Lenovo to take Fujitsu’s PC business under its wing

Fujitsu plans to hand over the reins of its personal computer operations to Lenovo Group, as the Japanese company seeks to focus on higher-priority areas such as information technology services.

The two companies aim to reach a deal this month. One proposal would have the Fujitsu group transfer its PC design, development and manufacturing operations to a Lenovo-led joint venture. Another option involves Lenovo taking a majority stake in Fujitsu’s PC subsidiary. About 2,000 Fujitsu employees likely would move under Lenovo’s umbrella.

The venture would take advantage of Lenovo’s scale as the world’s top PC maker, gaining more leverage when buying parts and software.

Fujitsu shipped 4 million PCs under the FMV brand worldwide in the fiscal year ended in March. Japan accounts for a majority of the PC business for Fujitsu, and it ranks second in the country behind NEC Lenovo Japan Group, a joint venture between NEC and Lenovo formed in 2011.

But amid competition from rivals in China and Taiwan, Fujitsu’s PC business apparently lost more than 10 billion yen ($96.5 million) for the fiscal year. The market overall has lost ground to smartphones and tablets, squeezing profit margins. Annual PC sales in Japan slumped from 15 million units several years ago to just 10 million or so last year.

Fujitsu, seeing substantial future growth as unlikely, spun off the business into a separate company in February. Talks broke down regarding a three-way merger with Toshiba’s PC business and Vaio — which was split off from Sony in 2014 — leaving Fujitsu to seek other restructuring options. The company ended up choosing Lenovo, which promised to maintain existing factories and jobs.

A future merger with the NEC-Lenovo venture would not be out of the question. The resulting entity would control more than 40% of the Japanese market, based on current shares. NEC sold most of its stake in the underlying holding company to Lenovo in July.

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