Wed, Mar 15, 2006 page12

• BenQ looks to mobile phones to boost performance

  OUTLOOK BenQ said it expected its new phones to fetch higher prices, while Taiwan Ratings Corp announced it had placed the firm on CreditWatch

  • By Jason Tan / STAFF REPORTER
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  Taiwan's biggest handset brand, BenQ Corp (明基), yesterday said it expects higher average selling prices for mobile phones to boost its performance from the second quarter onward, after posting losses last year due to the acquisition of Siemens AG's mobile phone division.

  "Overall revenue for the first three months will most likely fall below that of the fourth quarter last year," Jerry Wang (王文燦), BenQ's chief marketing officer, told an investor conference yesterday.

  Dragged down by its acquisition of the Siemens unit, BenQ posted a net loss of NT$6.02 billion (US$185.6 million), or minus NT$2.45 a share, in the fourth quarter.

  

  A man presents a mobile phone by BenQ Siemens at the world's largest computer and electronics trade fair, CeBIT, in Hanover, Germany last Wednesday. BenQ said yesterday that it expects higher average selling prices for its new phones bearing the BenQ Siemens brand.

  PHOTO: EPA

  The company had recorded profit of NT$200 million, or NT$0.09 a share, in the fourth quarter of 2004, according to its latest figures.

  Gross profit for the fourth quarter of last year fell to 8.1 percent, from 10.5 percent in 2004, while sales rose 65 percent to NT$66.3 billion, the data showed.

  Due to seasonal factors, shipments of the firm's products, including projectors, handsets, optical disk drives and liquid-crystal-display (LCD) televisions, are all expected to decline slightly in the first quarter compared with the previous three months, Wang said.

  However, the company is still holding on to its initial target to break even in the fourth quarter, he said.

  "We had enough losses last year and we are rebounding," Wang said.

  The company has decided to phase out its lower-return DVD recorder business and downsize its MP3 player unit in order to dedicate resources to China and other emerging markets.

  BenQ will continue to bank on its mobile phone business. The segment's revenue contribution soared to 42 percent last quarter, from 15 percent a year earlier.

  The company's digital media group, including products such as LCD TVs and projectors, contributed 8 percent, while computing products, including notebooks and LCD monitors, made up the biggest chunk at 50 percent, its statistics showed.

  In the first quarter, BenQ introduced its first 12 handsets under the "BenQ-Siemens" brand. It expects to add another 13 to 18 models to the lineup later this year.

  These mobile phones, offering the latest technology and designs, come with higher average selling prices and are expected to help boost the company's margins from the second quarter, according to Clemens Joos, chief executive of BenQ Mobile.

  "These new phones were well received in the CeBIT technology show in Germany, and a number of global telecom operators have put them on their lists," Joos said.

  In the past, BenQ failed to perform well, especially in notebooks and optical hard drives, and had no choice but to acquire Siemens' handset unit to revive performance, an analyst from JP Morgan said on condition of anonymity.

  It is easy to sell handsets as long as they are of good quality and a reasonable price; however, more will be needed if they want to be a leader globally, he said.

  "Mobile phone vendors must come up with flagship offerings, such as the RAZR slim phone from Motorola Inc. But I have yet to see that coming from BenQ," he said.

  He forecast that BenQ's losses in the current quarter would likely be within the range of last quarter's, amid the company's continuing merger transition and brand campaign.

  Meanwhile, Taiwan Ratings Corp (中華信評) said yesterday it had placed BenQ on CreditWatch with negative implications.

  The move reflects Taiwan Ratings' concerns over BenQ's huge operating losses and cash outflow in the fourth quarter due to its loss-making handset division, the company said in a statement.

  It also indicates the challenges BenQ faces to restore its handset sales and improve margins in the medium term, the statement read.

  Shares of BenQ fell 2.6 percent to close at NT$31.40 on the Taiwan Stock Exchange yesterday.

  Yesterday's conference was held after stock markets closed.
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