Lenovo laptops at an exhibition in Beijing. Lenovo said it will have a 51 percent stake in a new PC production venture with NEC. [Photo / China Daily]

Deal could help China's largest PC maker to close the gap with rivals

BEIJING - The Chinese computer maker Lenovo Group said on Thursday that it will invest $175 million to form a venture with NEC Corp, as part of its effort to expand outside China.

The deal, if successfully concluded, is expected to help Lenovo to close the gap with rivals such as Hewlett-Packard Co (HP), Dell Inc and Acer Inc in the global PC market.

The world's fourth-largest PC maker said that it will give NEC 281.1 million new Lenovo shares, valued at HK$4.85 (62 cents) apiece, to buy a 51 percent stake in the venture.

Both companies will transfer their Japan PC assets to the venture, named Lenovo NEC Holdings BV, and NEC will own a 49 percent stake, according to the statement.

The partnership with Japan's biggest computer maker paves the way for Lenovo to expand in Japan, which is the world's third-largest PC market after the United States and China. Lenovo said on Thursday that it will take a 26 percent share in the Japanese market after the deal.

"The agreement with NEC is a perfect fit for our strategy," said Yang Yuanqing, chief executive officer of Lenovo. He said the two companies may also establish cooperation in other fields, such as cell phones and the server market, in the future.

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Lenovo had 10 percent of the world PC market in unit terms during the first nine months of last year, ranking it behind HP, Acer and Dell, according to data from the industry researcher IDC.

NEC had a global market share of 0.9 percent, compared with 18 percent for HP, the industry leader, according to figures from IDC.

"After the deal, we will become the top player in two of the world's three largest PC markets," said Wong Wai Ming, chief financial officer of Lenovo.

The two companies said they will keep their own brands and seek synergies by utilizing NEC's product-development capabilities and Lenovo's procurement resources, Lenovo said.

"It's a good deal for Lenovo, as many of its previous efforts to expand in Europe and the United States have failed," said Simon Ye, an analyst at the research firm Gartner. He said Lenovo may reduce its costs by integrating NEC's PC business.

Lenovo's core business was severely affected by the global financial crisis, as corporate customers reduced IT spending to cut costs.

However, business has been on the rise since last year, as robust demand from emerging markets and a series of cost-saving measures helped to offset declining sales in developed markets.