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PACIFIC PARTNERS Japanese look to U.S. companies for 'multimedia' software


SAN JOSE, Calif. -- Like their American counterparts, Japanese computer and consumer electronics companies are counting on "multimedia" products to fuel a new round of sales growth -- and they are turning to U.S. firms for the software needed to bring the machines to life.

As a result, a Japanese multimedia software shopping spree is under way, not only in Silicon Valley but everywhere in the American electronics industry.

These deals involve every major Japanese electronics firm, along with American companies as big as Apple Computer Inc. and as small as the latest one-person garage start-up.

And while these partnerships raise familiar questions about American competitiveness in the '90s, early indications are that U.S. firms have learned some of the lessons from earlier work with the Japanese, and are much more reluctant to give away technology.

"There are several hundred Silicon Valley companies involved in multimedia, and I'd say a third of them are working with a Japanese company in one way or another," said Sheridan Tatsuno, of the research firm of NeoConcepts.

The deals haven't received nearly the attention of the moves by Sony or Matsushita in Hollywood or the music industry. But they are being done for some of the same reasons -- for example, to obtain the programming that will give consumers a reason to buy the multimedia devices pouring out of Japanese engineering departments.

"Multimedia" is an ambiguous and overused term, most often describing a new generation of computer and consumer electronics devices capable of mixing video and sound along with traditional computer applications. Everything from video telephones to software-rich home TV consoles to interactive movies and computer games can be developed.

In both Japan and the United States, multimedia is seen as a way of bringing new life to flattening sales and as a way for computer companies to enter large consumer markets.

Japanese firms, said Mr. Tatsuno, have an additional motivation: to keep a step ahead of competitors in Korea and elsewhere, who are making money out of the TVs and VCRs that were once Japan's cash cows.

But all of these devices require the kind of innovative software that has not in the past been the strong suit of the Japanese, forcing them to turn to the United States for the final missing piece.

In a typical example, NEC recently introduced a computer-controlled VCR targeted at professionals and "prosumers" -- high-end hobbyists and home users.

For a computer program that would control the device, it turned to Light Source Inc. of Larkspur, Calif., which specializes in that type of software.

With funding from NEC, three Light Source programmers developed the "NEC Video Sequencer," which Light Source owns and sells for $600.

It's common in this new round of U.S.-Japan deal-making for American companies to retain ownership of their products -- one reason the recent activity is not likely to raise quite the specter of a U.S. technology sellout.

Another reason is that U.S. companies are as keen on multimedia as the Japanese, and are making many of the same moves as those emanating out of Tokyo.

In addition, some of these deals with Japan are giving U.S. firms quick entree to huge consumer markets they might not otherwise have access to because of the current American invisibility in consumer electronics.

Apple, for example, has grabbed headlines with its deal to supply the software for Sharp for a new generation of portable personal "organizers."

SMSG is another example. The 7-month-old -- and highly publicized -- joint venture between Time-Warner and Electronic Arts, an entertainment software company, is developing a controller box that will mix cable TV signals, advanced computer games, CD-ROM programs and more traditional computer fare on a home television set.

Because SMSG wants to unveil the product at next year's huge Consumer Electronics Show, it sold a 20 percent stake to Matsushita, the firm behind such brand names as Panasonic and JVC, which will manufacture the product.

Not only will SMSG retain ownership of the technology, but also it will be able to one day do its own manufacturing.

While the Japanese have been eager customers of U.S.-made computer software, observers say the Japanese will be even more interested in the United States as a source of programming for the multimedia machines they have planned.

Still, there is some question about how long the party will last. Will Japan catch up in software just as it did in cars, steel, semiconductors and other areas?

"There's no question that Japanese companies are dependent now on the United States for software," said Allan Ayars, president of Interactive Media Technologies, Inc. in Scottsdale, Ariz. "The only question is how long will that last. It could be as little as two more years."

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