NEC's telephone network focus boosted?

By Reuters  |  Print this article Print

Lenovo and NEC Corp are reportedly in talks to form a joint venture in personal computers with an eye to being able to compete more effectively with global rivals.

A partnership in PCs between the two companies would be another step by NEC in its efforts to focus on building telephone networks, say analysts.

"It looks to me as if NEC is trying to lower its risks by detaching its personal computer business," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"We've already seen NEC pull out from the semiconductor operations in the past. After today's (reported) move, we can see that the company will put more focus on the telecommunications infrastructure business."

Goldman Sachs analyst Ikuo Matsuhashi said that although the joint venture would have little impact on NEC's PC business earnings, it would be a sign of change in NEC's business strategy.

"If NEC were to cede leadership to another company even in the PC business, something that would have been difficult to imagine in the past, that would mark a shift aimed at changing the company's earnings structure," he said in a note.

Matsuhashi reiterated a buy rating on NEC.

(Additional reporting by Reiji Murai, Kentaro Hamada, Mariko Katsumoro, Isabel Reynolds, Tim Kelly and Chikafumi Hodo in Tokyo, Swetha Gopinath in Bangalore; Chyen Yee Lee in Hong Kong; and Melanie Lee in Shanghai; Editing by Nathan Layne and Anshuman Daga)