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123webguru News Desk
BenQ to take over Siemens' mobile unit
By Georgina Prodhan and Baker Li
FRANKFURT/TAIPEI (Reuters) - Taiwanese technology group BenQ has agreed to take over Siemens' ailing mobile-phones unit, drawing a line under hundreds of millions of euros of losses for the German engineering giant.
The deal, announced on Tuesday, will cost Siemens 350 million euros ($430 million) in losses before tax in sweeteners, transfer costs and writedowns, and will catapult much-smaller BenQ from relative obscurity into the world's top 10 mobile handset vendors.
In return, Siemens will acquire a 2.5-percent stake in fast-growing BenQ, Taiwan's top maker of computer equipment and mobile phones, via 50 million euros worth of new BenQ shares.
BenQ will use the Siemens brand name for up to five years and will take over several high-profile sports sponsorship contracts, including one with star soccer team Real Madrid.
It will also take on 6,000 Siemens employees -- half of them in Germany, where many have job guarantees until 2006 -- along with all of Siemens' development and manufacturing sites in Manaus, Brazil and Kamp-Lintfort, Germany.
The company's headquarters will remain in Munich, Germany.
"With this partnership we have found a sustainable perspective for our mobile phones business. BenQ and Siemens complement one another ideally," Siemens Chief Executive Klaus Kleinfeld said in a statement.
Siemens shares closed 2.3 percent higher at 62.60 euros, the second-biggest gainer on Germany's blue-chip DAX index, which was up 1.5 percent.
END TO UNCERTAINTY
The German company will invest 250 million euros in the struggling business before handing it over to BenQ and will write down 100 million euros worth of products that are to be discontinued, Kleinfeld told a news conference in Munich.
The 350 million-euro total will appear in Siemens' profit and loss account before the end of the fiscal year to end-September, Siemens said, adding on an analysts' call that it foresaw no further restructuring charges.
But Kleinfeld declined to give a full-year earnings outlook for his company, saying that despite the removal of the biggest uncertainty for Siemens, other factors relating to parts of the information and communications businesses remained unknown.
The deal is expected to close in the September quarter if approved by BenQ shareholders and competition regulators.
Investors welcomed the news of Siemens' exit from the mobile-phones unit, which has been plagued by quality problems in more expensive models and price pressure on cheaper handsets.
The unit -- Siemens' only remaining consumer business in a portfolio that stretches from turbines to trams -- brought in 5 billion euros of sales of Siemens' total of 75 billion last fiscal year, but made an operating loss of 152 million euros.
"It was clear that Siemens could not succeed with the mobile-phones unit. With this solution the issue is off the table. That will bring calm to the company and to the shares," said SES Research analyst Oliver Drebing.
Siemens said it had given no guarantees to compensate BenQ if the business failed.
AMBITIOUS BENQ
BenQ said it expected the merged mobile-phones unit to break even in 2006, and raised its forecast for handset sales this year by 50 percent to 15 million units. New, BenQ-Siemens branded handsets will be launched in the fourth quarter.
BenQ said the deal would help it to become the world's fourth-biggest mobile-phone vendor -- a position occupied by Siemens until last year. It has since been overtaken by LG Electronics and Sony Ericsson.
The Taiwanese company, which also makes consumer-electronics products such as cameras and scanners, will gain instant access to Siemens' strong market positions in Europe and Latin America, to complement its strength in Asia, and to new technology.
But BenQ's shares closed down 2.7 percent at T$32.50 as investors said the company would have its work cut out for it.
"They have to rebuild the brand and its commitment," said analyst Aloysius Choong, of International Data Corp., adding that Siemens had neglected mobile phones somewhat while making up its mind what to do with the unit.
The ambitious, 3-year-old company is one of many Asian companies exploiting their manufacturing efficiencies and expertise to take over maturing product lines from U.S. and European companies.
This year, China's Lenovo Group has bought IBM's PC-manufacturing business and Taiwan's TPV Technology has bought the monitor-making unit of Dutch electronics manufacturer Philips.
In the Siemens-BenQ deal, Siemens was advised by Morgan Stanley while BenQ was advised by Citigroup.
(Additional reporting by Kerstin Doerr in Munich, Doug Young in Shanghai and Ulf Laessing in Frankfurt)
News Source
http://www.microsite.reuters.com
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