There may be a light at the end of the tunnel for BenQ Corp. and its long running mobile phone troubles. A rebound in its Taiwan mobile phone division could see it turn profitable by the third quarter of this year, the company says.
BenQ’s mobile phone shipments in the first quarter should post a small rise over the fourth quarter of last year, when it shipped 600,000 handsets, and the division should turn profitable sometime later in the third quarter, the company says.
That’s encouraging news for BenQ, which is recovering from estimated losses of over €840 million (US$1.1 billion) racked up over the past year in a failed attempt to become a global player in the mobile phone. The saga has seen BenQ turn from a roll model for other Taiwanese companies to follow as they build global name brands, to a warning on how overreaching can hurt a company.
It started in 2005, when BenQ obtained Siemens AG’s mobile phone operations as part of a plan to build a name brand that could expand throughout Europe, and then move west. At the time, BenQ already oversaw strong sales of its brand in certain parts of Asia, including China.
But stiff competition in the mobile phone industry stymied BenQ’s efforts, leading its German subsidiary, BenQ Mobile GmbH & Co. OHG to filed for bankruptcy last September after the Taiwanese parent announced it would stop investing in it. Finally, a few weeks ago, the German administrator dealing with the bankruptcy case said BenQ Mobile would be split up and sold after attempts to find a buyer failed.
Analysts have blamed cutthroat competition in the mobile phone business for many of BenQ’s problems in Europe. Nokia Corp. and Motorola Inc. dominated the mobile phone industry last year, both grabbing market share away from rivals. Nokia’s shipments surged to 347.5 million handsets last year, for global market share of 34.1 percent in 2006, up from 31.8 percent in 2005, according to industry researcher IDC. Motorola’s shipments rose nearly 50 percent year-on-year to 217.4 million units, increasing its market share to 21.3 percent from 17.5 percent.
Gartner Inc. noted that BenQ Mobile dropped out of the top six players in the mobile phone industry in the fourth quarter to end at ninth, and said a decision by its parent company to limit itself to markets in Asia and avoid Europe was smart because of the bad publicity surrounding its decision to stop investing in BenQ Mobile.
When the German-based company was healthy, it employed 3,000 workers, but that figure has dwindled to about 1,000 who have remained as bankruptcy administrators searched for a buyer. The fate of the remaining workers is currently unknown.
BenQ is facing its own problems in Taiwan, including a massive hit to its earnings and a slumping stock price.The company on Tuesday announced a record net loss of NT$27.6 billion (US$832.7 million) for the full year 2006 and said its chairman offered to resign for failing to turn BenQ Mobile profitable.
BenQ’s share price has fallen nearly 22 percent so far this year to NT$13.65 (US$0.41) early Wednesday on the Taiwan Stock Exchange.
