NEC, Lenovo Join Forces to Create Japan's Largest PC Group

China’s computer giant Lenovo and Japan’s No. 1 PC manufacturer NEC Corp., have announced a strategic partnership to create a joint PC venture between the two companies.

According to the partners, this new PC group will be the largest in Japan. By joining forces with expanded distribution channels, the new joint venture gives both Lenovo (News - Alert) and NEC a unique opportunity to grow their commercial and consumer PC businesses in Japan, the third largest PC market in the world. The transaction is expected to close by June 30.

The new joint venture will be known as NEC (News - Alert) Lenovo Group Japan. By combining NEC’s product development capabilities, and excellent customer service and knowledge of customer needs with Lenovo’s heritage of technology expertise, strong global business momentum, and global supply chain reach, the new company will give customers in Japan more innovative products that are faster to market, more attuned to their needs, and competitively priced, said the partners.

In this deal, Lenovo will own 51 percent of the joint venture and NEC will hold 49 percent. As part of this agreement, 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.

At a joint news conference in Tokyo, Lenovo CEO Yang Yuanqing, said, "It's crucial and very important for Lenovo's strategy to become the leading company in the PC industry."

Lenovo has been expanding aggressively outside its home China market since acquiring IBM (News - Alert) Corp.'s PC unit in 2005. Lenovo expanded into mobile Internet last year by launching its first smartphone 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.

“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. He added, “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.”

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. In addition, the two will also explore Google Android (News - Alert) based smartphones.

Hideyo Takasu, president of NEC Personal Products, will become president and CEO of the new venture while Roderick Lappin, currently Lenovo Japan president, will serve as executive chairman.

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