Lenovo in Talks to Buy NEC's Mobile Phone Unit: Report

Lenovo, which reportedly was interested in buying BlackBerry, is talking with NEC to acquire that vendor’s mobile phone business, Reuters reports.

PC maker Lenovo, which has been rumored to have an interest in buying embattled smartphone maker BlackBerry, reportedly is in discussions with NEC to acquire its mobile phone business.

Japan's NEC, which has seen its mobile phone fortunes fall in recent years, also is talking with other vendors about buying the struggling mobile phone unit, according to a March 29 Reuters report.

Quoting an unnamed "source familiar with the discussions," Reuters reported that NEC officials are looking at a number of options for its mobile phone business, which has been losing money over the past two years. The source's comments confirm earlier media reports of talks between the two tech giants.

"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," NEC officials reportedly said in a statement through the Tokyo Stock Exchange March 29.

Apple with its iPhone and Samsung with its array of Galaxy smartphones—including the upcoming feature-loaded Galaxy 4 S—are the dominant players in the booming smartphone space. They're followed by a number of device makers who are looking to get some traction in the market, from HTC to Nokia to BlackBerry, with its new BlackBerry 10 platform and Z10 device.

Lenovo also has been rolling out new devices. In August 2012, analysts with Technology Business Research noted that they expected the world's second-largest PC maker to continue sacrificing profits to gain greater share in the smartphone space, which the company entered in 2010.

At the 2013 Consumer Electronics Show in January, Lenovo unveiled six new phones, including the flagship K900, a device that is powered by Intel's Atom chips and runs Google's Android mobile operating system. Lenovo has been among the initial smartphone makers to adopt Intel's low-power Atom processors for any of its devices.

Over the past few months, reports have circulated that Lenovo was interested in buying BlackBerry, the once mobile phone king that has since seen its fortunes wane with the rise of iPhones and smartphones running Android. Lenovo Chief Financial Officer Wong Wai Ming told Bloomberg earlier this year that his company was weighing a number of possible acquisitions, with BlackBerry being one of them. Lenovo officials soon disavowed any interest in BlackBerry, but the issue made headlines again in early March when CEO Yang Yuaqing told a French financial newspaper, Les Echos, that a deal for BlackBerry "could possibly make sense," though he would first have to assess the market and BlackBerry's place in it.

Now NEC is in Lenovo's sights. According to Reuters, NEC officials in the past have said the mobile phone unit was a key part of their larger technology business, but that in October 2012, the company pared down the projected number of phone sales for its fiscal year that ends this month, from 5 million units to 4.3 million. Japanese device makers have had trouble gaining footholds in markets where Apple and Samsung are strong, and also are seeing growing competition from Chinese competitors.

Another indication of NEC's intent to exit the mobile device market is reported plans by the company to sell NEC Mobiling, its mobile services subsidiary, for up to $850 million, Reuters reported, quoting other unnamed sources.

This wouldn't be the first time Lenovo and NEC worked together in the tech industry. In 2011, the two entered into a joint venture to help both vendors better compete in the PC market.