BenQ boss sees Siemens unit turning profit in 2007

"We can achieve a profit quickly because we have sales and distribution channels globally ... We complement each other. What Siemens has, we don't. What we have, Siemens doesn't.."

Lee Kun-yao, BenQ chairman

BenQ Corp (明基電通), the nation's largest handset maker, will be able to make Siemens AG's loss-making mobile handset unit profitable in two years, chairman Lee Kun-yao (李焜耀) said in Beijing yesterday, although the company's shares fell in Taipei.

"We can achieve a profit quickly because we have sales and distribution channels globally," Lee told reporters at a press briefing. "We complement each other. What Siemens has, we don't. What we have, Siemens doesn't."

Lee wouldn't rule out job losses after the acquisition.

After the transaction, the companies will have a total of 2,800 research and development staff, which will all be retained.

Taipei-based BenQ plans to produce combination handsets with MP3, laptop and mobile phone combinations, Lee said.

Shares of BenQ fell 1.2 percent lower to NT$32.1 on the Taiwan Stock Exchange yesterday, after rising as much as 2.5 percent earlier.

Credit Suisse First Boston analyst Alison Yip said she cut her recommendation on the stock to "underperform" from "neutral" after the transaction announcement.

It may take some time for BenQ to make the acquired business profitable, Yip said.

"We question how BenQ can turn around Siemens' mobile devices division over the medium term, given BenQ's weak financials and its problem on delivering" cost cuts, the Hong Kong-based Yip said in a research report yesterday.

She cut her target price for the stock to NT$27 from NT$33.

BenQ chief financial officer Eric Yu (游克用) on Tuesday said the company aims to reach break even on its handset business this year.

"Potential layoff of high-cost employees in Germany, the pension fund, and outstanding liabilities" of the Siemens unit are factors that raise further concerns about its consolidation into BenQ's operations, Yip said in her report.

Siemens reached an agreement with unions last year to secure 4,000 jobs in Germany until the end of next year, and BenQ will honor that accord, according to the firms.