China's Lenovo to reaquire handset unit

TAIPEI/HONG KONG (Reuters) - Lenovo (0992.HK), the world's No.4 PC seller, said on Friday that it will pay $200 million to reacquire the cellphone business it sold off a year and a half ago, as the lines blur between mobile phones and PCs.

Lenovo spun off its mobile phone unit in 2008, saying at the time that the move was designed to help it return to its focus as a PC maker.

"We believe the convergence of mobile Internet devices and PCs is a global trend," Wong Wai Ming, Lenovo's chief financial officer, told reporters. "We really want to grow very fast in this area, and will spend appropriately."

Lenovo said it would pay its parent company Legend Holdings $154 million in cash and issue about 80.9 million shares at HK$4.407 to buy back Lenovo Mobile.

The company will first begin selling its handsets in its home base of China, where it is currently the market leader in the PC business, before expanding to other markets.

"We ourselves want to identify a market where we have a great chance of success," Wong said. "Initially, we will look at China, but Lenovo today is a global company, and we will look at developing globally."

The company's move also comes as rivals such as Dell (DELL.O) and Acer (2353.TW) announced plans this year to enter the smartphone sector, attracted by the fatter profit margins available in the handset business.

"When the market becomes a little mature, the number (10 percent) will be a little on the low side," Wong said, adding that he expects operating margins at Lenovo to be higher than 10 percent for mobile internet devices.

On the other side, cellphone giant Nokia (NOK1V.HE) has said it will begin selling low-cost netbook PCs.

Many analysts have dismissed plans by PC makers to introduce smartphones, saying the companies do not understand the difference between the two fields.

PC makers have set modest targets for themselves, with netbook PC pioneer Asustek (2357.TW) saying it intends to sell 1 million smartphones next year, compared to the 16 million units Nokia sold in the third quarter of this year.

(Reporting by Doug Young and Kelvin Soh; Editing by Toby Chopra)