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No. 359, August 1999

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Japanese Companies in the US


The Panasonic Internet Incubator — a facility to nurture early-stage Internet and electronic commerce businesses — will open in October at PANASONIC TECHNOLOGIES, INC.'s Panasonic Digital Concepts Center in Cupertino, California. The idea behind the Panasonic Internet Incubator is to help start-ups get their businesses off the ground by making available to them space within PDCC's 15,000- square-foot facility, business services and a wide range of business development resources. The incubator also gives MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. the opportunity to evaluate firsthand technologies that might be of interest to it. PDCC — which was established to make investments to advance the development of next- generation digital, networking and Internet technologies, products and services (see Japan-U.S. Business Report No. 350, November 1998, p. 5) — has room for as many as 15 early-stage firms. Five already have been selected, including a firm that has developed enterprise software that provides real-time customer data analysis.

Even before it decided to concentrate its financial resources on promising Internet firms, SOFTBANK CORP. had interests in more than 100 such businesses. Now that the company has refined its focus and can access a pair of venture capital funds set up specifically to invest in Internet firms (see Japan-U.S. Business Report No. 358, July 1999, p. 6) as well as its own funds, this number is certain to grow rapidly. In fact, three additions already have been made to the total. For starters, Softbank itself agreed to invest $91 million in MORNINGSTAR, INC. to help the Chicago-based investment information and services firm enhance the content and the technology supporting Morningstar.com. The deal will give Softbank a 20 percent stake in the private company. Morningstar's on-line investment information site is designed to provide unbiased data, research, news and analysis for both individual investors and institutional customers. Softbank's investment decision no doubt grew out the joint venture it formed last year with Morningstar, the developer of the five-star mutual fund rating system, to make available to Japanese investors information on the performance of various mutual funds (see Japan-U.S. Business Report No. 347, August 1998, p. 29).

WEBHIRE, INC., the self-described leader in the business-to-business Internet recruiting marketplace, also has caught SOFTBANK CORP.'s attention. SOFTBANK CAPITAL PARTNERS LP is investing $20 million in the publicly traded Lexington, Massachusetts company. In addition, Softbank is acquiring a block of Webhire stock held by AMAZON.COM INC. Through these transactions, Softbank and its affiliates will own 39 percent of Webhire. The company currently helps more than 1,000 employers quickly and cost-effectively advertise job openings, attract and evaluate candidates and manage the hiring process. Webhire also manages and powers a number of Internet recruiting sites and job-posting sites. It will use the money from the Softbank investments to accelerate its Internet growth plans as well as to market its services more aggressively.

WEBVAN GROUP, INC.'s aggressive — and expensive — plans to bring on-line grocery shopping to 28 major markets around the United States over the next two years have created a lot of buzz about the Foster City, California company. But Webvan also has made a name for itself because of its ability to attract high-profile financial backers. These include SOFTBANK CORP. Funds affiliated with the company were initial investors in Webvan. SOFTBANK CAPITAL PARTNERS LP and two other well-known venture capitalists were the main participants in the latest round of financing, which raised $275 million for an aggregate total of nearly $400 million. The fresh capital will be used for Webvan's national expansion.

Buying flowers and gifts on-line is quickly developing into a big business. SOFTBANK CORP. hopes to benefit from that boom through a stake in 1-800-FLOWERS.COM, INC. As part of a private placement that raised a total of $102.6 million, the U.S. venture capital unit of SOFTBANK HOLDINGS INC. put up $40 million for a 6 percent interest in the Westbury, New York e-commerce provider. 1-800-FLOWERS subsequently filed to go public. Its IPO raised a net $117.2 million. Although the Internet is the company's fastest-growing sales channel, customers also can purchase products by calling toll-free or by visiting one of some 120 company-owned or franchised stores. For both the on-line and telephone businesses, roughly 1,400 independently owned florists help with fulfillment.

Although the scale of their activity is entirely different, other Japanese companies also hope that strategic investments will enable them to tap the technology and/or the financial potential of Internet businesses. For instance, NTT COMMUNICATIONS CORP., the long-distance and international carrier created through the July 1 breakup of NIPPON TELEGRAPH AND TELEPHONE CORP., was one of three firms that invested a total of $20 million in shares of COMMERCE ONE, INC.'s unregistered common stock after the Walnut Creek, California provider of e-commerce solutions closed its IPO. Commerce One will use this money, including the $7 million put up by NTT Communications, for general corporate purposes. Earlier this year, Commerce One and NTT announced a project to establish a business-to-business electronic marketplace (see Japan-U.S. Business Report No. 355, April 1999, p. 25).

In less than a year, EDOCS, which pioneered the market for electronic bill presentment and payment software applications, has raised more than $22 million, including $18.6 million in second-round financing from such investors as the American venture capital unit of JAFCO CO., LTD. The flagship product of Wayland, Massachusetts-based edocs is BillDirect, which allows billers to deploy and manage their own EBPP solutions to deliver personalized, interactive bills, statements and invoices through their own Web sites or Internet billing services providers. The U.S. arm of JAFCO, Japan's top venture capital firm, currently manages five funds with a combined capitalization of more than $350 million.

The U.S. unit of NIPPON INVESTMENT & FINANCE CO., LTD. joined INTEL CORP. and a big American venture capital fund in providing a combined $5.1 million for SIMPATA, INC., a provider of customizable, Internet-based employee administration solutions for small and midsize businesses. With a nudge from the trio of investors, the Fremont, California company was created recently through the merger of a firm that developed software-based benefits administration programs and one that offered Internet-based employee administration services. Simpata will use the new funds to expand its technology development efforts and to further develop its customer services infrastructure.

The fast-expanding on-line music and video retail business will have a new, heavyweight player early in 2000 when CDNOW INC., an Internet-based seller of these products, merges with COLUMBIA HOUSE INC. That direct marketer of music and movies, owned by SONY CORP. and TIME WARNER INC., has 16 million club "members," but it also operates a Web service. This site and CDNOW's will be linked, creating a customer base of some 4 million people. Sony and Time Warner will each have a 37 percent stake in the merged company. The balance will be held by Ft. Washington-based CDNOW, which has been losing market share to AMAZON.COM INC. The deal will do double-duty by giving media giants Sony and Time Warner bigger footholds in the on-line world.

JUSTSYSTEM CORP., the developer of the top-selling Japanese-language word- processing program, has agreed to license its search engine to WCOLLECT.COM, INC., an on-line marketplace specializing in authenticated fine art, entertainment collectibles and sports memorabilia. Concept Base, which is expected to be available to U.S. shoppers late this year, employs fuzzy logic to conduct searches rather than the keywords now typically used. At the same time, collectors in Japan will have access to WCollect.com's inventory of 100,000 collectibles. The Beverly Hills, California company believes that this expansion will generate revenues of $10 million to $15 million in the first six months.

As soon as yearend, an enterprising EXPRESSION TOOLS, INC. hopes to be shipping an English-language version of its Shade three-dimensional computer graphics package. The Fukuoka software developer plans to open a U.S. office and sign up a distributor for what it calls a very sophisticated 3D geometric modeling, rendering and animation program suitable for all levels of computer users.

An exchange rate of ¥120=$1.00 was used in this report.aaaaaa

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