NEC and China's Lenovo said Thursday they will join forces to create the largest personal computer business in Japan and are exploring a possible tie-up in global PC sales.
Lenovo will own 51 percent of the joint venture to be known as NEC Lenovo Group Japan. NEC Corp. will hold 49 percent. As part of the deal, NEC will receive Lenovo shares worth $175 million.
The venture gives Lenovo a bigger presence in Japan while bringing NEC greater economies of scale and potential profitability for its struggling PC business.
NEC now has about a one-fifth share of Japan's PC market while Lenovo, the world's No. 4 PC maker, has about a 5 percent share.
"It's crucial and very important for Lenovo's strategy to become the leading company in the PC industry," Lenovo CEO Yang Yuanqing told a joint news conference in Tokyo.
Lenovo has been expanding aggressively outside its home China market since acquiring IBM Corp.'s PC unit in 2005. Lenovo expanded into mobile Internet last year by launching its first smart phone and two Web-linked portable computers.
For NEC, whose PC business has been limited to the Japanese market, the venture could provide a bigger customer base to survive increased competition.
"Fast-growing Lenovo's partnership would boost our strength and would provide a new opportunity for our expansion in Japan and overseas," NEC President Nobuhiro Endo said.
The two companies, which will keep their separate brand names in Japan, have also agreed to explore further business cooperation in areas such as tablet devices and servers, while seeking a possible partnership in global PC sales, Endo said.
Hideyo Takasu, president of NEC Personal Products, will become president and CEO of the venture while Roderick Lappin, currently Lenovo Japan president, will serve as executive chairman.
"With the NEC partnership we will achieve a No. 1 market position in Japan and we are one step close to our ultimate goal" of leading the industry, said Lenovo's chief financial office Wong Wai Ming in a conference call with reporters.
Lenovo is the world's fourth-largest PC manufacturer behind Hewlett-Packard Co., Dell Inc. and Taiwan's Acer Inc. A combined Lenovo-NEC could rise to third place, though rankings are unclear until 2010 global sales figures are reported, Wong said.
The venture with NEC focuses on PCs but will include some products based on Google Inc.'s Android smart phone system, Wong said, without giving details.
Lenovo has seen its strongest sales growth in China, India and other developing countries while growth in North America, Japan and more mature markets has been slower.
The company, based in Beijing and in Research Triangle Park, North Carolina, said profits rose 45 percent over a year earlier to $77 million in the quarter that ended in September.
Earlier Thursday, NEC reported its net loss swelled to 26.5 billion yen ($323 million) in the October-December quarter from 9.6 billion a year earlier as companies held back from investing in technology services. Group sales for the fiscal third quarter fell 12.7 percent to 720.7 billion yen.
For the full fiscal year through March, NEC projects a net profit of 15 billion yen.
Associated Press writer Malcolm Foster in Tokyo and AP business writer Joe McDonald in Beijing contributed to this report.
- CEO Yang Yuanqing
- economies of scale