Shares of BenQ Corp (明基) dropped by almost 1 percent yesterday, as investors indicated skepticism about the firm's progress in reviving its money-losing handset unit, even if it outsourced all handset production.
The stock price of the nation's top mobile phone maker slid 0.83 percent to end at NT$17.85 after losing ground to early gains in the mid-session yesterday. That brought the stock's decline to 43 percent since the beginning of the year.
BenQ said late on Wednesday that the company was trimming output and the number of employees in its European and Taiwanese factories to boost cost efficiency.
But the company declined to say whether it would ultimately farm out all of its production to other companies as its rivals Sony Ericsson Mobile Communications AB have been doing, nor did it respond to questions about whether it was in talks with Hong-Kong-listed handset maker Foxconn International Holdings Ltd (富士康控股), or other companies to sell its handset factories in Europe or China.
"It is a good idea for BenQ to think about outsourcing all production of its handsets, though the strategy will not greatly improve its bottom-line," said Daniel Wang (王得善), a handset industry analyst with Taipei-based Primasia Securities.
The strategy of outsourcing manufacturing to other companies would save little, compared to the company's massive operating expense of NT$13.23 billion (US$402 million) last quarter, Wang said.
The major problems faced by BenQ are how to recoup its market share by launching new products faster and targeting the right market segments, Wang said.
"I doubt BenQ can save big money by ending making phones at its factories," Wang said.
BenQ blamed postponement of the unveiling of new handsets in Europe as a primary reason behind the disappointing financial results for the first half of the year, which will also cause a delay in meeting the target of breaking even by the year-end.
As BenQ has failed to fulfill its promise by making significant improvement in narrowing losses during the past quarters, "people wanting to invest long-term will not risk buying the stock now," Wang said.
Wang Deng-cheng (
That would only help BenQ to boost its gross margin to 20 percent in the second half of next year, which would still lag far behind the 30-35 percent enjoyed by major handset vendors such as Sony Ericsson, Wang Deng-cheng forecast.
BenQ posted 7.5 percent in gross margin for the first six months of this year.
The company reported a NT$7.5 billion loss for the first half of the year after it took over Siemens AG's money-losing handset division last October.
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