Fri, Aug 25, 2006 - Page 12 News List

BenQ posts third straight quarterly loss

BETTER TIMES AHEAD The world's No.4 handset maker said it did not expect much improvement in the current quarter but that it would break even by the end of next year

By Lisa Wang  /  STAFF REPORTER

BenQ Corp (明基) posted its third consecutive quarterly loss due to a delay in launching new high-margin products, which also prompted the world's No.4 handset maker to extend its target for a turnaround to late next year.

BenQ, which is under growing pressure to turn around the unprofitable handset unit taken over from Siemens AG last October, said second-quarter loss was NT$2.5 billion (US$76 million), or NT$2.51 per share, compared to a net income of NT$480 million a year ago.

The results represented an improvement from NT$4.99 billion in loss during the first quarter, helped by a massive gain of NT$7 billion from asset sales.

"We have delayed launching new models, which are better priced, by one to two quarters behind our schedule. Because of the delay, we won't be able to hit our target [for a turnaround] as expected," Jerry Wang (王文燦), a vice president of BenQ, told investors yesterday.

Now BenQ expects to break even by the end of next year instead of the fourth quarter of this year, Wang said.

To boost growth, BenQ was undertaking a new restructuring plan to spin off its profitable manufacturing operation from brand-name business early next year.

"Our customers in some areas such as LCD TVs and computer monitors are increasingly concerned about the competition between BenQ and themselves. So we think it's time for us to separate the two," chairman Lee Kun-yao (李焜耀) told reporters.

Lee believed the restructuring efforts would bring more orders for and improve operation efficiency of BenQ at a time when it is still struggling to turn around the handset business.

Lee forecast the company's revenues for this year would rise to a combined figure of approximately NT$30 billion from brand and contracting businesses.

But the road ahead would not be easy as BenQ said it did not expect a significant improvement in the current quarter. Handset shipments, average selling price and revenues would be flat from previous quarter, the company forecast.

"The loss will reduce in the third quarter, though not dramatically," said financial executive Eric Yu (游克用).

As a result, Wang now pins his hope on Christmas demand to fuel growth of mobile phone shipments in the final quarter, which he expected a 30 percent expansion at quarterly rate.

BenQ only sold 7.25 million units last quarter instead of the 9.1 million projected in April. Mobile phones made up almost 40 percent of the company's total revenue of NT$ 54.85 billion last quarter.

Daniel Wang (王得善), who tracks the handset industry for Primasia Securities in Taipei, suspected the company's new restructuring efforts would increase BenQ's profitability.

"We care more about when BenQ can return to the black rather than the development of its non-core business," Wang said. "I doubt BenQ can keep its promise this time."

Profits from the manufacturing business would not be sufficient to cover the loss of BenQ's mobile phone business over the next few quarters, Wang said.

BenQ posted greater operating loss to NT$9.34 billion for the second quarter from NT$8.33 billion in the second quarter.

Shares of BenQ rose by the 7 percent daily limit, to close at NT$20.35 on the Taiwan Stock Exchange yesterday.

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