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Lenovo shares fall 7.6% after NEC sells stake

By Tuo Yannan  (China Daily)

13:39, September 07, 2012

Lenovo Group Ltd's software park in the Zhongguancun Technology and Science Park in Beijing. [Photo/China Daily]

Shares of Lenovo Group Ltd, China's biggest PC maker, declined in Hong Kong after the Japanese electronics giant NEC Corp sold its entire Lenovo stake on Wednesday.

Lenovo's share price dropped 7.55 percent to HK$6.12 ($0.79).

The Japanese company's stake came from a joint venture deal with Lenovo last year. In January 2011, NEC said it would combine its PC operations with Lenovo by setting up a joint venture.

As part of the deal, NEC was given 281 million shares in Lenovo, valued at HK$4.85 each, in exchange for a 51 percent stake in the joint venture, known as Lenovo NEC Holdings BV.

Under the terms of the deal, NEC was not allowed to sell the shares within two years. However, Lenovo has now granted NEC permission to sell the stake, given the Japanese company's recent lackluster performance.

"Lenovo can confirm we have granted a waiver regarding the shares of Lenovo stock owned by NEC," Lenovo said in an e-mail.

According to Japanese media reports, NEC lost more than 110 billion yen ($1.3 billion) in the 2011 fiscal year and has laid off more than 10,000 employees.

Meanwhile, the Chinese company said that the move won't affect the joint venture.

"(Lenovo and NEC) have built a winning business in Japan together, and we will continue to look for ways to expand and extend our strategic relationship," Lenovo said.

"We believe this is an appropriate action based on NEC's requests and financing needs as well as our shared commitment to our long-term, ongoing strategic partnership," Lenovo added.

Lenovo said that the joint venture has achieved momentum and that it expects to continue to build a leading company in Japan along with NEC.

Roderick Lappin, executive chairman of Lenovo NEC Holdings, said that Japan, as the world's third-largest PC market, clearly plays a key role in the company's future. He also said that the joint venture is targeting a 30 percent market share of the Japanese market within three years.

Before forming the joint venture, the companies' combined market share was about 23.6 percent. Now that percentage has gone up to about 25.4 percent, according to United States-based IT research company IDC.

"The move made by NEC means that the Japanese company has completely given up the PC market and is shifting its focus to other IT markets," said Wang Jiping, senior research manager with IDC China.

Meanwhile, according to Brazilian media, Lenovo is buying local electronics goods manufacturer CCE, one of the largest IT companies in the country.

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