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Poor product management blamed for BenQ unit woes

Poor product management blamed for BenQ unit woes

Taiwan's BenQ Corp. yesterday blamed poor product management for the demise of its mobile unit in Germany.
BenQ, the world's No. 6 mobile phone vendor by market share, filed for insolvency last week for the German operations it took over from Siemens AG in October 2005, endangering 3,000 jobs.
Rick Lei, a BenQ vice president, told reporters delays in launching new phones resulted in an estimated loss at the firm's mobile operations of 840 million euros (US$1.07 billion) from October 2005 to the end of September this year.
The loss includes the company's own-branded business and its contract-manufacturing operations, Lei said, who cited two reasons for the delays.
First, BenQ Mobile sold custom-made phones for operators, so the customization and modification process took time.
'Unbearable' loss
But the more important factor was poor product management at the German unit, he said.
"The unit's management team didn't make enough effort to integrate their project, customer and supply chain operations," Lei said.
The loss was "unbearable" for BenQ, which has registered capital of NT$26.2 billion, Lei said.
If BenQ were to continue to keep the German unit, BenQ Mobile, it would have to inject 800 million euros (US$1 billion) into the unit in the coming year, he said.
Keeping Siemens brand
BenQ, Taiwan's biggest mobile-phone maker, is trying to halt three straight quarters of losses since taking over the Siemens business last year by stopping funding to its German handset unit. The company, which yesterday forecast its fourth-quarter loss to "drop substantially," can still use the Siemens brand for four more years under the sale agreement.
"Legally, they become two separate companies, so it should slow losses" to BenQ, said Tony Tseng, an analyst at Merrill Lynch & Co. in Taipei. "Siemens still has a better brand recognition in some countries," so holding on to the German brand name would be a benefit, said Tseng, who rates BenQ "sell."
Shares of BenQ dropped 2.7 percent to NT$18.25 at the close of trading yesterday, contributing to a 37 percent loss since the company bought the Siemens business on October 1, 2005. The benchmark Taiex index rose 14 percent in the same period.
BenQ expects Siemens to honor an agreement to pay an outstanding amount of at least 150 million euros from the deal, said Eric Yu, who declined to give a breakdown of how much would go to BenQ and how much the German unit would receive. Siemens said on Monday it was reviewing whether to pay the amount to the Taiwanese company or the German unit.
Siemens, which sold its first mobile phone two decades ago, decided last October to pay BenQ to take on the business after losses mounted and its market share shrank. BenQ, which rolled out its first BenQ-Siemens handsets in January, bet the acquisition would help the company expand globally and boost sales of its other products such as computers and liquid-crystal display monitors.
The German business employs about 3,000 people and has a factory in Kamp-Lintfort whose capacity accounted for 20 percent to 30 percent of BenQ's total mobile-phone shipments in the second quarter.
Siemens, which faces criticism from workers, unions and politicians over BenQ's decision, and said on September 29 it may take legal steps against the Taiwanese company.
Merkel warning
German Chancellor Angela Merkel said yesterday Siemens AG has a responsibility to help former employees at BenQ Corp.'s German handset unit.
"What do we say to the workers of Benq, who are to be turfed out onto the street without a by-your-leave?" Merkel said in the text of a speech delivered in Kiel on German Unification Day. "Tradition-based companies like Siemens have a special responsibility to their former workers. It must be fulfilled."
Siemens yesterday responded to criticism from politicians and labor unions by creating a 35 million-euro (US$45 million) fund to aid workers at risk of losing their jobs. The head of the IG Metall labor union in Siemens's home state of Bavaria described the offer as a "drop in the bucket."
"How can we foster trust in the social-market economy, when the practical experience sometimes speaks another language?" Merkel asked her audience yesterday.


Updated : 2021-10-17 21:27 GMT+08:00