By Juro Osawa
TOKYO—Hoping to put another notch in its belt after its high-profile 2004 purchase of International Business Machines /zigman2/quotes/203856914/composite IBM -0.13% Corp.'s personl-computer operations, China's Lenovo Group Ltd. is in talks with Japan's NEC Corp. over what could be a large-scale tie-up, a person familiar with the matter said Friday.
While the person didn't specify what type of tie the two companies are discussing, any alliance would come as the companies' PC businesses are heading in different directions. NEC's once-substantial share of the global market has shrunk to insignificance, while Lenovo is an up-and-coming challenger, albeit with little presence in Japan.
"We do not comment on rumors or speculation," a Lenovo spokeswoman said.
Lenovo held about 8% of the global PC market by units in 2009, according to research firm IDC, putting the computer maker in fourth place behind Hewlett-Packard /zigman2/quotes/209685666/composite HP -0.25% Co., Dell /zigman2/quotes/203822527/composite DELL -0.99% Inc. and Acer Inc. NEC's once-flagship PC business was in 12th place with a 0.9% share—down from 11% in 1995, before fierce price competition from newcomers in Asia upended the market.
NEC does maintain a solid customer base in Japan, however, where it remains a leader in PCs with 18% of the market in 2009.
For NEC, a partnership with Lenovo would be a major step in its effort to realign operations and concentrate more investment on key areas in its information and communication businesses, such as cloud computing and next-generation telecommunications infrastructure.
As part of that effort, NEC last year merged its mobile-phone handset business with those of Hitachi Ltd. and Casio Computer /zigman2/quotes/202492162/delayed JP:6952 -0.53% Co. to create a single cellphone company. Also last year, its NEC Electronics semiconductor unit merged with Japanese chip maker Renesas Technology to form Renesas Electronics /zigman2/quotes/203872935/delayed JP:6723 +1.94% Corp. NEC, which had a majority stake in NEC Electronics, owns 34% stake of the new entity.
A partnership with Lenovo would spur hopes that the Japanese company could take advantage of Lenovo's client base in China to expand its information-technology services there, said Mizuho Investors Securities analyst Yuichi Ishida .
The Nikkei newspaper reported Friday that NEC is in the final stages of talks with Lenovo to join forces in the PC business by setting up a joint venture, and that Lenovo is likely to take a majority stake in it. The newspaper also said they are looking to work together on parts procurement and sales.
Investors warmly received reports of the tie-up. NEC's shares rose 2.1% to 244 yen ($2.95) in trading on the Tokyo Stock Exchange Friday. Lenovo shares fell 0.6% to 4.69 Hong Kong dollars (60 U.S. cents) on the Hong Kong Stock Exchange.
NEC said its PC business is profitable, but doesn't disclose figures. It forecast that revenue for the segment that includes PCs will rise 4.1% to 474 billion yen ($5.72 billion) in the fiscal year ending in March. That would represent about 14% of the company's 3.3 trillion yen forecast for group revenue.