Lenovo planning smartphone venture in expansion drive

Tue Jun 4, 2013 7:40am EDT
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By Lee Chyen Yee and Umesh Desai

SINGAPORE/HONG KONG (Reuters) - China's Lenovo Group Ltd, the world's No.2 PC maker, is in detailed discussions on a smartphone venture with NEC Corp, a Japanese partner in PCs whose mobile business is faltering, as it eyes partnerships and acquisitions to expand in high-growth markets.

Lenovo has been aggressively forging deals over the past eight years to gain prominence in PCs, and that strategy is now shifting to smartphones, tablets and enterprise computing as PC shipments decline.

Lenovo CFO Wong Wai Ming and other executives met on Tuesday with investors in Singapore to drum up interest in a bond issue that investors say could raise $500 million or more and help to fund a renewed acquisition drive, possibly including IBM Corp's low-end server business.

"It has significant equity and is a net cash company. They can easily raise $3 to $4 billion for acquisitions, including $1 to $1.5 billion debt," said analyst Warren Lau of Maybank Kim Eng.

Lenovo said on Tuesday that it was in talks over a smartphone venture, without naming its potential partner, while a source familiar with the situation said NEC and Lenovo had moved into detailed discussions on a joint venture although nothing had been finalized.

NEC has been in talks with Lenovo since early this year on a possible sale or tie-up involving its mobile unit, according to media reports and a source familiar with the discussions.

An NEC spokesman declined to comment on Tuesday on the possibility of a mobile joint venture with Lenovo but acknowledged the troubles that unit is facing.

"Our mobile phone business is in a difficult state and we acknowledge that we need to decide on a direction for the business. For that, we are considering various opportunities."   Continued...

Lenovo tablets and mobile phones are displayed during a news conference on the company's annual results in Hong Kong May 23, 2013. REUTERS/Bobby Yip