Fri, Oct 06, 2006 - Page 12 News List

BenQ shares shaken by Siemens' move

SUSPENDED Siemens' plan to put the funds it owed BenQ in escrow and Vodafone and T-Mobile's decision to stop handset procurement sent the stock into a nosedive


Shares of BenQ Corp (明基) yesterday dipped to their lowest level in three weeks amid reports that Siemens AG plans to withhold the remainder of the subsidies it has promised to pay Taiwan's top mobile phone company for taking over its unprofitable handset unit last year.

The share price of BenQ plunged 4 percent to NT$16.8 on the Taiwan Stock Exchange yesterday, underperforming the benchmark index which rose 1.78 percent.

"Siemens' latest move, along with the decision of telecom operators T-Mobile and Vodafone to stop purchasing handsets from BenQ Mobile triggered a sell-off of BenQ shares," said Wang Deng-cheng (王登城), who tracks the mobile phone industry for Yuanta Core Pacific Securities (元大京華證券).

Siemens' refusal to pay the remaining around 100 million euros (US$127 million) dealt a blow to BenQ's share price, but not the firm's financial position, Wang said.

Wang said the Taiwanese company still has sufficient cash, around NT$10.9 billion, at hand to fund its operation for the second half of the year.

Siemens said on Wednesday that it would withhold payment of the final installment of around 100 million euros it owes BenQ for taking over its German cellphone unit.

Instead, Siemens said it planned to deposit the sum in an escrow account where it would remain frozen until the legal relationship between BenQ Mobile GmbH and its parent BenQ was clarified, according to the German electrical engineering giant.

"We haven't received any formal notification from Siemens yet," BenQ spokesman Eric Yu (游克用) said in a telephone interview yesterday.

Yu said the company believes Siemens would pay the money to BenQ and BenQ Mobile based on the agreement signed last year.

Yu, however, said BenQ would take legal action to protect its rights if Siemens refused to pay the final installment of the subsidies.

Siemens' latest move came after the Taiwanese company said last week it would stop injecting new capital into the German mobile phone unit.

BenQ took over the mobile phone unit from Siemens last October, with the promise of 250 million euros in subsidies from the German firm.

However, less than a year after the takeover, BenQ has lost 840 million euros from managing the German unit.

BenQ yesterday reported that consolidated sales last month dropped 20 percent month-on-month to NT$12.8 billion, as it did not include sales from BenQ Mobile.

But, sales for this month would be fair because of seasonal demand for consumer electronics such as liquid-crystal-display (LCD) TVs and computer monitors, the company said.

The company added that Vodafone's and T-Mobile's suspension of handset procurement from BenQ Mobile would not affect its operation in Asia, as the German unit was under the receivership of the German court after it filed for insolvency.

BenQ said in a separate statement that the board of directors' decision to stop financing BenQ Mobile would not affect the company's commitment to Taiwanese consumers.

Hank Horng (洪漢青), president of BenQ's Asia-Pacific branch, said the company would continue to provide maintenance services for its local customers and would unveil more models as planned.

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