NEC Corp. is considering withdrawing from its money-losing smartphone business due to deadlocked negotiations with Chinese PC maker Lenovo Group Ltd. on integrating their mobile phone businesses, company sources said Wednesday.
NEC has had a partnership with Lenovo in the PC business since 2011. The Japanese firm had wanted Lenovo to purchase a majority stake in its mobile-phone subsidiary, NEC Casio Mobile Communications Ltd., whose liabilities exceed its assets by about ¥60 billion, to rebuild the business, but Lenovo was reluctant to do so.
NEC Casio was established in 2010 by merging the mobile-phone operations of NEC, Casio Computer Co. and Hitachi Ltd.
NEC officials have discussed retreating from the smartphone business because of the heavy costs incurred in developing new products, the sources said.
NEC’s move is in line with the firm’s efforts to pull out of unprofitable operations and look into focusing on the promising infrastructure business such as next-generation “smart meters,” the sources said. Smart meters record electricity consumption data and send it back to utilities for monitoring and billing purposes.
Getting a late start in the smartphone industry, NEC Casio has struggled due to tough competition from overseas rivals, including U.S. technology giant Apple Inc.
Its sales have worsened especially since the nation’s top mobile-phone carrier, NTT DoCoMo Inc., began a recent campaign to expand discounts on Sony Corp. and Samsung Electronics Co. smartphones.
Shares in NEC were up 4.76 percent at ¥242 by the lunch break, while the Nikkei 225 lost 0.58 percent.
“Investors are applauding the company’s apparent pullout from the smartphone market, as it was already too late to the field to make a significant impact on the global stage,” said Tatsunori Kawai, chief strategist at kabu.com Securities.
“It’s better for NEC to entirely withdraw from the market, so that it can allocate its resources more effectively elsewhere,” he told Dow Jones Newswires.