Japan's NEC Corp is in talks to sell its struggling mobile phone unit to its personal computer venture partner Lenovo Group Ltd (0992.HK), a source familiar with the discussions said, confirming media reports of the negotiations.
NEC is also in talks with potential domestic buyers, the source said on condition that he wasn't identified.
NEC has until now said its mobile business is an important part of its overall operations. But after two years of losses the company is shedding assets to bolster profitability.
"Amid the rapidly changing market we are considering a number of ways to bolster the competitiveness of our mobile phone business, but nothing has been decided," NEC said in a statement through the Tokyo Stock Exchange on Friday in response to the media reports.
Lenovo officials could not be immediately reached for comment.
Japanese phone makers have struggled to gain traction overseas in markets dominated by Samsung Electronics Co Ltd (005930.KS) and Apple Inc (AAPL.O) where they are also being challenged by upcoming Chinese makers. In Japan, the two foreign giants are whittling down their share of cell phone sales.
Last October, NEC cut its mobile phone sales target for the year ending March to 4.3 million from a previous estimate of 5 million units. Lenovo, the world's No.2 maker of PCs, is cranking up overseas expansion in smartphones after solid growth in China.
Japan's biggest cell phone maker, Sony Corp (6758.T), is vying with China's Huawei Technology Co (002502.SZ) and ZTE Corp (000063.SZ) to be No.3 in the global smartphone market.
NEC also plans to sell its mobile services subsidiary NEC Mobiling Ltd (9430.T) for as much as $850 million, separate sources told Reuters this month.
Marubeni Corp's (8002.T) telecommunications unit and TD Mobile, a joint venture between Toyota Tsusho Corp (8015.T) and Denso Corp (6902.T), are vying for the 51 percent stake, the sources said.