Lenovo Shares Plunge Amid Sony Vaio Takeover Report

Shares in Chinese PC maker Lenovo declined as much as 15% after reports that the company is planning an alliance with Japanese electronics giant Sony to buy its loss-making Vaio PC business.

The company shares were trading at HK$8.52, down 15.31% on Hong Kong stock exchange as of 2:23 pm local time. The shares have plunged 21%, since reaching their highest level in about 14 years on 29 January.

Japanese broadcaster NHK reported over the weekend that the companies are in discussions to form a joint venture that will take over Sony's troubled Vaio PC business overseas.

Sony later denied the report, while noting that it is mulling various options for its loss-making PC business.

"As Sony has announced previously, Sony continues to address various options for the PC business, but the press report on a possible PC business alliance between Sony and Lenovo is inaccurate," the company said in a statement.

The electronics company earlier said its PC business is expected to make a loss for the fiscal year ending in March. The business unit is facing sluggish sales as more and more customers are preferring smartphones and tablets to PCs.

In addition, Credit rating agency Moody's Investors Service earlier downgraded Sony's rating to junk status, predicting the company's overall profitability to remain "weak and volatile".

The credit rating agency noted that Sony's TV and PC businesses are facing intense competition from global rivals, rapid changes in technology and product obsolescence.

Downgrades

In order to boost its mobile business, Lenovo said last week it would acquire Google's Motorola Mobility handset unit for $2.91bn (£1.8bn, €2.2bn).

The acquisition, which is the fourth largest by a Chinese or Hong Kong firm ever, is expected to help the company in rivalling smartphone market leaders Samsung and Apple.

The acquisition disappointed a number of analysts, who noted that it was too expensive for Lenovo. Subsequently, they downgraded the company stock.

Once a prominent player in the smartphone market, Motorola sales lagged far behind Samsung and Apple. Despite its acquisition by Google, the company is yet to prove its ability to cope up with the competition.