Siemens is handing over about 6,000 workers of the handset operation to BenQ, which has around 14,000 employees around the globe.
Chen expects BenQ to start booking losses in the third quarter of next year and possibly into 2007.
JP Morgan analyst Johnny Chan shared the same worries with Chen, citing China's TCL Group as a precedent. TCL Multimedia and TCL Communications acquired the loss-making French handset businesses Thomson and Alcatel. Both found it far more difficult than expected to turn around the businesses due to competition and slower progress in cutting costs, Chan said in the latest report.
"Both stocks have seen significant de-rating in the past six months. We suspect BenQ's share price could follow a similar pattern in the next 12-18 months," Chan said.
Chan said he would revise his earnings forecasts to reflect the acquisition in due course. BenQ remains on the "Short" side of JP Morgan's Asia Pacific Tech Trading Portfolio with a target price of NT$27 for 2005, he said.
Despite the pessimistic consensus from analysts, International Data Corp (IDC) said there were some positive aspects of the BenQ-Siemens deal.
"The purchase of Siemens' handset unit will help BenQ expand its brand presence in Europe and Latin America, where Siemens has grabbed a solid market position, as BenQ only has a strong customer base in Asia," said Terry Tsao (
With Siemens' market position and BenQ's strong manufacturing capabilities and cost control, Tsao believes BenQ has a good chance to become one of the world's top handset vendors.
Indeed, it is too early to decide now to where the acquisition, rife with uncertainties, will lead BenQ. But as Tsao concluded, one thing's for sure: established European and US players are facing mounting competition from rising Asian stars.
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