Business

Lenovo, NEC form largest PC group in Japan

Posted January 27, 2011 7:39 a.m. EST
Updated January 27, 2011 10:40 a.m. EST

— NEC and Lenovo, the world's No. 4 PC manufacturer, are joining forces to create the largest personal computer business in Japan.

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.

"The new joint venture gives both Lenovo and NEC a unique opportunity to grow their commercial and consumer PC businesses in Japan, the third largest PC market in the world, through a stronger market position, enhanced product portfolios and expanded distribution channels," the companies said in a statement.

Lenovo, which bases most of its operations and does the majority of its business in China, 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 agreement with NEC is a perfect fit for our strategy. It reinforces our commitment to our core PC business while, at the same time, providing important new opportunities for growth in Japan,” said Yang Yuanqing, Lenovo's chief executive officer. “We have a long history of innovation in Japan and a firm commitment to the Japanese market. Now, we are combining our global strength and momentum with NEC’s market leadership. It is the perfect partnership for us and for our customers.”

According to the Kyodo News service in Japan, the Lenovo-NEC deal represents "the first full-fledged alliance between major Japanese and Chinese players in the information technology industry."

The deal was announced just hours after Lenovo's chairman said Chinese businesses are looking to expand to the United States. Liu Chuanzhi, the founder of Lenovo, brought the Chinese-based company to the U.S. when it purchased IBM's PC division in 2005. Now, Liu says further investment from China could be headed to the country where Lenovo operates its headquarters.

“Lenovo is the right partner at the right time for NEC, and we believe that we are creating a strategic relationship today that will benefit NEC and our customers for many years to come," said Nobuhiro Endo, president of NEC. “We believe this alliance will further reinforce and expand our PC business in Japan, upholding the NEC brand name, and will continue to provide Japanese PC users with products supported by high quality and service. Taking this strategic relationship as a first step, NEC will accelerate expansion of our IT business worldwide.”

Lenovo already operates a major research and development lab in Yamato, Japan. Its headquarters is located in Morrisville.

The deal may also be the first of several between the two companies.

"As part of this strategic alignment, Lenovo and NEC have also agreed to discuss further cooperation in other areas, including selling PCs and providing global support to Japanese companies operating outside of Japan (JOCs); developing, producing, and selling devices such as tablets; and selling additional IT platform products such as servers," the companies said.

Japanese media have speculated that NEC would use a partnership with Lenovo to help expand its own business in China.

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.

The announcement came after NEC reported a wider net loss for the most recent quarter. Its net loss swelled to $323 million in the October-December quarter.

Media reports had speculated about a Lenovo-NEC business deal for the past week.

The Nikkei business daily in Japan, for example, reported late Tuesday, "NEC, Lenovo reach basic agreement on PC joint venture."

NEC is the No. 1 PC maker in Japan, but in recent years, it has largely withdrawn from global competition.

The combined effort is expected to produce PCs at an NEC factory in Japan.