Reuters is reporting that Lenovo (LNVGY), the Chinese electronics giant, is in talks to acquire NEC’s mobile phone unit. Lenovo has been speculated to be in talks with both Nokia (NOK) and BlackBerry (BBRY) over the past two years. Various brokerages have claimed that it is negotiating to buy Nokia’s feature phone unit, Nokia’s Lumia phone unit or BlackBerry’s hardware operations. If Lenovo ends up buying the NEC handset operations, it would acquire a technologically highly sophisticated operation with a minuscule annual production volume of roughly 4 million units.
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The acquisition would open the door for the world’s No. 2 PC vendor to try to execute an aggressive cross-over to smartphone market — Lenovo would presumably be well positioned to ramp up smartphone volumes rapidly. This would mean that the most likely buyer of Nokia or BlackBerry would gobble up a much cheaper and more easily integrated alternative.
NEC enjoyed its halcyon days around 2001, when its global mobile phone market share briefly spiked close to 10% and hit double digits in Germany and the United Kingdom. That was the period when i-mode was the hottest buzzword in the mobile telecom industry and Japanese vendors like Sony (SNE), Panasonic and NEC were making big gains in Europe and North America. The Japanese vendors were badly dented by the phone industry downturn in 2001-2003 and mostly retreated from the global competition to their home market.
Lenovo is one of China’s most ambitious electronics companies; its acquisition of IBM’s (IBM) PC business made it the world’s second largest personal computer brand. The company has come to regret that purchase, however: Soon after it snapped up the PC division it became obvious that smartphones would become the most important consumer electronics category and that the PC was entering its twilight era.
China and India are now bursting with smartphone brands with heady global growth numbers. Huawei, Micromax, Spice, Karbonn and others are enjoying 80%-plus volume growth by capitalizing on one of biggest trends in the industry as growth has shifted from North America and Europe to South-East Asia and China. Until now, Lenovo has watched the triumphant expansion of these upstarts silently seething. The giant may now be ready to make its move.
Ironically, Lenovo just might be about to repeat the timing mistake it made with its big personal computer acquisition. Global smartphone volume growth has slowed from over 50% to about 35% in just a year. Growth in North America and Europe is sputtering badly right now. If Lenovo buys the NEC phone division and starts to ramp up seriously in 2014, it just might enter the global smartphone competition just when the volume growth falls below 25% amidst intensifying competition.
This article was originally published on BGR.com