Lenovo acquires its NEC JV stake, carrying on PC-centric strategy

A model displays an NEC notebook computer at an industry expo in Tokyo. [Photo/Agencies]

The company will continue its PC-centric strategy

Lenovo Group Ltd, the world's largest personal computer maker, will spend about $195 million to acquire its PC joint venture with the Japanese company NEC Corp.

The deal highlights the Chinese tech giant's determination to rely on the PC business for growth, despite the continuing decline in global PC shipments.

Lenovo will buy a roughly 44 percent stake in Lenovo NEC Holdings BV, a joint venture established five years ago, NEC said on its official website. NEC will retain about 5 percent of the ordinary shares.

The venture has helped the Beijing-based company become the biggest PC maker in Japan.

Kanae Maite, a Japan-based principal analyst at Gartner Inc, said Lenovo owns 25 percent of Japanese PC market in 2015. "Its strong performance in both the consumer and the business PC arenas is a good reason for this deal."

Lenovo has a Japan R&D center that leads the design of the ThinkPad brand, which is a key for the company to maintain profit margins in high-end markets, he added.

The move is also in line with Lenovo Chairman Yang Yuanqing's strategy that the PC unit will continue to be the company's pillar business. "The global PC market won't go down forever. I believe it will maintain at about 250 million units a year," Yang said last month.

Financial reports showed that Lenovo derived 66 percent of its 2015 revenue from the PC business, but the profit margin was low. Other PC makers such as Dell Inc and HP Inc are scrambling to diversify their business into cloud computing and other areas. Lenovo also made similar moves, putting forward the devices plus cloud strategy.

But in Yang's view, hardware is the company's core competitiveness. "Cloud computing can generate some revenue, but it will be less than that from selling hardwares and devices," he said.

In the first quarter of 2016, worldwide PC shipments totaled 60.6 million units, marking a year-on-year decline of 11.5 percent. Lenovo performed better than the average, with a shipment of 12 million units, a decline of 8.5 percent, data from International Data Corp showed.

Jason Liu, an analyst at IDC China, said that despite the poor performance of the PC industry as a whole, niches such as laptop-tablet hybrid products are growing rapidly. "The future trend lies in leveraging cloud computing to connect smartphones, PCs and tablets," Liu added.

Lenovo to launch bendable smartphone

Lenovo Group Ltd aims to revive its faltering smartphone business with a handset that can wrap around a user's wrist.

The flexible device may come to market in the next five years, Lenovo's co-head of mobile business told broadcaster CNBC in an interview.

The Beijing-based company unveiled a concept smartphone, CPlus, last month. Its 4.26-inch display is bendable.

The move is Lenovo's latest push to differentiate its smartphones in a crowded market where products look and work mostly the same.

"It's hard to put an exact time frame on it. I think this is a product that could come to market in the next five years," said Aymar de Lencquesaing, co-president of Lenovo's mobile business group.

According to de Lencquesaing, one of the keys to commercialize CPlus will lie in how to achieve a balance between its "technology, novelty and price point".

In the first quarter of this year, Lenovo dropped outside the global top five smartphone vendors for the first time in four years, while smaller local players Oppo Electronics Corp and vivo Mobile Communication Technology Co Ltd are leaping forward.

Di Jin, research manager at IDC China, said flexible displays are likely to be a trend in the smartphone sector, given the rapid development of new materials.