NEC Buys up Remainder of Infrontia

Reuters has reported that NEC is spending about 33.5 billion yen ($282 million) to gain full ownership of phone-making unit NEC Infrontia Corp. in its latest step to pool group resources and eliminate overlap.

NEC, Japan’s third-largest electronics conglomerate which already owns 53.3 percent of NEC Infrontia, said on Thursday this week it would launch a tender offer for the remaining 58.9 million shares at 569 yen each, or an 18 percent premium from Thursday’s closing price.

The consolidation step comes after the Tokyo-based company earlier this year made two software subsidiaries, NEC Soft and NEC System Technologies, into wholly owned units.

Reuters reports that NEC will shift 200 of its engineers to NEC Infrontia to boost the number of employees developing IP telephone systems at the unit to 1,000 by July 2006 in a bid to better compete with rivals such as Avaya.

If NEC is unable to acquire all outstanding NEC Infrontia shares through the tender offer, it plans to swap the remaining shares of the subsidiary with NEC shares to turn it into a wholly owned unit.

Through the consolidation, NEC, with group revenues of around 5 trillion yen, aims to boost sales of its communication services and hardware for corporate clients to 500 billion yen from 350 billion yen in the medium term.

Stephanie Watson of UK based analyst MZA told Comms Business Magazine that in terms of their analysis for first half 2005 global PBX and IP PBX lines shipped this move would make the combined NEC operations the number three supplier behind Panasonic and Nortel and moves Avaya to the number four position.

Comms Business Magazine believes the impact in the UK will be minimal as NEC does very little PBX business here. However, there is considerable speculation in the UK channel that Philips are about to sell off their telecoms division and that NEC are certain to be a prime suspect in any possible move to purchase the Dutch giants’ phone operation.