Wed, Oct 25, 2006 - Page 12 News List

BenQ's European failure sparks record third-quarter losses


BenQ Corp (明基), Taiwan's top mobile phone maker, yesterday posted a record high quarterly loss as it failed to turn around the unprofitable mobile phone unit it took over from Siemens AG less than a year ago.

BenQ, however, said the worst period was behind it.

"We now are fixing some of the remaining problems. We hope the company will soon be on the road towards healthy growth," chairman Lee Kun-yao (李焜耀) told investors with relief.

Lee admitted that the plan to push the Taiwanese brand onto the global stage via the merger with Siemens' handset unit had been "unsuccessful."

Losses widened to NT$12.22 billion (US$369 million), or NT$4.65 per share, in the third quarter, bringing the total loss in the first nine months to NT$19.7 billion. This was compared to a net income of NT$20 million, or NT$0.01 per share, in the third quarter of last year.

Late last month, BenQ decided to stop funding BenQ Mobile, its money-losing European subsidiary, and put the Munich-based company into receivership because of a run of losses that began with the takeover last October.

"We believe it will now be easier for us to hit our goal of turning things around in 2007 as operational expenses will be reduced by 90 percent after excluding BenQ Mobile," BenQ president Sheaffer Lee (李錫華) said.

BenQ remains strong in liquid-crystal-display (LCD) monitors, projectors and printers, which were making profits, he added.

BenQ would continue to sell branded mobile phones, but it would shift its focus to the high-margin niche market, rather than the highly competitive mass market, Lee said without providing any clear brand strategies.

Despite the expected significant improvement in expenses and costs, "it will not be easy for BenQ to turn things around," JP Morgan analyst Kevin Chang (張凱偉) said.

"BenQ's operations have just returned where they were one or two years ago, but the competition is much stiffer now as more players have joined the battle," Chang said.

He said he would retain his "sell" rating on BenQ with a target price at NT$6.5.

Excluding sales, BenQ Mobile revenues dropped over 26 percent to NT$40.67 billion in the quarter ending last month from NT$54.85 billion in the second quarter.

"Overall revenue will slide slightly further in the fourth quarter," BenQ's president Lee said.

BenQ's mobile phone business made up 18 percent of the company's total revenue last quarter, down from 36 percent in the previous quarter. LCD monitors, among other computing products, made up around 70 percent of the third-quarter revenue.

Separately, BenQ also said it planned to raise NT$10 billion to reduce debts, which totaled NT$4 billion as of last quarter, over the next four quarters by selling long-term investments and fixed assets worth a combined NT$70 billion.

Shares of BenQ rose 0.58 percent to NT$17.25 on the Taiwan Stock Exchange yesterday, underperforming against the benchmark TAIEX index's 0.81-percent gain.

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