Wed, Jun 08, 2005 - Page 1 News List

BenQ to buy Siemens phone unit

ACQUISITION The deal between Taiwan's largest cellphone manufacturer and the German company will make BenQ the world's biggest handset maker overnight

By Lisa Wang  /  STAFF REPORTER

BenQ Corp (明基電通), Taiwan's biggest mobile phone maker, yesterday announced that it will acquire Siemens AG's debt-ridden handset unit, aiming to bring the Taiwanese brand onto the world stage.

The deal will turn Taipei-based BenQ into one of the world's biggest cell phone vendors overnight, with annual revenues doubling to a total of US$10 billion, the head of the company said yesterday at a press conference.

"BenQ has been seeking ways to boost its economic scale and manufacturing capabilities to become a leading mobile phone player. We think Siemens is a partner that will be complementary," chairman Lee Kun-yao (李焜耀) told a packed house of reporters in Taipei.

Lee said the company will acquire Siemens' entire mobile phone business, with more than 7,000 employees worldwide, and will have its headquarters in Munich.

In a joint statement issued yesterday, BenQ said it will be acquiring all of Siemens' development and manufacturing locations in Manaus, Brazil and Kamp-Lintfort in Germany. The factory in Shanghai, which is operated as a joint venture together with a Chinese partner, will also remain a development and manufacturing location, it said.

Under the terms, BenQ will also get 250 million euros in cash from the German phone giant to develop patents and market the new brand BenQ-Siemens, according to the company.

Within 5 years after the agreement takes effect in October, BenQ will be able to launch products under the co-brand BenQ-Siemens, the company said. After that, BenQ will run only its own brand, the company added.

Siemens will also spend 50 million euros to get a 2-percent stake in BenQ by purchasing the company's global depositary receipts (GDRs) by September at the earliest, BenQ said in a statement.

As Siemens, the world's No.5 cellphone vendor, will absorb all of the losses incurred before the agreement takes effect, BenQ chief financial official Eric Yu (游克用) said confidently his company aims to break even in 2006.

With the contribution from Siemens, BenQ's handset shipment will exceed 15 million units this year, up from 10 million estimated previously, Yu said. The company will hold a special shareholders' meeting on July 28 to approve the acquisition deal and the issurance of GDRs.

Vincent Chen (陳豊丰), an analyst with CLSA Ltd (里昂證券) in Taipei, is quite conservative about the acquisition, citing uncertainties.

"It will be a challenge for BenQ to reach the break-even point for the new mobile operation next year as the company hopes. It will be good enough for BenQ to shrink losses from the unit by cost savings," Chen said.

"The only positive part of the deal is BenQ will have no cash offer for Siemens' handset division, but overall, I'm still negative about the acquisition," Chen added.

But Daniel Wang (王德善), an analyst with Primasia Securities, was relatively optimistic.

"Siemens' offer looks quite positive to BenQ, especially for BenQ's brand business," Wang said. Besides, BenQ will have chance to take over Singapore's Flextronics to make phones in the pipeline, he added.

The key question is how much BenQ can reduce its costs to compete directly with mobile phone giants Nokia Oyj and Motorola Inc, which are slashing prices to gain market share, Wang said.

BenQ shares yesterday lost NT$0.9 to NT$32.5 yesterday on the Taiwan Stock Exchange after the purchase of Siemens' handset division was disclosed on Monday.

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