BenQ ready to cut its losses in German handset unit

BenQ Corp (明基), Taiwan's biggest mobile phone maker, yesterday said it would not inject any fresh capital into its German mobile phone unit to stem unsustainable losses since it took over Siemens AG's money-losing handset division a year ago.

Munich-based BenQ Mobile GmbH & Co OHG, fully owned by Taipei-based BenQ, was considering filing for insolvency protection, the company said at a press briefing yesterday. The European unit may be disbanded if losses continue to widen, according to BenQ.

The German unit has offices in Bocholt and Munich and a factory in Kamp-Lintfort. But BenQ stressed that it would continue selling BenQ-Siemens mobile phones made in its Chinese factories.

The news came after BenQ posted NT$13.52 billion (US$409.8 million) in losses since it absorbed Siemens' handset unit last October.

"Despite the progress achieved in reducing costs and expenses, widening losses have made this very painful decision unavoidable," BenQ chairman Lee Kun-yao (李焜耀) told reporters in Taipei yesterday.

Lee said BenQ had a lot of problems that were beyond its control as the company failed to hit financial targets, and it wouldn't be easy for BenQ to limit the massive losses in the short term.

Last month, BenQ told investors that it would postpone the break-even point to the middle of next year at the earliest after failing to significantly narrow losses in the second quarter.

"We believe we can still turn the mobile phone unit around, but we have to invest lots of money to make that possible," Lee said.

"That would put the company under heavy financial pressure, so we have to do some risk management," Lee explained.

BenQ's board decided yesterday to suspend the US$400 million it had planned to inject into the German subsidiary last month. BenQ, which also makes notebook computers, DVD recorders and digital projectors, has already injected 600 million euros into the German handset unit.

Eric Yu (游克用), BenQ's chief executive financial officer, said the company's losses were expected to diminish sharply in the fourth quarter after the German government took control of loss-making BenQ Mobile.

"The move will have a positive effect on BenQ as it will stem losses," said Vincent Chen (陳豊丰), an analyst with CLSA Ltd in Taipei.

BenQ shares have plummeted 36 percent on the Taiwan Stock Exchange from NT$28.4 last October to NT$18.2 yesterday. In Germany, shares of Infineon Technologies AG plunged by 3.1 percent to 9.41 euros after BenQ, its client, announced the insolvency protection plan.