JIN-166 -- Watch What You Leave on Those Used PCs

J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the week's business and technology news

Issue No. 166
Wednesday, January 30, 2002


++ Viewpoint: Watch What You Leave on Those Used PCs
++ Noteworthy News
- Sony, Dentsu to Launch Broadband Communications Business
- UFJ Debiting Gaffe Causes Double Trouble
- With Foreign Minister Tanaka Gone, Will Ogata Get the Nod?
++ Events

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++ VIEWPOINT: Watch What You Leave on Those Used PCs

Throwing away a computer may be riskier than you think. At least two
cases of serious data leakage from used PCs were reported in the
Japanese press this month. Personal health information from several
health insurance associations was found on a computer in a used PC
shop in Nagoya, and a PC containing data from investigations done by
the Fukuoka Prefectural Police Department was found in a Fukuoka-area
store. The problem stems from people assuming that erased material
cannot be retrieved from a hard disk or from plain negligence.

The two incidents were reported in mid January. Since then, software
companies like Personal Media have been explaining to customers what
they have to do to ensure a hard disk is erased. "We have been
receiving a lot of inquiries mostly from government organizations,"
says Akira Matsui, head of the planning division at Personal Media.
The company says it has sold more than 10,000 copies of its
data-erasing software Disk Shedder in the two weeks since the news
from Nagoya and Fukuoka broke.

It's anybody's guess how many PCs are being thrown out or traded in
in Japan, but some industry watchers say about 8 tons of PCs are
thrown out every year. They say used PC shops probably handle a total
of 100,000 computers a year, or 1 percent of Japan's annual PC production.
These sources say the numbers are on the rise, and that's good news for
a relatively new market: data erasing software and services.

Reformatting a hard disk drive doesn't completely erase data.
Data still resides in the hard disk and can be reproduced with
data-restoring software. Some used PC shops say they confirm whether
data has been erased before they sell a PC, but "it is entirely up to
each shop's conscience to check," says Hisanori Tatae at Japan
Electronics Information Technology Industry Association.
About 50 percent of corporate PCs are owned by leasing companies, and
there's nothing forcing them to erase data, he adds. "That's why you
need to be responsible for erasing your own data."

According to Matsui, Personal Media's Disk Shedder overwrites a hard
disk with random numbers up to five times, preventing anyone from
restoring the data. The company says the software uses a
method recommended by the US National Security Agency. Personal Media
recently launched an English version of the software and is targeting

Some companies, such as Fujitsu Business System and Otsuka
Corp., are providing services to erase the data for you. The charge
is generally about 1,800 yen per PC. These companies also provide
services for recycling corporate PCs.

Used PCs have become more popular in Japan since it revised the
Energy Conservation Law in April 2001. The revised law requires PC
manufacturers to collect and recycle used corporate PCs. For
corporations, the law's requirements are nothing new; they had
been recycling used computers for decades, even before the law was
enforced. But the new law made corporations rethink their strategies.
If they were paying to get rid of their PCs, why not sell them?

Used PC shops make pretty good margins. Industry sources say even in
a competitive market, the shops report profit margins of 20-30 percent
of revenue; that's a lot higher than the margin on new PCs.

The Energy Conservation Law is expected to extend to privately owned
PCs some time in fiscal 2002, which begins in April. That's likely to
fuel more growth in the used PC market and in data erasing services.

-- Sumie Kawakami

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** Sony, Dentsu to Launch Broadband Communications Business

Extract: Sony and advertising giant Dentsu announced this afternoon
that they will develop a communications business for "the broadband
era." Dentsu will buy 40 percent of Sony's advertising agency
Intervision on April 1, the companies said at a press conference.

The company, which will be renamed later, will be capitalized at
240 million yen and have sales of 55 billion yen in the year through
March 2003, the companies said. They said the new company will focus
on "creating a new marketing model for the broadband era that fuses
the highly effective customer relations management made possible by
Internet interactive media with corporate and product advertising
approaches, equaling the creative strength employed in traditional
mass media."


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** UFJ Debiting Gaffe Causes Double Trouble

Extract: It took the new UFJ Bank, formed through the merger of Sanwa
and Tokai banks, just 13 days to make its first gaffe. A computer
glitch caused accounts to be debited twice for single
withdrawals in 180,000 cases last week, the banks said. It could
take several weeks to undo all the errors, a daily newspaper reported.

Commentary: As one of those 180,0000 double debits, I would like to
remind UFJ that they owe me 15,180 yen. Let's see how many days it
takes this megabank to pay me back. The clock's ticking...BR

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** With Foreign Minister Tanaka Gone, Will Ogata Get the Nod?

Commentary: The Japanese foreign minister is scheduled to meet Russian
Foreign Minister Igor Ivanov on Saturday. The problem is,
who is the Japanese foreign minister? Now that Prime Minister
Junichiro Koizumi has forced the colorful and controversial Makiko
Tanaka to resign, the person showing up to meet Ivanov on Saturday
-- Koizumi says he will make his choice by then -- will have a very
bright spotlight on them. J@pan Inc usually stays away from the
murky world of Japanese politics, especially when it comes to the
ridiculously complex network of personal relationships that is
working behind the scenes, but we'll cast our vote this time for
Sadako Ogata, the former UN High Commissioner of Refugees. You can
bet that Koizumi's cadre is busily phoning her in New York trying
to work out a deal. It would be nice to have a real diplomat in the
position and not another LDP old boy.

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Written by Bruce Rutledge (bruce@japaninc.com) and Sumie Kawakami

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