Lenovo-NEC Smartphone JV: Where’s The Value?

Lenovo nears new smartphone JV with NEC

A day after we saw the latest sign that Lenovo (HKEx: 992) was pursuing a major purchase in the US, we’re getting news of another smaller deal by China’s leading PC maker with word of a new smartphone tie-up with faded Japanese brand NEC (HKEx: 6701). Whereas I quite like the US deal that would see Lenovo buy the low-end server business of IBM (HKEx: IBM), this smaller deal with NEC looks more like Lenovo’s older pattern of buying up dying global brands with little or no real value. Read Full Post…

Lenovo-NEC Ties Grow With Smartphone Talks

Lenovo eyes NEC’s cellphones

Just a year after re-entering China’s cellphone market, faded Japanese electronics giant NEC (Tokyo: 6701) is in rumored talks to sell its cellphone business to Chinese computing giant Lenovo (HKEx: 992). I previously predicted that such a tie-up could come after NEC’s original announcement last March that it would return to  China, and this latest move could auger an eventual takeover of NEC’s entire struggling consumer electronics business by Lenovo. Read Full Post…

Lenovo NEC: Here to Stay? 联想与NEC能否长相厮守?

A year after announcing their landmark joint venture, Lenovo (HKEx: 992) and NEC (Tokyo: 6701), the leading PC makers in China and Japan, are releasing some numbers to try to convince the world that their marriage was correct and the venture will dominate the difficult Japanese market. I’ll admit that I’m not quite a skeptical as I was when the 2 sides first announced their joint venture, as they seem to be taking a relatively cautious approach to the business. Still, I would only give this venture a relatively modest chance for success, perhaps around 40 percent, versus a previous prediction for around a 35 percent.

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NEC China Cellphones: New Lenovo Tie-Up? NEC计划重回中国手机市场 或与联想联姻

What looks like a new wrinkle has emerged in the growing love affair between Chinese PC giant Lenovo (HKEx: 992) and Japanese electronics giant NEC (Tokyo: 6701), in what could well end up as a marriage that could serve as a template for similar Sino-Japanese tie-ups in the consumer electronics space. Media are reporting that NEC has announced it will once again enter the China cellphone market 6 years after its high-profile departure, with plans to sell a smartphone model, as well as 2 tablet PCs. (English article) Historians will recall that NEC left China back in 2006, at the time citing mismanagement for its decision to leave the world’s largest cellphone market. Of course the real issue was that its phones had become virtually invisible in the market, paralleling a trend in the rest of the world that has seen not only NEC but most Japanese brand cellphones and PCs become non-players nearly everywhere except for their highly protected home market. So what’s different now that would embolden NEC to return to China, the world’s biggest mobile market but also an incredibly competitive one where consumers are especially price sensitive and NEC has little or no brand recognition? The answer is: Lenovo. Last year the 2 companies entered into an interesting agreement that effectively saw Lenovo take over NEC’s PC operations through the establishment of a joint venture. (previous post) Lenovo followed later by saying it may move some of its production to Japan, in what looked like a bid to ease concerns from NEC’s Japanese customers who were undoubtedly worried that their computers could suffer a quality downgrade if all production was moved to China. (previous post) This kind of tie-up looked interesting as it had the potential to provide Lenovo with a quick entry to the lucrative Japan market that has been one of the toughest for foreign brands to tap due in part to local preference for domestic brands that are perceived as higher quality. It also gave Lenovo, the world’s second biggest PC maker, a new premium brand to market outside Japan through its numerous sales channels in both western and developing markets. There aren’t any details in the latest reports about NEC’s decision to re-enter China’s cellphone market, but I would be willing to bet that Lenovo, as China’s dominant PC player with about a third of the market, will be a strong partner behind the scenes, providing NEC with access to its strong sales and service networks throughout the country. Furthermore, while the Lenovo name is synonymous with good quality PCs in China, the same is hardly true for its cellphones, which have had a much more difficult time establishing a strong name in the company’s home market as it vies with better known names like HTC (Taipei: 2498), Apple (Nasdaq: AAPL) and up and comers Huawei and ZTE (HKEx: 763; Shenzhen: 000063). This NEC move back into China, if Lenovo is really involved, could provide Lenovo with an important new premium brand that doesn’t have any of the baggage associated with its own cellphones. That could pave the way for an eventual joint venture for the NEC cellphone brand similar to the 2 companies’ PC tie-up. In fact, TCL (Shenzhen: 000100; HKEx: 2618), another Chinese brand known for its cheap cellphones, made a similar shift with its purchase of the Alcatel cellphone brand name around 5 years ago, and Alcatel-branded phones now account for the lion’s share of its sales outside China. So, what exactly is the end game in this growing love affair between Lenovo and NEC? If the PC partnership proves successful in Japan and this new NEC cellphone initiative in China is also a success, I could easily see an eventual sale in the next 2-3 years that would see Lenovo acquire outright NEC’s PC and cellphone units, 2 of its main consumer electronics businesses. Such a deal could serve as a template for future tie-ups between Chinese electronics companies and their Japanese counterparts. Chinese companies could use such deals to shed their image as makers of cheap, lower-end products, while Japanese firms could shed their increasingly unprofitable and marginal electronics businesses.

Bottom line: NEC’s re-entry to the China cellphone market looks like the latest wrinkle in its growing ties with Lenovo, which could ultimately result in a longer-term marriage.

Related postings 相关文章:

Lenovo Considers Japan Production 联想向日本转移制造业务为明智公关手段

Lenovo Results: Honeymoon Nearing an End? 联想并购後的蜜月期何时结束?

Lenovo-NEC: Let the Defections Begin 联想与NEC结盟注定失败

Lenovo-NEC: Let the Defections Begin 联想与NEC结盟注定失败

I haven’t written for a while about Lenovo (HKEx: 992), which seems to have rediscovered its appetite for questionable M&A in difficult Western markets with its just-completed joint venture that will effectively see it take over NEC’s (Tokyo: 6701) troubled PC business. (English article) First, let’s move past the slick announcement and say what this deal really is. The two sides are calling the new alliance, which saw Lenovo give NEC $175 million in shares in exchange for 51 percent of a joint venture containing NEC’s PC assets, a partnership. But in reality, it’s the first step in a process that both sides hope will eventually see Lenovo take over NEC’s PC business, which is quickly becoming irrelevant everywhere in the world except for its highly protected home market in Japan. The big problem behind this deal is that Japanese customers, both corporate and consumers, aren’t stupid: they will quickly realize that NEC — which now holds a quarter of the Japanese PC market — is no longer a Japanese brand after this tie-up and will abandon it in droves, much the way US and other global consumers abandoned IBM-brand PCs after IBM (NYSE: IBM) sold its PC business to Lenovo in 2005. I expect to see similar results with Lenovo’s other recently acquired Western brand, Germany’s Medion (Frankfurt: MDN). (previous post) Luckily for Lenovo, it’s only investment in this NEC deal is the $175 million it put into the joint venture, and even that was only in shares. Lenovo is probably hoping that when the dust settles, there will still be enough business left from the legacy NEC operations to justify this move. But realistically speaking I see a 50 percent chance or less for this tie-up to succeed, and doubt Lenovo’s share of the Japan PC market will top even 15 percent 5 years from now.

Bottom line: Lenovo’s new joint venture with NEC is likely to fail, with NEC-brand PCs set to rapidly lose share in the Japanese PC market in the next 5 years.

我很长时间没有写关於联想<0992.HK>的文章了。联想收购NEC的PC业务,成立合资公司後,好像又重新对并购西方国家企业感兴趣了。首先,让我们看看,这桩并购到底是什麽实质内容。首先,联想发行新股支付NEC 1.75亿美元,换取与NEC旗下PC部门组成合资企业中51%的股权。但事实上,这仅仅是联想在收购NEC的PC业务上迈出的第一步。除了在受到保护的本土市场,NEC的PC业务在其他市场都已经沦落到无足轻重的地步。这桩交易背後的一个大问题是,日本消费者,无论是公司还是个人,都不蠢:他们将很快认识到,占据日本PC市场四分之一的NEC电脑产品,在这一交易之後不再是日本品牌了,他们会逐渐放弃这个品牌,就像美国和其他国家消费者在2005年联想收购IBM的PC业务後放弃IBM品牌一样。我觉得联想收购的其他西方企业品牌,如德国Medion公司<MDNG.DE>,也会面临类似下场。但对於联想来说,幸运的是其对NEC的投资只是其对合资公司投入的1.75亿美元。联想可能希望,尘埃落定後,NEC品牌还会有足够多的生意。但老实说,我觉得这个结盟成功的机率至多不过50%,对五年後联想在日本PC市场能占到15%份额也表示怀疑。


Related postings 相关文章:

Lenovo Makes Strange Move Into Germany 联想进军德国令人摸不着头脑

Lenovo’s Game Console — Yet Another Plan 联想:新推游戏机,这次能行吗?

HP Looking For China Formula 惠普寻找中国方程式的答案


PCs: Lenovo Back at Old M&A Approach with Fujitsu Talks

Bottom line: Lenovo and other Chinese firms need to abandon their approach that targets declining, older brands for global M&A, and instead focus on organic growth and more strategic assets with better growth potential.

Lenovo eyes Fujitsu’s PC business

The acquisitive Lenovo (HKEx: 992) was in M&A headlines again last week, when media reported it was in talks to buy the aging PC business of Fujitsu, an operation that is largely inconsequential outside its home Japanese market. Such a purchase would continue a trend dating back more than a decade, which has seen Lenovo purchase declining global brands for bargain prices with hopes of resuscitating those names to expand its global footprint. Read Full Post…

SMARTPHONES: Lenovo Slashes Moto, Xiaomi Goes Further Offline

Bottom line: Lenovo’s big job cuts at Motorola could auger a write-off of the brand in the next half year, while Xiaomi’s huge offline expansion looks necessary but will further undermine its trendy high-tech image.

Lenovo slashes jobs at Moto

Two former smartphone high-flyers are in the headlines today, with PC giant Lenovo (HKEx: 992) and Xiaomi both taking steps to try and regain their former glory. Lenovo’s move looks like a major retreat for its struggling Motorola brand, which has just slashed more than half of its staff. Meantime, Xiaomi has just rolled out two higher-end models in a bid to go upscale. But what caught my attention were details of the company’s plans to sharply boost its offline presence in the latest reports.

Both stories reflect companies in transition, after each tumbled from the ranks of China’s top smartphone brands due to failure to build a loyal customer base. Lenovo bought Motorola for $2.9 billion 2 years ago and was hoping to position the faded brand as its premium product line. Meantime, Xiaomi skyrocketed to fame 3 years ago partly on an online-only sales model that helped it control costs and position itself as a trendy, cutting-edge brand. Read Full Post…

PCs: Lenovo Test Drives Cars with LeEco

Bottom line: Lenovo’s investment in the smart car business looks like a necessary step for an important new growth area, but its choice of LeEco as partner looks more dubious.

Lenovo invests in LeEco’s car business

I’ve been quite bearish on stumbling PC giant Lenovo (HKEx: 992) these days, but at least I have to commend the company for trying something new to jump-start its fading fortunes. That’s my initial assessment, on reading reports that Lenovo has invested in the smart car business of online video superstar LeEco (Shenzhen: 300104), formerly known as LeTV. But that said, even if the reports are true, Lenovo seems to be coming to the smart car story slightly late, and I also have serious doubts about the suitability of LeEco as its choice of partner. Read Full Post…

STOCKS: Alibaba Dumped By Softbank, Lenovo by Google

Bottom line: New sales of Alibaba and Lenovo shares by big stakeholders partly reflect disappointment in each stock’s performance by the seller, as both companies face issues that could stunt their medium-term growth.

Big stakeholders sell Alibaba, Lenovo shares

The folks at e-commerce giant Alibaba (NYSE: BABA) and PC leader Lenovo (HKEx: 992) are licking their wounds today, after each was dumped by a major major shareholder. In the first case longtime backer SoftBank has just sold off a big chunk of its Alibaba holdings, raising a hefty $7.9 billion in the process. The second deal has Internet giant Google (Nasdaq: GOOG) looking to sell about $200 million worth of Lenovo stock. Alibaba and SoftBank are trying to put a positive spin on their development, but the bottom line is that both Alibaba and Lenovo stock have become disappointments recently for all investors. Read Full Post…

CELLPHONES: Stubborn Lenovo Clings to Broken Motorola Name

Bottom line: Lenovo’s decision to tweak the Motorola name is a desperate move to revive the brand, and only postpones an inevitable write-off the company will need to make for the failed acquisition.

Lenovo tweaks Motorola name

In a move that smells of desperation, struggling smartphone maker Lenovo (HEx: 992) has decided to tweak its Motorola brand name whose sales have tanked since being acquired by the Chinese company in 2014. The move will see Lenovo retire the formal Motorola name and simply refer to the brand by its shorter and trendier Moto moniker. More precisely, the brand will become known as Moto by Lenovo.

This particular move isn’t so significant from a financial perspective, since Lenovo isn’t ready yet to ditch the iconic but faded US brand it acquired for nearly $3 billion in 2014. But the reality is that Motorola lost its trend-setting image long ago, and Lenovo’s attempts to reclaim the brand’s luminary past have been a resounding failure. Read Full Post…

SMARTPHONES: 2015 Graces Huawei, Punishes Lenovo

Bottom line: Huawei is likely to consolidate its position as China’s top smartphone brand this year, while Lenovo and Samsung could regain some market share as each mounts aggressive turnaround campaigns.

Huawei takes China smartphone crown
Huawei takes China smartphone crown

A year is almost like an eternity in the fast-moving smartphone world, and nowhere is that reality more on display than in the latest quarterly data on China’s cut-throat market. In the smartphone history books, 2015 will go down as the year that saw Huawei surge to become China’s largest player, with smaller homegrown brands Vivo and Oppo also making impressive gains. On the other side of the aisle, the year is one that former high-flyers Samsung (Seoul: 005930) and especially Lenovo (HKEx: 992) would rather forget, as both plunged out of the nation’s top 5 brands.

Smartphones are an extremely big business due to their high prices, a fact that has drawn numerous companies to the space and created intense competition in China. But constant changes to technology, combined with increasing commoditization due to the dominance of the free Android operating system, means that unknown companies can quickly rise to become major players. Similarly, a winner one year can quickly stumble to become a loser the next. Read Full Post…