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BenQ reports widening losses

A woman walks past posters reading ''Unity, BenQ, Let's Go!'' outside a BenQ investor's meeting yesterday. BenQ announced that its fourth quarter losses had grown to NT$7.89 billion (US$238 million) from a year ago. PHOTO: CHANG CHIA-MING, TAIPEI TIMES

BenQ Corp (明基) said yesterday its fourth quarter losses had widened to NT$7.89 billion (US$238 million) from a year ago, dragged down by the unsuccessful takeover of Siemens AG's unprofitable mobile phone unit.

Taking responsibility for the turn of events, chairman Lee Kun-yao (李焜耀) tendered his resignation during a board meeting yesterday. But his resignation was turned down, Jerry Wang (王文燦), a vice president at BenQ, told an investor's conference yesterday.

"The board wants him to stay and hopes he will help the company turn around as soon as possible," Wang said.

Lee, who did not attend the conference, was trying to keep a low profile amid recent insider-trading probes. Lee was barred from traveling abroad while Eric Yu (游克用), a senior financial executive, was detained by prosecutors.

BenQ said the company's losses had reached NT$7.89 billion during the period of October to December last year, from NT$6 billion a year ago.

However, this represented a contraction from NT$12.22 billion in losses in the third quarter after the company stopped investing in the money-losing mobile phone unit last September, less than two years after the takeover.

The fourth-quarter losses were due to high non-operating expenses amounting to NT$6.72 billion, including NT$4 billion for one-time after-sale customer services and maintenance and NT$1 billion for royalties, financial executive David Wang (王淡如) said.

Overall, losses last year spiked to NT$27.61 billion, or NT$10.78 a share, compared to NT$5.23 billion, or NT$2.12 a share, in 2005.

"We believe the first quarter is the bottom point. Business will improve quarter by quarter [after the split of the contract and brand businesses]," Jerry Wang said.

"We could return to profits in the fourth quarter," he said.

Despite BenQ's blueprint, investors remained concerned over speculation that the company was becoming a target for hostile takeovers in the wake of heavy trading volume last Thursday.

"BenQ will only have few opportunities in terms of core business. The company's remaining value rests in its potential for a merger," said Vincent Chen (陳豊丰), an analyst at CLSA Ltd in Taipei.

Investors could attempt to take over BenQ as only a small number of investors would be interested in buying its stocks, Chen said.

Jerry Wang said that "no interesting parties have approached us yet."

BenQ said that its net value was close to NT$17 a share.

This included the company's long-term investments such as AU Optronics Corp (友達光電), the world's third-biggest maker of liquid-crystal-display panels.

BenQ stocks dropped 6.19 percent to NT$13.65 yesterday, against a 0.02 percent decline at the benchmark TAIEX index.

Revenues plunged 48 percent annually, or 15 percent on a quarterly basis, to NT$34.6 billion during the final quarter of last year, with handset contribution down to to 4 percent from 42 percent at its peak.

Taiwan Ratings Corp (中華信評) said yesterday that its ratings on BenQ had not been immediately affected by the company's fourth-quarter loss of NT$7.89 billion, as the firm's cash flow and balance sheet in the fourth quarter of last year remained consistent with the current ratings.

However, ratings on BenQ could be under pressure if the company failed to improve its handset business unit over the short to medium term, Taiwan Ratings said.
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