Analysts expect BenQ profits to drop 94 percent

BenQ Corp (明基), which in June agreed to take over Siemens AG's unprofitable mobile-phone unit, may report its smallest profit in almost four years on declining handset shipments and lower monitor prices.

Second-quarter income probably fell 94 percent to NT$168 million (US$5.3 million), or NT$0.069 a share, from NT$2.97 billion, or NT$1.28, a year earlier, according to the median forecast of four analysts surveyed by Bloomberg News. That would be the company's lowest profit since the NT$7 million BenQ earned in the third quarter of 2001.

"Operating margin was affected by a reduced revenue base," said Steven Tseng (曾續良), an analyst with Yuanta Core Pacific Securities (元大京華證券) in Taipei, which has a "hold" recommendation on the stock.

It was another "poor quarter for BenQ with weaker handset orders and falling LCD monitor prices," Tseng said.

BenQ K.Y. Lee (李焜耀), 52, is betting the takeover of Siemens' unprofitable mobile-phone unit will help him achieve his goal of creating a globally recognized brand, increase BenQ's profit and make it the world's fifth-biggest handset maker. The Siemens co-branding may also raise the profile of BenQ's other electronics products such as digital cameras, computers and LCD monitors.

Sales, reported earlier, fell 29 percent to NT$29.8 billion from a year earlier. The Taipei-based company had revenue of NT$32.3 billion in the first quarter. BenQ said on April 28 that sales would be little changed in the second quarter from the first. The company will announce results at about 2pm today.

The company said on April 28 that first-half handset sales will fall from a year earlier because of the company's "changing customer mix." Handset shipments in the first quarter dropped to one million units from 2.9 million in the fourth quarter, the company said, without providing year-earlier figures.

BenQ, which says its name is an acronym for "bringing enjoyment and quality to life," will more than double revenue to US$10.9 billion with the takeover of the Siemens unit, the company said June 7, when the agreement was announced. The transaction is expected to be completed by the end of next month.

BenQ its forecast for handset shipments this year to more than 15 million from the previous projection of 10 million.

"There's no catalyst for BenQ until the impact of the Siemens transaction filters down in the fourth quarter," said Vincent Chen(陳豊丰), an analyst at CLSA Taiwan (里昂證券).

A slump in flat-panel display prices probably put pressure on prices of BenQ's LCD monitors in the second quarter, and may cause the company to report an operating loss, Chen said. Display and imaging products account for more than a half of BenQ's revenue, he said.

Shares BenQ have fallen 1.9 percent this year, compared with a 1.7 percent gain for the benchmark TAIEX. The stock rose 0.2 percent to NT$34.10 as of 10:55am in Taipei.