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Lenovo, buoyed by a financial quarter that saw a 20 percent revenue jump in its PC business, is buying a controlling stake in Fujitsu’s troubled PC business.
The two companies announced Nov. 2 that they, along with the Development Bank of Japan, are creating a joint venture around Fujitsu’s PC business, with Lenovo buying a 51 percent stake for $157 million and the bank buying another 5 percent.
The joint venture will continue to be known as Fujitsu Client Computing Ltd. (FCCL) and products will continue to carry the Fujitsu name. Kuniaki Saito will remain the representative director and president once the joint venture launches.
The move comes as Lenovo looks to bolster its PC business. The company earlier this year was displaced by HP Inc. as the world’s top vendor in a PC market that has seen shipments slow over the past several years, but that is beginning to see signs of stabilization.
Lenovo saw the fortunes of its PC business rise in the most recent financial quarter, with revenue hitting $8.4 billion, a 20 percent increase over the same time last year. The company’s PC and Smart Devices business group includes not only PCs, but also tablets and smart devices.
However, the company’s mobile business has been essentially idling in neutral since Lenovo spent $2.9 billion in 2014 to buy Motorola from Google, although there was a slight revenue bump in the past quarter thanks in large part to momentum behind its Moto-branded smartphones, according to company officials. According to Bloomberg, Lenovo CEO Yang Yuanqing is taking costs out of the mobile business and may have seen buying a stake in Fujitsu’s unit as a way of bolstering its PC efforts.
The global PC market has been in slump since late 2011, hindered by the popularity of other devices such as smartphones and tablets. This has extended PC buying cycles among both consumers and business users, although analysts point to such factors as 2-in-1s PCs and the Windows 10 refresh cycle as reasons why there are signs that the PC market is stabilizing.
However, Gartner analysts in October said that PC shipments worldwide fell another 3.6 percent compared with the same three months last year, and that HP and Lenovo were in a virtual tie for the top spot on the list of PC vendors.
The PC business has been an irritant for Fujitsu for several years as officials have struggled to figure out what to do with the unit. Early last year there was talk of negotiations between Fujitsu and fellow Japanese PC makers Toshiba and Vaio—the latter brand created when Sony spun out its PC business.
The goal of the negotiations was create a joint venture by merging all of their PC businesses in a single company with the hope of being more competitive on the global stage. However, those negotiations eventually fell apart, although by that time Fujitsu had spun out its PC and smartphone units into separate businesses.
Reports of a possible tie-up between Lenovo and Fujitsu in PCs first emerged in October 2016, but that speculation eventually faded.
For its part, Lenovo several years ago created a joint venture with system maker NEC to sell PCs in Japan. Five years after launching the joint venture, Lenovo in 2016 spent $195 million to buy out the bulk of NEC’s stake in the operation, leaving NEC with 5 percent ownership.
According to Lenovo officials, the strategic collaboration with Fujitsu will attempt to drive growth as well as improve competitiveness and scale in the Japanese PC market as well as worldwide.
The joint venture will pair Fujitsu’s sales, support, R&D, manufacturing and systems integration capabilities with Lenovo’s global scale and strong presence in the worldwide PC market. The Development Bank of Japan will provide industry expertise, the officials said.
The deal is expected to close in the first quarter next year.