The Boston Globe from Boston, Massachusetts • 112

A4 THE BOSTON SUNDAY GLOBE JUNE 4, 1995 A REPORT ON NEW ENGLAND'S GROWING COMPANIES AMSwertag call for PC phone images Business Vivo Software sees a clear future in video conferencing By Ronald Rosenberg GLOBE STAFF Organogenesis' shares slide on negative Dorf man report NBC's financial correspondent Dan Dorf-man last week told his viewing audience to "beware of hype, it can turn into hell." Dorfman was referring to Organogenesis the Canton biotech company that makes a human skin equivalent used for grafting. Dorfman said the firm's chief executive, Herb Stein, told him over breakfast in Febru- ary that Organogenesis would raise about $15 "hen Sarah Dickinson called British Telecom's headquarters near London, she could be seen and heard on an executive's desktop video Local Viewer Local Viewer -J sSrw T-rH VhwAppiicatioiH I Sj J7: A 4 I VrvoW) FiFADMf Djrl Vr-yA) iv I 4 At Lhjiu p'' pt 3 Meeting Maker XP jj i i'. tj VI M-H)Mi'f 4" II HI ij V- TSX Ji I Die Mil Call Transmit Options Window HH tTf -mi" mtmmm i miiwijiu immm mi gll kj' k.iu -A 1,11 1 rr-r fipcumfftt Troy A A A I A- "I id UVvN. i III I II SURVEY WW VMAROJ IM'VAVf Af1T conferencing system. And she stayed on screen while the executive walked down the hall to bring in a colleague into the discussion.

It was after-business hours overseas. So, when an elderly German cleaning lady happened into the office to empty waste-baskets, Dickinson tossed out a cheerful, American "Hello, how are you?" "She literally jumped and began screaming in German, dropped her cleaning supplies and, with this total look of terror, ran out of the room," recalled Dickinson, program director and video conference analyst with Personal Technology Research of Waltham. No doubt others will be scared too until desktop video conferencing becomes less like science fiction and more like daily technology. But one person's fear will be another's opportunity as video conferencing, once limited to large corporations using expensive room-sized systems, begins arriving at office cubicles and later in people's living rooms and dens. Vivo Software a 2-year-old tham company, wants to participate in the coming boom.

The company last month introduced a software-based system to turn a personal computer into a video-conferencing tool for a price well under what self-contained hardware-based systems cost Staffan Ericsson, Vivo's founder and president of the 30-employee company, says his short-term goal is to make the video phone the next multimedia accessory for the home computer, just like CD-ROM systems were last Christmas. "Maybe some parents will put it on their kids' computer when they go off to college, while others will use it as a way to keep in touch with grandparents, sort of a granny phone," he said. The 40-year-old Ericsson knows he's up against tough competition. Before founding Vivo in 1993, he spent six years at industry pioneer PictureTel Corp. of Danvers.

PictureTel which made its name in high-end, business-conference- GLOBE STAFF PHOTO JANET KNOTT Staffan Ericsson, president of Vivo Software, is pictured with photographer in the video image created by his product million by spinning, off a portion of a subsid- iary. But Dorfman said the company, in a "sea of red ink," has failed to do that and now Stein won't return his phone calls. Dorfman also contended there were phony rumors of a buyout by Pfizer the pharmaceutical giant And he said Evan Sturza of Sturza's Medical Investment Letter believes theitock will plummet because there are less expensive alternatives already on the market tojQrganogenesis' lead product tAq Organogenesis spokesman declined to cotnqient, saying the company has already addressed the issues. Organogenesis' stock dropped two points sindHhe Dorfman report Thursday, to close at 10 oh Friday. Ahead Inc.

in pact with IBM Ahead the Bedford maker of multimedia products, last week said that it has entered into an exclusive distribution and licensing agreement with IBM for its "virtual guitar." IBM has the North American, South American and European licensing rights to Ahead's year-old "Quest For Fame" PC CD-ROM title, a fantasy game with a simulated guitar pick that can be "strummed" against any solid surface, such as a tennis racket The game features Boston rock group Aerosmith. Ahead chief executive Bradley J. Naples said the announcement reflects a new marketing strategy: The company will focus on developing software, while forming partnerships to handle distribution. TCC buys subsidiary Technical Communications Corp. of Concord last week purchased Datotek, an subsidiary based in Dallas, for less than $5 million in cash and debt financing.

Specific terms of the deal were not disclosed. Datotek's revenues last year were $7.5 million. TCC designs cryptographic devices and secure communication systems for military, governmental and commercial customers. Datotek also makes communication encryption devices, primarily for foreign countries' armed services. Small-business hiring soars Small-business hiring in the first quarter was the strongest it had been in four years, according to a survey by the National Federation of Independent Businesses.

Nearly one-fifth of the 2,000 companies surveyed reported increased employment during" first three months of the year. Ajid wages gain 15 percent Cheaper by the year The average price of a desktop video conferencing system is expected to plunge in the next few years $1,700 units in 1997 and more than 3.8 million in 1999. The cost, she said, will drop to an average of $300 in 1999. Tiny Vivo, which shipped its first product in December, aims to meet that $300 mark by '97 and take market share away from the big boys in the meantime by using itsjess-expensive software technology. Most video-conferencing systems use hardware, in the form of special microprocessor cards that slip into a personal computer to handle the compression and decompression of images, data and sound.

Vivo's system uses software to harness the power of a computer's Pentium microprocessor to do the work. And it can piggyback on top of a computer's existing hardware to send faxes, connect to the Internet and share video images, data and EMERGING BUSINESS, Page A5 room systems and have both developed desktop video-conferencing systems for personal computers. And Intel anxious to sell more Pentium computer chips, has created its own video systems. Last year, PictureTel and Intel controlled about 85 percent of the worldwide desktop video-conferencing market, with British Telecom garnering 12 percent. But the overall market was small: Dickinson estimated that 28,000 units were sold last year.

And the price was high: PictureTel and units sell for between $2,500 and $3,000, Intel's for $999 to $2,500 and Vivo's for $1,500. In the coming years, Dickinson said, personal computer video- conferencing systems will take off. She projects sales of $900 $500 $350 $3Q' 1995 1996 1997 1998 1999. SOURCE: Personal Technology Research, Waltham US auto tariffs take back seat when East Asia is on board I arst-quarter net income and wages for I 'small businesses showed significant gains, according to a Padgett Business I I OKYO US Trade Representa- tive Mickey Ranter's promise to I I slap nearly $6 billion in punitive I I tariffs on Japan's luxury car ex-LJ ports unless the country rapidly opens up its automotive markets has hardly been driving the Japanese to distraction. In fact, what's perceived here as America's trade belligerence is spurring some painfully polite conversations about what has been described as "the world's most important economic relationship." "For many years, America has been Japan's most important trading partner and customer," says a senior staff mem By Michael Schrage ber at Japan's sential role that Japanese affiliates played in East Asia's exports of some $205 billion worth of goods to both America and Japan last year, it's clear that the 1990s are seeing one of the most profound shifts in trade flows in the past 50 years.

"In economic terms, East Asia has become the most important region in the world for Japan," old Japan hand James C. Abegglen, chairman of Gemini Consulting, insisted in recent comments here. "First, East Asia is now Japan's largest market Second, East Asia is where Japan's companies will make their manufacturing investments. Half of the overseas employees of Japanese are now in East Asia, and 40 percent of Japan's manufacturing investments." Perhaps even more significantly for Japan's burst-bubble economy, Abegglen noted, "East Asia is where Japan's companies enjoy profits on their manufacturing investments. Mi ll's annual studies since 1985 show that Japan's manufacturing investments have made no profit in North America; made, but no longer make, some profit in Western Europe, and do very well in East Asia." Follow the money.

If you're a global Japanese enterprise, where do you invest for the economic dynamism, growth and profits of tomorrow? Do you really want to let trade conflicts with the United States take precedence over the development of new trade practices in Asia? The surging East Asian economies combined with a yen so strong that dollar bills shrink and cower in the exchange markets have transformed the way Japanese business now looks at the workL East Asia as much or more than America is becoming the touchstone of daily business practice. Four years ago, for example, Setsuya Tabuchi and Yoshihisa Tabuchi (who are not related) resigned in disgrace from the leadership of Nomura, the world's largest brokerage firm, in part because of the firm's alleged dealing with the head of the yakuza, Japan's mafia. This past month, the men were officially rehabilitated by Nomura managing director Atsushi Saito. "Big Tub" and "Little Tub," as they are known, were invited back onto Nomura's board of directors. Why? The Asian connection: The Tabuchis are said to be well connected in Vietnam and China.

"Why don't we make use of their diplomatic skills in Asia now that we see Asia I and China as the most important markets in our strategy?" Saito asked. If Asia doesn't offer a good business reason, then at least it offers a good excuse. Far more significant however, is the fact that Japanese companies are now cutting deals with East Asian firms that they would have studiously avoided just three years ago. Just two months ago, Nissan -one of the car companies that would be hurt by America's proposed tariffs said that it would form a joint venture with Samsung, South Korea's largest chaebol, or industrial group, to manufacture autos. Samsung will pay Nissan about $83 million in fees for the transfer of vehicle development and plant construction technology.

What's more, Nissan will get a 2 percent slice of the retail price of every vehicle sold. This goes wefl beyond the outsourcing of production that sends self-conscious cries about the "hollowing" of Japanese industry ringing though MITI and Japan's various chambers of commerce. Asian op portunities are forcing Japanese companies to re-evaluate their practices and policies about technology transfer and collaboration with their East Asian suppliers. What's more, Japan is truly seeing East Asia as a marketplace not just a source of cheaper production. The result is that new kinds of products are being explored and designed.

New kinds of innovations are emerging for the Asian marketplace, just as Japan's consumer electronics and automobile companies have successfully tailored products for the US and European marketplaces. In this context why should it be surprising that Japan has been so successful in enlisting the support of its East Asian cohorts in publicly opposing America's unilateral trade sanctions? Ironically -and sadly instead of isolating Japan by forging alliances with East Asian countries and companies that also have legitimate complaints about Japan's inappropriate trade practices, the United States has managed to successfully isolate itself in the eyes of East Asia. The United States remains, of course, overw helmingly important to Japan's economic future. But it is disconcerting to see that Japan seems to be a more effective participant in the most dynamic economic region in the world than is America. Where does a $6-b31ion tariff on luxury automobiles fit as a tactic to remedy that reality? Michael Schmge is a writer, consultant and research associate far the Sloan School at MIT.

He am be reached by electronic maH at tchragelatimes.com on the Inter net His column is distributed by the Los Angeles Times Syndicate. Services survey of 5,000 companies. Net income of companies with fewer than 500 employees increased 20 percent from the same period a year ago. Employees shared some of the fortune, with wages going up 15 percent the study found. The East led the nation in wage growth with a 17 percent increase, and the Midwest had the nation's largest jump in retail sales at 22 percent The West had a 32 percent increase in net income, and Southern companies posted a 14 percent rise.

TINACASSIIH Tte'Calendar The Bank of Boston will offer courses at the NeWUm Marriott and 100 Federal St designed to encourage export trade. The classes, available to companies of all sizes, will run Tuesday, Wednesday and Thursday. Each of the classes cost $75. For information, call 1-800-850-4579. The New England Non-Proflt Business Exposition wfll present more than 30 seminars Tuesday on nonprofit management issues.

The seminars, at 775 Commonwealth will cost $20 each and run from 8 un. to 5 pjn. Contact the New England Non-Profit Quarterly to register at 508-226-3661 The 9th annual New England Business Conference will be held from 7:30 a.m. to 5:30 pjn. Thursday at the Burlington Marriott with an dinner closing the day.

The conference wil include speeches by Steve Bernard, founder of Cape Cod Potato Chips, and seminars on "getting to the top." Ministry of International Trade and Industry. "So it may be appropriate for Japan to ask if America perhaps is too important a trading partner. Like the United States, Japan must carefully consider both its global and regional economic responsibilities and relationships. Today, all of our trade relationships no matter how important- exist in contexts that did not exist even five years ago. The future, therefore, will not be just an extension of the past" The most significant change, the MITI bureaucrat acknowledges, has been the breath takingly rapid rise of East Asian economies and Japan's involvement with them.

According to International Monetary Fund statistics, Japanese exports to East Asia rose from $85.2 billion in 1990 to more than $130 billion last year. By contrast, Japan's exports to America grew from $91 bfflion in 1990 to about $107 bil-bon last year. When one figures in the es.