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Lenovo, NEC Form PC Joint Venture in Japan

The deal will enable Lenovo to make in-roads into the Japanese market, and both companies will be better positioned to challenge HP and other majors competitors.

Japanese and Chinese electronics firms NEC Corp. and Lenovo Group on Jan. 27 announced they will form a personal computer joint venture in Japan, as they take on global giants such as Hewlett-Packard.

The deal will enable China-based Lenovo to make in-roads into the Japanese market, and both companies will be better positioned to challenge the computer titan HP and other majors, analysts and business media said.

Multinational Lenovo will take a 51% stake in the company, called NEC Lenovo Japan Group. NEC will hold 49%.

"The agreement with NEC is a perfect fit for our strategy," Lenovo chief executive Yang Yuanqing said. "It reinforces our commitment to our core PC business while, at the same time, providing important new opportunities for growth in Japan."

The leaders in their respective domestic PC markets will immediately start cooperating in manufacturing, development and sales, the statement said.

NEC controlled about 18% of the Japanese PC market in 2009, but globally it came in 12th with a share of less than 1%, the Nikkei business daily said last week, citing data by IDC intelligence firm. Lenovo, which bought IBM's PC business in 2004 for $1.25 billion, had roughly 27% of its home market and was ranked fourth in the world with a market share of about 8%.

"Lenovo is the right partner at the right time for NEC," said NEC president Nobuhiro Endo, after the Japanese firm reported its net loss in the October-December quarter almost tripled from a year earlier to 26.5 billion yen ($322 million). "We believe this alliance will further reinforce and expand our PC business in Japan ... Taking this strategic relationship as a first step, NEC will accelerate expansion of our IT business worldwide."

The deal comes as Lenovo pushes to diversify its business into new product types such as smartphones and tablet computers, amid huge global demand. Yang said that the two firms would potentially be able to tie up in the smartphone area too. "But both Endo-san and myself think this is the first step to form this joint venture -- we must ensure we will be successful in integrating two PC businesses together," he said. "Then, we could discuss another cooperation including smartphones or other areas."

Copyright Agence France-Presse, 2011

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