell off state-owned infrastructures.  Even that was not enough, so they basically had to borrow again, this time with much higher interest rate.  It is like paying back the mortgage with credit card loan.  Very dangerous move.

2-Channel says that there will be another deadline coming in November - will they somehow survive, or IMF intervene again?  This time around, US is fighting its own crisis and Japan is busy helping US, and I wonder how much of money can be used for Korea, which has been acting almost "irrationally" hostile against both countries....

So the details aside, the broader economic problem of this country seems to be the inequality in wealth distribution within the country.  Now there are several major Korean brands known internationally, such as Hyundai, Samsung and LG, but these "zaibatsu" (conglomerate) controls too much of its economy, giving little room to develop healthy small/medium enterprise sector.  Because of it, Samsungs and Hundais have to import much of the components from Japan, causing the trade deficit, despite of its very strong export drive.  Those big Korean brands, although well-known, have not enjoyed "high quality" brand recognition that compares to Sony or Toyota, and that is because of lack of home-grown reliable component suppliers.

The country also looks to have failed to nurture the middle-class population (such as SME owners and employees) and thus the domestic market has not developed well.  That causes the economy's heavy dependency to external trade, thus making it more sensitive to the foreign currency volatility and the economic weakness of U.S. and other major trade partners.

So I still need some help in making sure if all the above is true (especially because 2-channel is notoriously anti-Korea), and the actual seriousness of the country's economy, but in general, if the above is true (and sounds pretty legit to me), Korea's case is one of the extreme cases of the "poverty in the middle-class" problem, which is the base tone of the current economic crisis in the U.S., and in Japan in lesser extent.

From the point of view of wireless industry watcher, I have been concerned that once-mighty Korean handset brands have not really come up with good handsets lately.  They were successful in coming in to the U.S. market with sleek clamshell phones with multimedia funcionality at the time of digital transition in the late 90's, taking the advanced designs and technologies from the home country (which they had quickly adopted from Japan by then).  Now Samsung and LG only makes also-run handsets, such as cheapy looking iPhone copycat. 

So what is really going on in Korea still remains to be a concern for me.

Source:  2-channel summary site

Michi

Enotech Insight