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TOKYO -- Overhyped, overvalued and, perhaps, oversold? That's what investors currently holding Japanese technology and Internet shares are wondering as doubts over Japan's leading Net companies spread furiously in the wake of the recent routing of U.S. tech shares.

Shares in Net incubator

Softbank

, which has major stakes in a number of U.S. dot-coms, and mobile-phone-seller-cum-Internet-play

Hikari Tsushin

have been more than halved since hitting their highs in February. And while analysts had hoped Net bashing in Japan would subside when fiscal year 1999 ended March 31, it's only picked up steam.

Questioning whether Net firms will garner profits is a legitimate question, and in Japan's case, the answer will come over the next two months as earnings are announced. Unlike the U.S., where companies file quarterly earnings, Japan Inc. is only required to file half-year results, with most coming in May.

Softbank, which has a stake in

TheStreet.com Inc.

(TSCM)

through a U.S. unit, estimates net profits for fiscal 1999 will be 52.5 billion yen ($498 billion), a 320% increase from its previous tally of 12.5 billion yen. So why are investors crying? The source of the increase is worrisome, they say, since the firm generated cash by selling some of its stake in its units such as

Softbank Technology

and

Pasona Softbank

.

In addition, Softbank has been selling dud holdings in the U.S., including

TheStreet Recommends

Ziff-Davis

(ZD)

.

Commerzbank Global Equities Japan

estimates the company raised about 200 billion yen through the sales of stakes in units or wholly owned investments. This will be allocated for new, and potentially risky, investments such as Softbank's planned buyout of the nationalized

Nippon Credit Bank

. For Commerzbank, the deal clouds the potential for Softbank's future revenue stream. The brokerage cut the company's rating to hold from buy in late March. Some find succor, however, in the fact that Softbank still holds a near 50% stake in

Yahoo! Japan

.

A darker cloud hangs over Hikari Tsushin, however. Investors liked Hikari because it garnered revenue from its core phone operations, even as it invested in Net firms. Now Hikari says its sales forecast for cell phones for the year ending Aug. 31 is falling by more than 12%, which will translate to a 13 billion-yen operating loss vs. a previous forecast of a 6 billion-yen profit for the first half.

Domestic investors aren't the only ones who are a bit scared. According to

Goldman Sachs

strategist Kathy Matsui, European investors are also shifting away from Japanese Net plays and into more stable and undervalued growth stocks. "Investors are likely to show a preference for those companies that can demonstrate solid, steady earnings growth over those companies that have high, but volatile, profitability," Matsui wrote in her latest report.

It's hard to peg a fair price for Japan's Net plays. Like valuing U.S. Internet companies, many don't know whether to look at cash flow or subscriber growth or some other benchmark. Until investors get comfortable with Net shares and valuations, they are looking towards blue chips that have revenue streams from a core business in addition to an Internet angle. Those companies include

Toshiba

,

NEC

(NIPNY)

and

Hitachi

(HIT)

. Toshiba hopes to see Internet-related profits emerge in 2003 as it increases sales from its core semiconductor and liquid crystal display (LCD) operations. The firm supplies chips to game consoles such as

Sony's

(SNE) - Get Sony Corp. Report

PlayStation2

, while LCDs are used in mobile phones and handheld computers.

Smaller picks include

Net One Systems

, a distributor for

Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

products and

Oracle Japan

. Although the recent tech bashing has damaged Oracle Japan, a unit of

Oracle

(ORCL) - Get Oracle Corporation Report

, to the tune of 20% over the past two months, the firm generates revenue from its software catered toward business-to-business and online financial firms.

Besides the May earnings period, Oracle Japan's 9.7 million-share offering April 28 will be the next litmus test for the appetite of Japanese Net shares. The firm is jumping from the over-the-counter market to the

Tokyo Stock Exchange's

first section.

Just like investors holding

Nasdaq

-listed shares, Tokyo will also have to tough it out until the Net storm subsides. And if you believe the leaders of Japan's Net wave are as sharp as everyone said they were only a few months ago, prices right now seem awfully cheap.