NEC announced the deal Thursday, the same day it reported that its net loss grew in the December quarter grew to 26.5 billion yen, or $323 million, from 9.6 billion yen, or $115.8 million, the same period a year ago. The Japanese company blamed the loss on lower sales for technology services to businesses.
The joint venture combines NEC's roughly 20% of the Japanese PC market with the fourth largest computer maker in the world, behind Hewlett-Packard, Dell, and Acer, according to IDC. Lenovo will hold a 51% stake in the new venture and NEC 49%. The organization will be called Lenovo NEC Holdings and will be registered in the Netherlands. The deal is expected to close by June 30.
NEC plans to spin off its PC business from its NEC Personal Products subsidiary to the new company. As a result, Lenovo will pay NEC $175 million in stock. Lenovo currently has a major research center known as Yamato Lab in Yokohama, Japan, and a sales office in Tokyo.
"Lenovo is the right partner at the right time for NEC, and we believe that we are creating a strategic relationship today that will benefit NEC and our customers for many years to come," Nobuhiro Endo, president of NEC, said in a statement. "We believe this alliance will further reinforce and expand our PC business in Japan."
NEC and Lenovo plan to continue selling PCs under their respective brand names and provide sales and support through existing channels. The advantage of the joint venture will be in combining NEC's product development capabilities with Lenovo's procurement resources, the companies said.
Hideyo Takasu, president of NEC Personal Products unit, will become president and chief executive of the new business, while Roderick Lappin, representative director and president of Lenovo (Japan), will become executive chairman.
As part of the deal, Lenovo and NEC have agreed to discuss future cooperation in selling PCs and providing global support to Japanese companies operating outside the company. The partners have also pledged to consider developing, producing, and selling other products, including tablets and IT hardware, such as servers.