Sony Denies Talks with Lenovo For PC JV to Sell Vaio Business

Japanese electronics giant Sony and Chinese PC maker Lenovo are reportedly in talks for a joint venture in the PC business.

Japanese broadcaster NHK reported 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.

Sony had earlier lowered its full-year profit forecast by 40% in October. In the financial year to 31 March, the company expects to make a net profit of 30bn yen ($290m, £177m, €212m), down from its earlier projection of 50bn yen.

In line with the slump in the PC business, the company is planning to restructure the product and manufacturing strategy for the division.

Sony is set to release its quarterly results next week.

Downward Earnings Pressure for PC Business

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.

"Sony's profitability is likely to remain weak and volatile, as we expect the majority of its core consumer-electronics businesses - such as TVs, mobile, digital cameras and personal computers - to continue to face significant downward earnings pressure," Moody's said.

The rapid penetration of smartphones is leading to the "cannibalisation" of Sony's key businesses, according to Moody's.

Lenovo's Acquisition Spree

Lenovo generates about 80% of its revenue from PCs, and the company has fared well with its low-cost strategy diversification into profitable markets.

The company also entered the smartphone market with its low-cost products and witnessed a steady increase in shipments. IPhone maker Apple recently suffered shrinkage in its global market share as second-tier smartphone brands Huawei, LG Electronics and Lenovo grew their smartphone shipments around two times faster than the global industry average, according to research firm Strategy Analytics.

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