Japanese electronics giant NEC Corp will likely abandon smartphone production after failing to bring China’s Lenovo Group Ltd (聯想) on board to bolster its money-losing unit, a report said yesterday.
NEC shares soared 4.76 percent to end at ￥242 on the news, while the Nikkei 225 rose 0.11 percent.
The Nikkei Shimbun said NEC had asked Lenovo to take a majority stake in development and production subsidiary NEC Casio Mobile Communications, but the two sides could not reach agreement.
Without the extra muscle Lenovo would have provided, NEC believes it will struggle to rebuild the business in a highly competitive market dominated by South Korean giant Samsung and consumer favorite Apple.
The company plans to freeze development of new smartphones and focus solely on conventional handsets, the business daily said, without naming its sources.
Smartphones account for more than half of sales at NEC Casio Mobile, which is saddled with excess liabilities of ￥60 billion (US$604 million), the paper said.
“Investors are applauding the company’s apparent pullout from the smartphone market, as it was already too late to the field to make a significant impact on the global stage,” said Tatsunori Kawai, chief strategist at kabu.com Securities.
“It’s better for NEC to entirely withdraw from the market, so that it can allocate its resources more effectively elsewhere,” he told Dow Jones Newswires.
NEC refused to confirm the report.