Lenovo, NEC in Talks Over PC Joint Venture, Reports Say

Lenovo, the world's fourth-largest PC maker, is in talks to create a joint venture with NEC that would enable both businesses to better compete globally, according to published reports.

Five years after becoming a player on the global PC scene by buying IBM's personal computer business, Lenovo reportedly is in talks with NEC about a joint venture of sorts around their PC units, according to reports.

Quoting an unnamed source, the Wall Street Journal reported Jan. 21 that the two companies are looking at an alliance that would help both grow their presence in the worldwide PC market. The source did not say what type of tie-up Lenovo and NEC were discussing, but other reports say the joint venture would involve Lenovo acquiring a majority stake in NEC's PC business, NEC Personal Products Ltd., a wholly owned subsidiary.

Those reports are based on a story in Japan's Nikkei newspaper. A Lenovo spokesperson declined to comment on the speculation.

Such a joint venture would marry the world's fourth-largest PC vendor-Lenovo-with a company that, while fading from the global PC scene, still is the top computer seller in Japan.

The traditional PC market is under pressure because of slowing consumer spending and a growing cadre of ultra-mobile devices, including tablets and smartphones. However, it's still a substantial market, and analysts say that enterprise purchases are making up for some of the consumer drop-off.

Market research firm IDC estimated that PC shipments in 2010 grew 14 percent, to 346 million units, and executives at both Intel and Advanced Micro Devices are predicting that the market will grow at least 10 percent or more in 2011.

Hewlett-Packard is the top global PC vendor, with about a 17.9 percent market share in shipments in 2010, according to Gartner. Depending on which research firm you read, either Dell or Acer took the second slot, with the other coming in third. Ranking fourth in both the IDC and Gartner numbers was Lenovo, with 9 percent to 10 percent of the market.

Toshiba is No. 5, and reports have NEC in about twelfth place. Combining their efforts could benefit both Lenovo and NEC in a number of ways. For Lenovo, it would mean more weapons in its arsenal as it tries to chip away at the leads that HP, Dell and Acer have accumulated. Right now, both Dell and Acer have market shares of 12 percent to 13 percent.

It also will give Lenovo, which is based in China, greater traction in the Japanese market, where NEC reportedly is the top vendor with more than 18 percent of the market. NEC would be hitching its wagon to the top Asian PC vendor outside of Japan and help it grow in the rapidly expanding Chinese market.

According to IDC, Lenovo was by far the top Asian PC vendor (outside of Japan), with 20.2 percent of the market based on units shipped, a significant jump over its 18.2 percent market share in 2009.

A distant second is HP, with 11.8 percent, followed by Dell, Acer and Asus, according to IDC. However, both HP and Dell are spending millions of dollars in hopes of opening inroads into the Chinese market.

But as analysts have said, the PC market is about more than just competition among the players. Other devices, particularly tablets, are beginning to factor into the picture, even as consumer spending on PCs slows.

IDC analysts in a Jan. 18 report said the worldwide media tablet market-fueled primarily by the success of Apple's iPad tablet-grew 45 percent from the second to third quarter in 2010.

All that will have an impact on the larger PC market, according to IDC analyst David Daoud.

"The U.S. market was expected to shrink year over year, given the exploding growth experienced in the fourth quarter of 2009," Daoud said in a statement Jan. 12 when IDC announced 2010 PC market numbers. "Growth steadily slowed throughout 2010 as weakening demand and competition from the Apple iPad constrained PC shipments. In addition to relatively high market penetration and a 'good-enough' computing experience with existing PCs, consumers are being more cautious with their purchases, and competing devices have been vying for consumer dollars. This situation is likely to persist in 2011, if not worsen, as a wave of media tablets could put a dent in the traditional PC market."