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Lenovo extends lead in Japan's PC market with Fujitsu deal

Chinese group builds on its top-ranked alliance with NEC

Lenovo CEO Yang Yuanqing, left, and Fujitsu President Tatsuya Tanaka announce the PC tie-up in Tokyo.

TOKYO -- Lenovo Group, which has grown by acquisitions into one of the world's biggest makers of personal computers, has struck a new deal with Tokyo-based Fujitsu that will give the Chinese company a combined two-fifths market share in Japan.

Lenovo will buy a controlling 51% stake in Fujitsu's PC unit, and the government-backed Development Bank of Japan will take 5%, paying Fujitsu a combined 28 billion yen ($245 million), the companies said Thursday. Lenovo will gain the right to appoint four of the joint venture's seven directors.

The Chinese manufacturer, which bought IBM's PC business in 2005, already leads the Japanese market through a joint venture formed with NEC in 2011. With the Fujitsu deal, it will leave competitors like Dell and HP of the U.S. even further in the dust.

Lenovo aims to raise its purchasing power and further solidify its business through the partnership, Chairman and CEO Yang Yuanqing told reporters here Thursday.

Long in coming

Negotiating the deal took more than a year. The parties "frankly and thoroughly discussed" the joint venture arrangement, said Fujitsu President Tatsuya Tanaka. Structural details, including the venture's relationship with the market-leading NEC-Lenovo alliance, took time to iron out.

The parties decided to keep Fujitsu's factory in western Japan's Shimane Prefecture and its FMV line of PCs alive, and to conduct business separately from NEC.

Since the NEC deal, Lenovo has combined production and maintenance operations and continues to streamline. Capitalizing on NEC's network of big-box sellers to rapidly increase its share in Japan, the deal is seen as a model for successful mergers.

Japan's PC market shows little prospect of growth, but centers on high-end models. Lenovo hopes to absorb Fujitsu's know-how in small-batch production, as well as miniaturization and other qualities customers seek.

Asked whether Lenovo would pursue mergers with any other Japanese manufacturers, Yang said only that the company seeks to "guide the Fujitsu merger to success first." But there is no doubt the sector benefits from economies of scale in procuring components and software.

Even combined, Japan's remaining main players -- such as Toshiba, Panasonic and former Sony brand Vaio -- command only about a 15% market share. Further consolidation is likely as going it alone gets tougher.

Endowed with a vast home market, Lenovo and its Chinese electronics compatriots have raised their cost competitiveness and are wielding that formidable edge to carve out bigger chunks of global sales. This trend is not limited to PCs. In Japan's smartphone market, where domestic makers and Apple once reigned, Huawei Technologies and its low-cost peers are building their presence.

(Nikkei)

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