Report: NEC Mulling Selling Mobile Phone Unit to Lenovo

Only one year after re-entering the China smartphone market, NEC is in deliberations to sell its money-losing mobile phone business to Chinese PC heavyweight Lenovo, according to a published report.

Lenovo isn’t NEC’s only suitor for its mobile business, however, as the Japanese device maker also is in talks with companies in Japan, sources reportedly said. Faced with hefty competition from Chinese competitors Huawei and ZTE in addition to stalwarts Apple (NASDAQ: AAPL) and Samsung (as well as Lenovo), NEC’s mobile unit has posted a number of consecutive losing quarters, cut jobs and recently pared its sales forecast for mobile phones by 14 percent to 4.3 million units for the fiscal year.

So far, no details of the talks have surfaced, such as whether NEC’s manufacturing operations are included in the discussions or prices being bandied about. In response to the buyout buzz, NEC issued a statement through the Tokyo Stock Exchange that it is “considering a number of ways to bolster the competitiveness of our mobile phone business,” backed with a qualifier that “nothing has been decided,” according to another report.

Inasmuch as the NEC mobile buyout chatter comes amid news that Lenovo is entering the mobile chip design business, it’s not surprising that the PC maker is looking for a kickstart to extend its geographic reach in the smartphone market. Without doubt, landing NEC’s smartphone business would open a wide door to the Japanese market for Lenovo—punctuated, of course, by an ability not only to leverage the well-regarded NEC name domestically but also internationally.

Lenovo certainly is floating enough trial balloons to buy into a larger stake of the smartphone market and, at some point, one of them is going to land on a target. Earlier this year, the company’s chief financial officer confirmed that the vendor was looking around for possible acquisition targets and strategic alliances. “We’ll have no hesitation if the right opportunity comes along that could benefit us and shareholders,” said Wong Wai Ming, Lenovo chief financial officer.

Maybe NEC is that right fit.