Japan’s Top Online Service Becomes a Fujitsu Subsidiary

Japan’s largest Internet service and proprietary
online content provider, NIFTY-Serve, will become a wholly owned subsidiary
of Fujitsu
Ltd. beginning in April.

Nissho Iwai Corp., one of Japan’s leading general trading companies, has
announced that on March 31 it will sell its entire 50 percent stake in NIFTY
, operator of NIFTY-Serve, to information technology giant Fujitsu
for 26 billion yen (US$220 million).

NIFTY Corp. was formed in 1986 (originally as N.I.F. Corp.) as a 50:50
joint venture between Nissho
and Fujitsu. The company began
marketing CompuServe access from Japan in March 1987, and launched its
NIFTY-Serve services the following month.

NIFTY-Serve signed up 500,000 subscribers in its first six years of
operation. It grew quickly from 1993, reaching 1 million subscribers in
April 1995 and 2 million in September 1996.

With 2.69 million members as of February 1999, NIFTY-Serve remains
Japan’s biggest online services provider, marginally ahead of its
long-time rival BIGLOBE (formerly
NEC PC-VAN), which reported 2.67 million members.

Nissho Iwai’s decision to pull out of NIFTY Corp. is part of a
restructuring drive aimed at reducing group assets by 1.6 trillion yen
(US$13.6 billion).

The group suffered an extraordinary loss in FY 1998 of 160 billion yen
(US$1.4 billion) on liquidation of a financial services unit.

Even with the 25.5 billion yen (US$216 million) profit from the sale of
its 10,000 NIFTY Corp. shares, as well income from the sale of its Osaka
head office and other properties, the troubled trading giant will post
an unconsolidated net loss of 44.5 billion yen (US$377 million) for FY

Nissho Iwai clearly was eager to sell its NIFTY Corp. shares before the
end of the current fiscal year, and Fujitsu was not the only prospective
buyer. The Japanese-language Mainichi Shimbun reported last week that
Nissho Iwai was negotiating with NTT
, which is interested in
obtaining a stake in a major Internet service provider as a means of
diversifying its services.

For Fujitsu, the acquisition represents a major opportunity to expand
its network business and create greater synergy between NIFTY-Serve and
its InfoWeb Internet access service.

“InfoWeb targets mainly corporate users,” said a Fujitsu spokesman,
“while NIFTY-Serve’s strength is its large pool of individual users. So
the two complement each other. By taking advantage of the strong points
of each service, we hope to strengthen our overall network services

To strengthen its content operations, Fujitsu is also expected to build
up the relationship between its NIFTY-Serve and its G-Search database
business affiliate.

NIFTY-Serve generated 43.1 billion yen (US$365 million) in sales in
fiscal year 1997 (through March 31, 1998). Revenues for FY 1998 are
projected to be about the same or slightly higher.

Earlier plans had called for NIFTY Corp. to go public by 2001, with
Nissho Iwai selling its shares on the open market. Fujitsu intended to
acquire just enough shares to make it the majority shareholder.

With the purchase of a 100 percent interest, however, its seems unlikely that
Fujitsu will proceed with the planned over-the-counter listing of NIFTY

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