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NEC could ditch telecoms services unit

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Ailing Japanese IT giant NEC could be set to jettison yet more of its business and move further from the mobile space after reports suggested its ready to sell subsidiary NEC Mobiling for up to $850 million.

NEC Mobiling designs and builds telecoms infrastructure equipment, operates a repair and maintenance service for mobile handsets, and runs a Japan-wide network of mobile phone shops reselling carrier devices.

Unnamed “industry and financial sources” told Reuters that NEC is looking for ¥70 to 80 billion ($US742 million - $US848 million) for the business, with domestic rivals Marubeni and TD Mobile – a joint venture between Toyota and auto-parts biz Denso – both interested in NEC’s 51 per cent stake.

NEC has been undergoing some pretty drastic restructuring over the past 12 months as it looks to turn around its fortunes.

After losses in excess of $1.3bn in fiscal 2012, the IT giant announced plans to shed around 10,000 jobs, and has been streamlining the business through selling its shares in Lenovo, as well as flogging a heap of flat panel patents to Hon Hai (aka Foxconn).

Ironically, one of the few parts of the business in its doom-laden report of January 2012 doing well was carrier networks.

However, according to Forrester analyst Bryan Wang, even this area has become increasingly difficult to make money in thanks to competition from foreign rivals like Huawei, Alcatel and Nokia Siemens Networks.

“The opportunity for local vendors like Fujitsu and NEC is shrinking. The Japanese market is mature and NEC is not actively gaining market share,” he told The Reg. “[Offloading NEC Mobiling] makes business sense. It’s a part of the natural process for Japanese technology companies, moving away from their non-core business.”

The question remains whether NEC’s failing Mobile Terminal Business will follow suit.

Smartphone shipments were hit hard last year by the rise of foreign invaders such as Apple and Samsung. In fact, research from market watchers Counterpoint said foreign brands captured more than 50 per cent of the Japanese market for the first time last year.

Tellingly, NEC was not even mentioned in that report.

With NEC forecast to post a $100bn profit this financial year, there is less pressure on it to ditch the mobile phone division, but it will have to make its mind up eventually, according to Wang.

There’s significant competition now and a lot of pressure on local vendors. It’ hard for them to spend more R&D on innovating so they’re losing out in the smartphone game,” he added.

“I’m not saying it’ll happen soon, but ultimately NEC will have to rethink its strategy here.”

NEC couldn't immediately be reached for comment. ®

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