UPDATE 1-NEC talks on Lenovo mobile phone venture stalled -source

Wed Jul 17, 2013 6:59am EDT

* Talks stalled due to disagreements on ownership, patents -source

* NEC considering options, including halt to new smartphone development

* NEC shares rise nearly 5 percent

TOKYO, July 17 (Reuters) - Japanese electronics company NEC Corp's talks with Lenovo Group Ltd over a mobile phone venture have stalled due to disagreements over majority ownership and patents, a source familiar with the matter said on Wednesday.

The Nikkei business newspaper reported that NEC planned to exit its loss-making smartphone business after a mobile phone deal with Lenovo, already a partner in the personal computer business, failed to materialise.

The source said NEC was still considering several options, including talks with a potential partner other than Lenovo, or halting the development of new smartphones and focusing on its existing lines of feature phones.

NEC and Lenovo declined to comment.

China's Lenovo Group, the world's No.2 PC maker has been examining partnerships and acquisitions to expand in high-growth markets such as smartphones, tablets and enterprise computing, spurred by a decline in PC shipments.

NEC had been in talks with Lenovo since early this year on a possible sale or tie-up involving its mobile unit, NEC Casio Mobile Communications Ltd, according to media reports and a source familiar with the discussions.

NEC holds 70 percent of the unit, in which Hitachi Ltd also holds a stake.

NEC, once a major player in Japan's mobile phone market, has seen its market share slip to about 5 percent.

NEC's shares ended 4.8 percent higher at 242 yen after the Nikkei report, their highest in more than six weeks, compared with a 0.1 percent rise in the benchmark Nikkei average. Lenovo's Hong Kong-listed shares rose 0.7 percent.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article