NEC Reportedly Hanging Up On Smartphones

TOKYO (Nikkei)--NEC Corp. (6701.TO) will withdraw from smartphone operations following the failure to bring Chinese firm Lenovo Group Ltd. (0992.HK) on board to help its money-losing mobile phone business, The Nikkei reported in its Wednesday morning edition.

The Japanese electronics company had been negotiating a deal with Lenovo since the end of last year. NEC was hoping to rebuild the cell phone business under Lenovo's leadership, complementing an earlier partnership in personal computers.

NEC requested that Lenovo take a majority stake in development and production subsidiary NEC Casio Mobile Communications Ltd., whose liabilities exceed assets by roughly Y60 billion. But the two parties could not reach an agreement.

Casio Computer Co. (6952.TO) and Hitachi Ltd. (6501.TO) are among NEC Casio's current investors, while NEC oversees management of the Y260 billion business.

Amid rapid advances by Apple Inc. (AAPL) and Samsung Electronics Co. (005930.SE), Japanese cell phone manufacturers have struggled. NEC, once the domestic leader, has fallen to No. 8, with a market share of only 5% or so.

NTT DoCoMo Inc.'s (9437.TO) latest strategy -- providing generous discounts on Sony Corp. (6758.TO) and Samsung smartphones -- has eroded NEC Casio's sales volume further.

NEC now plans to freeze development of new smartphones, including those marketed under the Casio brand, and focus solely on conventional handsets. It will reassign the bulk of NEC Casio employees to other group firms.

The firm will continue to consider selling off some cell-phone-related patents and may revisit the possibility of a business merger if a potential partner is willing to take a majority interest.