Business / Corporate

Lenovo to acquire Fujitsu's PC business via joint venture in 2018

Kyodo, Bloomberg

China’s Lenovo Group Ltd. will take over Fujitsu Ltd.’s personal computer business by setting up a joint venture in which the world’s biggest PC maker will take a majority stake, the companies said Thursday.

Lenovo will take a 51 percent stake in the PC business that the Japanese electronics maker spun off last year, while the state-owned Development Bank of Japan will take 5 percent. Fujitsu will sell off its own stake, which is worth ¥28 billion ($245 million).

The transfer of shares to Lenovo and the bank will be carried out between April and June next year, while Fujitsu will maintain its brand and production system, Fujitsu said.

Fujitsu and Lenovo announced in October last year that they were in talks to form a strategic partnership in the PC business.

As the domestic market is set to continue shrinking, Fujitsu, maker of the FMV PC series, is aiming to bolster its competitiveness by joining hands with Lenovo.

In Japan, Lenovo, which acquired IBM Corp.’s PC business in the mid-2000s, runs a joint venture with NEC Corp., a dominant player in the domestic PC market.

Lenovo reported a 5 percent jump in revenue to $11.8 billion in the quarter ended in September, surpassing projections for $11.3 billion and marking the biggest rise since the same period of 2015. Net income fell 11 percent to $139 million, which was bolstered by accounting gains.

Lenovo, however, is struggling to find growth in its key PC, smartphone and server divisions. Though it lost the top spot in PCs to HP Inc., the market shrinkage of the past few years is easing and CEO Yang Yuanqing is taking costs out of a mobile business that’s made little progress since it bought Motorola for $2.9 billion.

“A healthier PC market may finally aid Lenovo’s platform almost as much as it has HP or Dell,” Anand Srinivasan and Wei Mok, analysts at Bloomberg Intelligence, said before the announcement. “The server and mobile platforms need structural fixes.”

PC shipments climbed 17 percent from the previous quarter, allowing Lenovo to arrest the erosion in market share. Its struggling smartphone division also made headway into Latin America and Western Europe.

“Lenovo’s business lines remain weak in the past quarter and now it has cash flow difficulties,” said Qian Kai, an analyst with CICC. He noted that Lenovo gained more than $100 million in net income from tax rebates.

“I don’t foresee Lenovo turning around its smartphone business. It lags far behind market leaders in China, and in the markets like India where they did well, the challenge is growing thanks to companies such as Xiaomi.”

“Our mobile business turnaround is still in progress,” Yang said in a statement.