How ASCII's President Lost Control of His Own Company
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Kazuhiko Nishi, a prominent figure in the Japanese software industry, stepped down on June 26, 1998 from the president's seat of ASCII Corporation--the company he founded in 1977 with some college friends--and was forced to take responsibility for his company's debt of 13.2 billion. He is now a common member of the Board of Directors of ASCII.
by Yaeko Mitsumori While speaking with Computing Japan, he was mum about the events leading to his resignation. But when reviewing the highlights of his halcyon days in the '80s, he says he enjoyed riding the surf while the surfing was good. Since Japan is suffering through a nasty storm these days, he says he feels he needs to wait until the weather clears. "When the sea is calm, five people can ride on a raft, but with weather like this, only three can safely ride on that raft," muses Nishi. "So we have to ask the other two people to get off. If we kick them off, maybe we'd be charged with murder. So we provide emergency food and life jackets, and wait until things clear up." Since he has more free time after his dressing-down at ASCII, he has been giving back to a new generation by teaching at the Tokyo Institute of Technology, Waseda University, and at Shobi Junior College. Nishi attributed ASCII's poor business performance and swollen debt -- 44 billion in losses in fiscal 1997 -- to the depressed mood at the turn of the millennium. He believes that when the 21st century dawns, people's uplifted moods will boost the economy. On the other hand, Nishi predicts that the software business in Japan will become much worse next year, and small businesses in particular will go bankrupt, one after another. When the economy recovers after 2001, the surviving companies will see great gains, but only the three largest companies will be able to survive, Nishi predicts. ASCII suffered troubles three times before, in 1992, 1996, and 1997. Each time Nishi weathered the crisis by the sheer force of his own personality, earning the nickname "favored son" for his mastery of dealing with Japan Inc.'s movers and shakers. In 1992 when a shortage of funds occurred, he won financial support from the Industrial Bank of Japan, reportedly by kneeling on the ground before Special Advisor Sohei Nakayama (Nishi denies this). In 1996 when four executives left the company and raised complaints against him, he was rescued by a group of supporters. In 1997 when the firm reportedly suffered from a lack of capital, he brought in funds from Isao Okawa, Chairman of CSK Corp. and Sega Enterprises, Ltd., making ASCII a member of the CSK Group. (Nishi, on the other hand, explained that he decided to join the CSK Group partly because he needed more money for R&D, and because he wanted to explore new markets by jointly working with CSK, which targets corporations, and Sega which targets families.) When ASCII received 10 billion in financial support from Okawa, some reports say relations between Okawa and Nishi were so close that they were like parent and child. Nevertheless, at the end of April 1998, Okawa took drastic restructuring measures and removed Nishi from his position as ASCII president. Nishi, however, insisted that this arrangement was a success, because by accepting support from CSK, ASCII was able to survive. "Because of this," Nishi says, "I can answer your questions right now. Since the storm is raging right now, we should wait until it passes. Meanwhile, we'll continue with some degree of business in order to avoid dying from a shortage of energy and oxygen." While he declined to talk about the reasons for the failure of his business, he is more than willing to discuss his plans for the education business. As mentioned above, he is teaching at three universities while also supervising ASCII's education business as the president of ASCII's Education Company. Nishi has led the Japanese software industry with his brilliant intuition since the early 1980s. Now, he looks determined to change the Japanese education system with his unique ideas and power to act. "A professor should not conduct an examination on his own students," Nishi says. "Instead, a different professor should conduct the test to evaluate the students' understanding on a fair basis." He is also promoting a new educational program where a sophomore stops attending classes at the end of his term, and is employed by a company for a couple of years. After gaining work experience, he would then continue his education at a college funded by the firm. To implement such a unique education system, Nishi is lobbying the industry, the academy, and the Education Ministry. He says that he is receiving a good reception from all sectors toward his new ideas.] ASCII entered the education business just three years ago and revenues from his side venture still account for only 10% of the total revenues of ASCII. However, Nishi predicts that profits will increase as by tenfold within the next 10 years. Regarding the future of the Japanese computer industry, he says that, since the use of PCs has diversified, interaction between computers and other machines/devices will increase, and the man-machine interface will have more importance in the years to come. He feels that digital consumer electronics is a field with much potential for prosperity.
"JustSystem failed because it focused on software that only targeted the Japanese market," he says. "On the other hand, Japanese game software is successful because they are selling all around the world. Export is the key for success [for the Japanese software industry]." He adds that Japan does have advanced software in certain areas such as CAD (computer aided design).
When asked what advice he would give to the young who want to start a venture business, he carefully ponders for a moment, then says, "They should prepare well before they launch a business. One option is, after gaining management experience at a small business for at least 10 years, they can break out and start their own business. Another option is to start a business with a good advisor who will grant advice to the entrepreneur in the course of running the business."
ASCII revealed its reconstruction plan in April of this year. Under the leadership of the new president Norikazu Suzuki, the firm will focus on its main business domain -- publishing, games, and education, while asking banks to convert their debts to convertible bonds (CB). (They are requesting that the banks convert 70% of the total 32 billion bank loan to CB, and the remaining into long-term loans.) The Industrial Bank of Japan, ASCII's main lender, has accepted ASCII's request, but still pending are negotiations with six other banks. Even if these banks accept ASCII's terms, ASCII still has to buy them back if the banks do not change those CBs into ASCII stock because of bearish stock prices.
Yaeko Mitsumori specializes in information and telecommunications. She can be reached at dt4y-mtmr@asahi-net.or.jp.
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