Lenovo, NEC Seal PC Venture

Lenovo Group Chief Executive Officer Yang Yuanqing (left) shakes hands with NEC President Nobuhiro Endo during a joint press conference in Tokyo Thursday. China's Lenovo and NEC said Thursday they will join forces to create the largest personal computer business in Japan.[Photo: Shanghai Daily]

Related: Lenovo and NEC Plan Joint Venture

Lenovo Group Ltd, China's No. 1 PC maker, announced Thursday it will invest US$175 million with NEC Corp to form a joint venture to sell personal computers in Japan, the world's No.3 PC market.

Lenovo will own 51 percent of the joint venture to be known as NEC Lenovo Group Japan, with NEC taking the balance. NEC has the option of selling its stake to Lenovo at the end of five years. As part of the deal, NEC will receive Lenovo shares worth US$175 million.

It's the biggest international expansion for Beijing-based Lenovo since its US$1.25 billion acquisition of IBM's PC unit in 2005.

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

The deal marks the latest move for Lenovo, which holds the No. 4 spot in the global PC market, to expand its overseas business and challenge market leaders Hewlett-Packard, Dell and Acer. A combined Lenovo-NEC could rise to third place, though rankings are unclear until 2010 global sales figures are reported, Lenovo's Chief Financial Officer Wong Wai Ming said in a conference call.

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 is Japan's biggest PC brand with an 18 percent market share, according to research firm Gartner.

For NEC, whose PC business has been limited to the Japanese market, the venture could give a bigger customer base to survive 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.

"It's a key step for Lenovo to grab market share in mature markets like the US and Japan," said Li Jun, president of CCID Consulting, a Beijing-based research firm.

Earlier this month, Lenovo launched its LePad in the United States to challenge Apple's iPad.

In the domestic market, Lenovo had a 28 percent of the market by the end of third quarter, down from 35 percent several years ago, research firm IDC said.