NEC, Intel link Net provider services

TOKYO -- Japanese computer giant NEC Corp and Intel Corp, the world's biggest computer chip maker, announced Wednesday they are joining forces to offer Internet provider services, which both companies expect to power future growth.

NEC said it had agreed with Intel (Nasdaq:INTC), which is fast diversifying into Internet services, to use the U.S.-based chipmaker's global Internet networks and facilities.

The deal will give corporate customers of NEC's Internet online service "Biglobe" access to global markets as they strive to expand their e-commerce businesses. In return Intel will get access to NEC's extensive domestic networks and expertise in systems integration.

"It (the pact) will provide us with substantial backup facilities and large leeway as we try to cope with expected explosive growth in e-commerce in Japan," Koji Nishigaki, NEC president, told a news conference.

Intel will open a data centre in Japan by early next year at a cost of about $100 million, Intel said. It is investing over $1 billion to set up data centres around the world within the next two to three years.

NEC plans to provide Japanese customers with easy-to-use Internet terminals, which Intel plans to develop by the end of this year, the two firms said.

A ticket to the future
The announcement comes only a day after NEC outlined a sweeping restructuring plan aimed at repositioning it as an Internet-focused company.

"This is part of our efforts to make Biglobe an open and global platform by making alliances with numerous companies," Nishigaki said.

On Tuesday, Nishigaki said NEC wants to make Biglobe the driving force behind its foray into the Internet, gathering 10 million subscribers by 2002, up from 2.72 million now.

NEC is following the lead of rival Fujitsu Ltd, which has reengineered itself into Japan's biggest Internet service provider and seen its share price surge as a result.

For Intel, the move is another step to diversify beyond its core but slower-growing microprocessor business into the Internet hosting service sector.

Its Intel Online Services is an outsourcing service for small and medium-sized firms needing help to set up electronic commerce businesses over the Internet.

Besides NEC, Intel has struck a slew of partnership deals for its Internet hosting service, including with Citigroup's unit e-Citi and Internet media company ExciteAtHome Corp's Shopping Service.

Turning NEC around
Embattled NEC, which last year posted a net loss of 158 billion yen ($1.48 billion), announced on Tuesday that it would take a 100 billion yen charge to overhaul its operations and restructure its poorly performing home electronics business.

'With restructuring of loss-making businesses well on their way to solution, NEC, belatedly, has made clear its strategy that Internet will form the core of its business.' -- Takatoshi Yamamoto, an electronics analyst at Morgan Stanley Dean Witter

It also lowered its group net profit forecast for the current year to March 2000 to 10 billion yen from 25 billion yen, blaming poor sales of telecommunications equipment and a slide in memory chip prices. Tokyo-based NEC is Japan's largest computer chip maker.

Takatoshi Yamamoto, an electronics analyst at Morgan Stanley Dean Witter who rates NEC outperform, lauded the action being taken by the company to turn itself around.

"With restructuring of loss-making businesses well on their way to solution, NEC, belatedly, has made clear its strategy that Internet will form the core of its business," Yamamoto said.

NEC shares finished down 1.16 percent or 35 yen at 2,115 yen on Wednesday. The stock has more than doubled in value since the beginning of the year, exceeding the Tokyo Stock Exchange Electronics Machinery Index's 55 percent gain.