TOKYO (Reuters) - Japan's Fujitsu Ltd on Thursday confirmed it was in talks with China's Lenovo Group to cooperate in the design and manufacture of personal computers (PC), and that any outcome would see it retain its own PC brand.

The announcement comes at a time when sales of increasingly sophisticated smartphones and tablet computers squeeze demand in a global PC market that peaked half a decade ago.

The possible alliance with the world's largest PC maker "is aimed at strengthening our brand and business," Fujitsu President Tatsuya Tanaka said at a briefing in Tokyo after the company released its latest earnings report.

"Scale is key to cost reduction, especially when operating globally," he said.

Fujitsu and Lenovo, in a joint statement, said they were exploring means of cooperation and were discussing financial support with the state-backed Development Bank of Japan.

Tanaka declined to comment further while details were under discussion.

Reuters reported the talks earlier in October. At that time, a person familiar with the matter said an alliance could see Lenovo gain control of Fujitsu's PC business to allow the Japanese firm to focus on IT services for corporate customers.

For Lenovo, a deal could help boost its purchasing power and consolidate its footing in a PC market where profit margins are thin. The Chinese firm's previous PC deals include buying the PC division of International Business Machines Corp in 2005 and creating a PC joint venture with NEC Corp in 2011.

Fujitsu also on Thursday said its operating profit more than doubled in the second quarter to 37.1 billion yen ($355 million).

Its share price ended up 7.8 percent after the announcements, compared with a 0.3 percent decline in the Nikkei average stock price index.

(Reporting by Makiko Yamazaki; Editing by Christopher Cushing)