Lenovo, NEC in PC joint venture talks: Nikkei

China's Lenovo Group is in talks to take a controlling stake in the PC business of Japan's NEC Corp in a deal that would help it close the gap with larger global rivals, the Nikkei newspaper said.

Lenovo, which ranks fourth in the global PC market behind Hewlett-Packard, Dell Inc and Taiwan's Acer Inc, wants to expand its share of the Japanese market while also tapping NEC's technology for development, the paper said.

NEC, which is the top maker in Japan's mature PC market but does not rank in the top 10 globally, is eyeing the tie-up as a chance to grow in the fast-growing Chinese market, the Nikkei said, without identifying the source of the information.

A spokesman for NEC declined to confirm or deny whether the two companies were in talks.

Shares of NEC were up 2.5% at 245 yen in early Tokyo trade, outperforming a 0.6% fall in the benchmark Nikkei average.

"It looks to me as if NEC is trying to lower its risks by detaching its personal computer business," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, adding that it would a positive development for the firm.

"We've already seen NEC pull out from the semiconductor operations in the past. After today's (reported) move, we can see that the company will put more focus on the telecommunications infrastructure business."

Lenovo is in talks to take a majority stake in NEC Personal Products Ltd, a wholly owned NEC unit that makes and sells personal computers, the Nikkei said. NEC generates about 250 billion yen (USD 3.01 billion) in annual sales from the PC business, accounting for roughly 7% of its revenues.

NEC controlled about 18% of the Japanese PC market in 2009 -- but globally stood 12th with a share of less than 1%. Lenovo had about 27% of its home market and was No 4 globally with a share of about 8%, the Nikkei said.

NEC-branded PCs are expected to remain on the market, the Nikkei reported.