Lenovo Group Ltd. (992), the world’s second-largest computer maker, fell the most in more than two months in Hong Kong trading after NEC Corp. (6701) sold its stake in the Chinese company to raise cash.
Shares of Lenovo dropped 7.6 percent to close at HK$6.12 in Hong Kong trading, the largest decline since June 21. The benchmark Hang Seng Index slid 1.5 percent. NEC fell 2.6 percent to 111 yen in Tokyo, the biggest drop since Aug. 28.
Lenovo had issued 281.1 million shares to NEC in exchange for a 51 percent stake in a venture between the companies. The shares were subject to a lock-up restriction that prohibited NEC from selling them until two years after the deal closed on July 1, 2011. Lenovo shares have risen 39 percent since then, and the Chinese company yesterday waived the restriction prohibiting NEC from selling stock.
“The overall stock market is weak today and the sale just added selling pressure to the share price,” Jonathan Ng, a Singapore-based analyst at CIMB-GK Pte., said in an e-mail. “The sale is purely for financial reasons and will not change the business relationships.”
Brion Tingler, a Lenovo spokesman, confirmed the company granted a waiver to NEC and referred questions about specifics of the sale to the Japanese company.
“We believe this is an appropriate action based on NEC’s requests and financing needs as well as our shared commitment to our long-term, ongoing strategic partnership,” Tingler said in an e-mail today. “We will continue to look for ways to expand and extend our strategic relationship.”
NEC sold its entire 2.7 percent holding in Lenovo to make use of its assets, Takehiko Kato, a spokesman for the Tokyo- based electronics maker, said by phone today. The 18 billion yen ($229 million) sale resulted in a gain of about 4 billion yen, he said. There won’t be any change in NEC’s venture with Lenovo, Kato said.
“We still expect Lenovo to leverage NEC’s expertise on developing high-end commercial models,” Christine Wang, a Taipei-based analyst at Daiwa Capital Markets, said in an e-mail today. “Meanwhile, we expect Lenovo to produce more in house in Japan for the Japan PC market.”
NEC is cutting 10,000 jobs, or about 8.6 percent of its workforce, after it posted a third annual loss in four years on slumping demand for its smartphones and notebook computers. The company plans to provide 17.5 billion yen in loans to Renesas Electronics Corp. (6723) in October to help the unprofitable Japanese chipmaker trim losses.
NEC shares have declined 29 percent this year.
The electronics maker sold the stake ahead of schedule as “it was able to foster trust with Lenovo,” NEC’s Kato said.
Lenovo, which bought the personal-computer division of International Business Machines Corp. in 2005, boosted sales last year by buying control of Medion AG (MDN), an Essen, Germany- based computer maker, and NEC’s PC unit. Sales rose 37 percent to $29.6 billion in the year ended March 31, the fastest rate since the 12 months through March 2006.
The purchases helped Lenovo increase shipments of computers including Thinkpad laptops by almost 15 percent in the second quarter, compared with a 0.1 percent decline in industrywide sales, Stamford, Connecticut-based Gartner Inc. said in July. That increased Lenovo’s market share by two percentage points to 14.7 percent in the period, almost matching Hewlett-Packard Co. (HPQ:US)’s 14.9 percent, Gartner said.
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