Sat, Jul 02, 2005 - Page 10 News List

Siemens shifts focus to high-end mobile phones

PUSHING THE MARGIN The German engineering giant hopes to rescue its market share and reputation by concentrating on expensive multimedia phones

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Siemens AG, which will give up its mobile-phone unit to Taiwan's BenQ Corp (明基) later this year after losses mounted, plans to focus on more expensive handsets where margins are higher as users demand more multimedia functions.

The Munich-based company on Thursday unveiled two mobile phones costing about 300 euros (US$362) and 400 euros each that will become available in October and have features including music and video players as well as a camera with a built-in flash.

BenQ has the right to use the Siemens brand on phones for 18 months after changeover, scheduled to take place by the end of September.

With the new phones, Siemens aims to repair both its market share and reputation, which suffered from the sale of faulty phones and a publicly scrutinized search for a partner. Siemens has racked up more than 500 million euros in losses from phones in the past year, and its market share slipped to the lowest level since 1999 in the first quarter, researcher Gartner said in May.

"We will claw our way back to the top," Clemens Joos, who heads Siemens's mobile-phone unit and will become president of the BenQ-owned company, said at the product presentation in Hamburg.

"We will expand the higher-priced market segment, and we have a unique opportunity to do so," Joos said.

Siemens, which is Germany's largest engineering company, this month said it will pull out of the mobile-phone industry after two decades by handing the business and its 7,000 employees to BenQ.

The transfer will cost Siemens about 350 million euros.

Joos said Siemens still plans to introduce more than 10 handsets on its own this calendar year, and the first jointly developed BenQ and Siemens phones may appear in the first three months of next year. The companies plan to start negotiations about which products they will introduce together after receiving regulator approval for the takeover, he said.

The Siemens brand will disappear altogether from mobile phones in five years at the latest, according to the agreement between the two companies.

The phones introduced on Thursday, which Siemens showed together with two new cordless phones, are the SL75 which slides open to reveal the keypad, and the S75 phones targeted at business customers. Siemens was the first company to introduce a phone that slides open in 1997, and producers including Nokia Oyj, the market leader, have followed with similar products.

BenQ has also focused on phones that provide multimedia capabilities such as faster wireless Web access or music players.

Among its phones is a cube-shaped device called the Z2, which offers a special music player, a camera and radio.

The Taiwanese company, which will advance to the No. 5 spot among global handset producers with the takeover, plans to move its global headquarters for handsets to Munich, where Siemens is based. Four senior managers will join the new management team in Munich under Joos, he said on Thursday.

"Employees are now seeing what opportunities there are" in the business under BenQ, Joos said.

"Before, there clearly wasn't any perspective for the business," he said.

The German mobile-phone factory, based in Kamp-Lintfort, where Siemens employs about 2,000 people, will become "a core factory" for BenQ, where the company will house research and development functions as well as the European logistics center for the business, Joos said. The company runs another handset factory in China and one in Brazil.

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