Unnamed sources have informed the Reuters news agency that Japan's NEC Corp. is currently in talks to sell its struggling mobile phone unit to its PC venture partner Lenovo. The company is also negotiating with potential domestic buyers as well.
The news is surprising given that up until now, NEC has stressed that its mobile phone unit was an important part of its overall operations. But sources claim that the company is shedding assets to bolster profitability after two years of consistent quarterly financial losses and a declining market share.
"Amid the rapidly changing market we are considering a number of ways to bolster the competitiveness of our mobile phone business, but nothing has been decided," a NEC representative said via the Tokyo Stock Exchange in response to the reports.
According to Reuters, Japanese phone makers are failing to gain traction overseas thanks to smartphone monsters like Samsung and Apple. On a local level, these two giants are even cutting into the company's market share while Chinese phone makers follow close behind.
In October 2012, NEC cut its mobile phone sales target for the fiscal year ending March 2013 from 5 million units to 4.3 million units. Meanwhile, the world's #1 or #2 PC maker Lenovo (depending on who you ask) is looking to expand its smartphone coverage, especially overseas.
Back in January, Lenovo Group Chief Financial Officer Wong Wai Ming said that the company was accessing potential acquisition targets and strategic alliances. There was talk that RIM would be one of those alliances given that Lenovo doesn't have a strong smartphone portfolio in North America. But the company followed up by dismissing the RIM topic as mere press chatter.
Although Lenovo does have a smartphone business, it's nowhere near the magnitude of Apple and Samsung. But as of last October, the company commanded 11.5-percent of the Chinese mobile market, filing in second place behind Samsung and ahead of Apple (11-percent), Huawei (9.9-percent) and Coolpad (9.7-percent).
"There is definitely a slowdown in the [PC] market in all parts of the world," said Milko Van Duijl, Lenovo's president for the Asia-Pacific and Latin America regions in a recent interview. "However, we are so strong in China that [it] was a good reason for us to expand into smartphones."
Lenovo currently hasn't provided any feedback regarding news of acquiring NEC's mobile phone unit. Meanwhile, sources claim that NEC is looking to sell its mobile services subsidiary, NEC Mobiling Ltd, for up to $850 million USD in a separate deal.