First to List on TSE's Mothers Exchange Score Bonus Buzz

Internet Research Institute -- "Everything on IP and IP on Everything" -- wants to apply Internet Protocol to every conceivable field. Owning several router and server operating technologies -- meaning Internet infrastructure, a lucrative area to be in at the moment -- IRI can deliver highly effective network traffic engineering. This ensures a smooth data flow without traffic jams -- essential for reliable connections, database services, and e-commerce.

IRI is targeting its services at telcos, network equipment vendors, government offices, distribution service companies, and financial institutions, and it's looking to form partnerships and joint ventures to help it along the way.

The company has three main lines of business. First is "Internet operations projects," which includes serving as an ISP for, primarily, telcos. Also falling under this category is network construction and operation, as well as consulting, for content providers, e-commerce merchants, and others.

In its advanced research operations, its second area, IRI undertakes research projects on the next-generation Internet, based on the national and local governments' science and technology plans.

The third area is product-development support, in which its test lab plays a central role. Its connectivity and performance-evaluation tests are in high demand among network equipment vendors.

IRI seems to be in the right place at the right time. So why is it listing on Mothers? "The Tokyo Stock Exchange is the center of the Japanese economy, and it means something to list there, at the heart of things," says president Hiroshi Fujiwara. "Also, it's good to stand out by being the first to list there. We have already built a low-risk business; we plan to use the funds raised to build a data center."

Liquid Audio Japan develops and sells systems for the delivery of music over the Internet. The company was founded in 1998 by Itochu and telemarketer Superstage, with an 18 percent capital participation by Liquid Audio, the US outfit that pioneered this biz.

Liquid Audio Japan's two main businesses -- software and services -- are both music related. Its software is used for rewriting audio data in the proprietary Liquid Audio format, distributing music files, and allowing end-users to download audio clips (including both freebies and purchases). With services, the company compiles sales data and creates reports for, say, music copyright holders.

The firm's core product, Liquid Server, records and warehouses files encoded with its Liquifier Pro software and supports hassle-free distribution of files. It also automatically generates marketing reports and listening and purchase logs and embeds digital watermarks in files to protect copyright. The client software, Liquid Player, comes with a host of security features to prevent illegal copying.

The company also customizes Liquid Player for kiosks and other applications. Its Liquid Player Pro is a mastering tool for recording from the original source (music CD, DAT, et cetera) onto hard disks. The system can combine audio data (even data recorded using different compression techniques), images from record jackets, lyrics, and program notes in the same file. It can also define distribution restrictions (within Japan only, for example) and limit the playback period (say, only during a special sales campaign).

So why did Liquid Audio Japan go with Mothers? "We had thought about making an OTC offering under the new 'venture company' criteria," says president Masafumi Ookanda. "But we decided if we could be the first to list there, we'd go with Mothers. We wanted to become a publicly traded company as soon as possible, since it improves our negotiating position vis à vis major recording companies."

Liquid Audio Japan's initial public subscription was ¥3 million, while IRI's was ¥11.7 million. According to an industry source, the price difference was due mainly to variations in the performance and potential of the two companies. IRI sales have increased steadily since its 1997 founding, while Liquid Audio was in the red from July to September last year. With regard to business potential, the source says IRI's business activities have been highly valued by the industry, owing much to the reputation of its president as a key figure in Japan's Internet R&D scene. Liquid Audio Japan, meanwhile, is "just a Japanese subsidiary of an American company."