Sony, Lenovo in talks for PC biz JV

Japanese technology major denies reports of alliance but says various possibilities being considered

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Japan’s Sony Corp and Chinese technology company Lenovo Group are in talks about a possible joint venture to take over Sony’s loss-making Vaio PC business overseas, Japanese broadcaster NHK reported on Saturday.

The Japanese electronics and media giant called the report inaccurate while acknowledging that it was looking at various possibilities for the unit.  

“Sony continues to address various options for the PC business, but the press report on a possible PC business alliance between Sony and Lenovo is inaccurate,” the company said in a statement.  

Sony has said it plans to revise its product and manufacturing strategy for the Vaio unit as it faces a slump in its PC business, hit by the popularity of smartphones and tablets.  Sony, which will release results next week, had previously predicted its PC business would be in the red for the year to end-March, without disclosing figures.  

Moody’s Investors Service cut Sony's debt rating to junk status last week, highlighting challenges in its television and PC businesses and pressure on profitability at its entire core consumer electronics operation. Lenovo earns about 80 percent of its revenue from personal computers but has been aggressively diversifying into more promising markets.  

Last week, Lenovo said it would buy Google Inc’s Motorola Mobility handset unit for $2.91 billion, the fourth-largest US acquisition by a Chinese or Hong Kong company ever, to face off against Samsung Electronics Co Ltd  and Apple Inc in the smartphone market.

Lenovo had on Wednesday said it would buy Google Inc's Motorola Mobility handset unit for $2.91 billion in the fourth-largest U.S. acquisition by a Chinese or Hong Kong company ever. “We are not only the number one PC company in the world but with this agreement we will become a much stronger number three smartphone company,” said Wong Waiming, Lenovo’s chief financial officer, on a conference call on Thursday.

Investors, however, took a dim view of the deal, which came less than a week after the company announced it was buying IBM Corp's low-end server unit for $2.3 billion. The stock fell 8.2 per cent on concerns Lenovo might have overpaid for a loss-making business and would dilute the value of shares by issuing new ones to help pay for the purchases.

Together with the IBM agreement, Lenovo has agreed in the last week to fork over as many as 800 million shares, representing about 7.7 per cent of its outstanding stock.

With its acquisition of Motorola, Lenovo is emerging as the most viable contender to global smartphone leaders Apple and Samsung - albeit still a distant third-place player.