BenQ Corp (明基), the nation's biggest handset maker, should abandon its global ambitions and rebuild itself as an Asian brand after an acquisition from Siemens AG led to a US$1.1 billion loss at its mobile-phone business, investors said.
BenQ, based in Taipei, may report a NT$4 billion (US$120 million) third-quarter loss today, according to the median in a Bloomberg survey of five analysts. Earnings have been hurt by last year's purchase of Siemens AG's mobile-phone business, which last month filed for bankruptcy protection after BenQ said it would stop funding the unprofitable unit.
"Retreating to and recasting itself as a regional player in Asia's handset market is probably the way out for BenQ after the setback in Europe," said Peter Wu, who helps manage the US$1.5 billion Invesco Taiwan Technology Fund, including BenQ shares. "That's why I'm still keeping the stock."
Asia's mobile-phone market is expanding about five times the rate in the US, with China and India adding a combined 10 million users each month. Still, BenQ faces competition from Nokia Oyj and Motorola Inc, the world's two largest handset makers, as they seek to increase market share in emerging markets with models priced as low as US$40.
Munich-based Siemens agreed to pay BenQ 250 million euros (US$316 million) to acquire its mobile-phone unit last October. BenQ expected to save as much as US$500 million in costs, and gain a similar amount in sales from the acquisition by this year, chairman Lee Kun-yao (
Instead, the company posted three straight quarters of losses on marketing costs and a delay in new models, dragging the shares down 39 percent in the past 12 months. BenQ's stock is the fifth-worst performer on the 132-member MSCI Asia Pacific Information Technology Index in the period.
BenQ, which started out making electronics for other companies in 1984, will continue its branded handset business in "selected markets," Lee said.
The company expects to introduce three to four new cellphones by the end of this year, focusing on Asia and the Middle East.
BenQ probably posted a fourth straight quarter of losses in the third quarter ending Sept. 30, analysts said, compared with a NT$20 million profit in the third quarter of last year before including the German unit in its accounting. The loss in the second quarter was NT$2.51 billion.
BenQ last month forecast a "substantial" narrowing of losses in the fourth quarter after stopping funds to the unit.
"There could be legal implications from BenQ's decision to stop funding, probably from the German employees," said Kevin Chang (張凱偉), a Taipei-based analyst at JPMorgan Chase & Co. "If Siemens could have terminated its handset business without any implications, it would have done that without paying BenQ to do so."
Chang has an "underweight" rating on BenQ.
Siemens, Europe's biggest engineering company, said on Oct. 5 it halted planned payment of a remaining 100 million euros for BenQ's acquisition of the mobile unit. Siemens also said on Oct. 9 that BenQ is "obliged to take care of guarantee claims" from customers who own BenQ-Siemens handsets.
The German unit produced 20 percent to 30 percent of BenQ's phones sold in the second quarter. Almost all the remainder is made in the company's two Chinese factories, chief financial officer Eric Yu (游克用) said.