CEO Comment Volume 40, 2009.02
Financial Results for Q2 of Fiscal Year Ending June 2009 and Business Development
Favorable 2C (consumer) Businesses and Slumping 2B Solution Businesses
As approved at the special board meeting on February 5, we hereby announce the following revisions to our earnings forecasts for the second quarter (Q2) of the fiscal year ending June 2009. (Statement regarding the revisions to our earnings forecasts (consolidated & non-consolidated) the second quarter (Q2) of the fiscal year ending June 2009 [PDF/Japanese])
Hit by the drastic changes in the global economic environment that have occurred in the current term, the first fiscal year since we integrated the management of our group subsidiaries under the 2B solution businesses (targeted at corporate customers) in line with the reorganization of our business, we lowered our interim results forecasts due to sales in our 2B solution businesses not meeting forecasts and losses on the valuation of listed securities, although the portal/blog segment and the finance segment continue to grow favorably.
The highlights of our financial results for the second quarter of the fiscal
year ending June 2009 are summarized in the following four points.
1. Sales declined compared with the corresponding quarter of the preceding
year.
2. We returned to an operating income and ordinary income from losses posted
a year ago.
3. We continued to log a net loss.
4. We reiterated our financial results forecasts for the full fiscal year.
The biggest negative factor in our Q2 financial results is the decreased sales at DG Communications Inc., the Digital Garage Group’s largest sales driver in the solution business segment, which was dragged down by the advertising market.
Although the schedule for the sale of the shares held by DG Incubation Inc. has been delayed, the expansion of the Kakaku.com Group’s earnings drove the overall operating income growth of the Digital Garage Group.
We continued to log a net loss as the result of an extraordinary loss of 490 million yen, which included losses on the valuation of listed securities due to the rapid degradation of market conditions. Partly because our solution segment originally emphasized the second half of a fiscal year due to seasonal factors, we intend to realize a more powerful synergy from the management integration focusing on cross-media functions, which is one of our strengths, in the current fiscal year ending June 2009.
The Kakaku.com Group is gaining more support due to the shift of individual purchase tendencies under the current economic recession and this trend is continuing to accelerate in the second half of the year (Kakaku.com’s Q3 financial results). In our incubation business, we will do our best to ensure income, targeting other goals that we could not meet in the first half at the same time.
The following are the highlights of our recent business activities.
[twitter]
The Digital Garage Group, the only Japanese company that is providing capital to Twitter Inc., announced a capital and business alliance with Twitter in January 2008.
We revealed the Japanese version of “twitter”, which we jointly developed with Twitter in accordance with the alliance, in April 2008. It has been reported that “twitter” hit the U.K. market and the number of accesses is increasing explosively. The position of “twitter” appears to follow Facebook and MySpace in the U.K.
The Digital Garage Group is exploring profitable models and accelerating the incubation of related businesses, starting with the development of the Japanese version of “twitter.” Meanwhile, CGM Marketing Inc. started its official site "IKKO Style" by leveraging "twitter" on December 10 as a communication site for fans of Japanese make-up artist IKKO. We are expecting the site to be enhanced through a joint promotion with existing media slated to start in February.
As a business model, we are planning to introduce fee-based services, sponsored advertisements, as well as product development and marketing based on communication with users of the site, for example. In respect to the site's content, we are planning to start the first Web TV broadcast by a member of the entertainment industry. Please expect the site to become a new profit source of the Digital Garage Group.
Recently, I increasingly feel that the global recession is rapidly spreading all over Japan. The Digital Garage Group, however, is sincerely handling its businesses with a view to further growing the favorable 2C (consumer) business segment and harvesting results from the 2B Solution business segment, which failed to meet expectations in Q3, in the second half of this fiscal year.
We sincerely appreciate your continued support and guidance for both the Digital
Garage Group companies and Digital Garage Inc.
