A man uses his laptop next to Lenovo's logos during the Mobile World Congress in Barcelona, Spain, in this February 25 2016 file photo.    Picture: REUTERS
A man uses his laptop next to Lenovo's logos during the Mobile World Congress in Barcelona, Spain, in this February 25 2016 file photo. Picture: REUTERS

Hong Kong — Lenovo Group has agreed to buy a majority stake in Fujitsu’s personal computer (PEC) unit for up to $269m, in a bid to corner a larger share of a market that is battling weak sales as more people switch to mobile devices.

Having lost the world’s largest PC maker crown to HP this year, Lenovo has been looking for ways strengthen its core business. Weakness in this segment contributed to a profit decline between July and September, after pushing it into the red for the first time since 2015 in the previous quarter.

"PC is still the core of Lenovo. It is still a very decent market ... commercial customers will still use PC," Lenovo chairman and CEO Yang Yuanqing said. "I think it is worth investing in this area."

Lenovo said it would pay ¥17.85bn ($156.70m) in cash, and ¥2.55bn to ¥12.75bn based on performance to 2020, for a 51% stake Fujitsu Client Computing.

"Lenovo has been trailing HP at the global level by about one and two percentage points of share for the past two quarters, so adding Fujitsu to the mix, in theory, helps close that gap," said Bryan Ma, analyst at industry consultancy IDC.

"Lenovo gets to bolster its position in Japan, where it currently already leads," he said, adding that in terms of scale, Fujitsu stands to gain more. "Fujitsu is too small on a global level to get [Lenovo] much scale."

Lenovo and Fujitsu first announced in October 2016 that they were exploring co-operations in their PC business. News of the deal drove Lenovo shares up by as much as 5% on Thursday to their highest since August, but lower profits between July and September kept a lid on gains.

Lenovo posted a profit of $139m for the second quarter, compared to $157m a year ago. A taxation gain of $118m helped earnings beat a consensus of $44m. Its revenue was $11.8bn, compared with $11.2bn last year and analysts’ estimate of $11.3bn.

While Lenovo’s global PC unit shipments rebounded 17% from the previous quarter, its PC market share over six months dropped 0.2 percentage points to 21%, it said, without revealing shipment numbers.

PC makers around the world are struggling given changing demand trends, with data from Gartner showing that worldwide shipment of PCs fell 3.6% from a year ago in the quarter ended September, the 12th such consecutive decline.

Lenovo warned that market conditions would remain challenging in the short term, but said component costs would likely stabilise. CEO Yang said it was still Lenovo’s target to turn around its struggling mobile business by the end of the financial year in March.

The segment reported a narrower operating loss before taxation of $261m for the second quarter. Lenovo shares closed up 2.18%, compared to the broader market that was down 0.26%.

Reuters

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