Chinese PC manufacturer Lenovo will invest $175 million in a joint venture with Japan's NEC to sell computers in Japan.
The plan is to help Lenovo, the world's No. 4 computer maker, outpace global market growth.
From Lenovo's official statement:
The new joint venture combines NEC’s market reputation, product development capabilities, well-regarded customer service and knowledge of customer needs in Japan with Lenovo’s heritage of technology expertise, strong global business momentum, and global supply chain reach. It will give customers in Japan more innovative products that are faster to market, more attuned to their needs, and competitively priced.
The key term here: scale. NEC is Japan's most popular PC brand, with 18 percent market share, according to Gartner.
Interestingly, the venture will materialize as a new company, "NEC Lenovo Japan Group." Lenovo will own 51 percent of the company, NEC will own the rest, and the latter will have the option to sell that stake back to Lenovo after five years.
NEC chief executive Nobuhiro Endo said in a Reuters report that there are no plans for a reciprocal deal, in which it sells NEC-branded computers in China.
More points about the deal:
- Japan's homegrown brands have successfully resisted challenges from foreign brands such as HP in their local market.
- This is another move by Lenovo to keep pace with Taiwanese rival Acer.
- The hardware business comes with extremely thin margins. That gives companies two options: scale up or diversify into services, as HP and Dell have done.
The companies have also agreed to discuss further cooperation in other areas. Of note: developing, producing, and selling devices such as tablets; and selling additional IT platform products such as servers.