BenQ Promises Big Gains After Q1 Handset Slump

Nobody ever said turnarounds are easy. Siemens’ loss-making mobile phone division has been hard for BenQ to swallow since its purchase late last year. The Taiwanese company on Monday reported its second straight quarterly loss since taking over the handset division, hurt by restructuring charges and a slump in handset sales.

But the mobile phone subsidiary promised big gains in the April-to-June financial period as it beefs up advertising in Europe for several new handset models and prepares to launch even more.

BenQ posted a loss of $4.99 billion new Taiwan dollars (US$154.6 million) during the three months ending March 31, compared to a net profit of NT$303.2 million during the same period a year ago. The loss nearly met analysts’ forecasts, but was the company’s second straight setback. In the fourth quarter of last year, its first after acquiring and setting up BenQ Mobile GmbH & Co., the Taiwanese firm reported an NT$6.02 billion loss.

Revenue also fell compared to the previous quarter, to NT$57.94 billion versus NT$66.30 billion during the fourth quarter last year. In the first quarter of 2005, BenQ reported revenue of NT$26.7 billion, but the figure is difficult to compare to this year because the purchase of Siemens’ mobile phone division caused BenQ’s revenue to double.

BenQ executives offered a bullish outlook for its mobile phones in the second quarter. Handset shipments are expected to grow 30 percent over the 7 million units sold in the first quarter, and average selling prices will increase 10 percent, the company said.

“We should see a clear improvement on our bottom line in the second quarter,” said Sheaffer Lee, president of BenQ.

The company expects overall revenue to rise 10 percent quarter-on-quarter during the three months that end June 30.

Clemens Joos, the chief executive officer of BenQ Mobile, said the new company has already become more efficient, shaving 150 million euros (US$185.2 million) in costs by slimming down its R&D and marketing operations, as well as squeezing some savings from component suppliers.

Joos also reiterated a pledge to turn the mobile business profitable by the end of the year.

“The Christmas [sales] season will push us to profitability,” he said.

The handset business was so tough for Siemens that it agreed to pay BenQ 250 million euros to take over the division and help the new venture succeed. BenQ officials have said they believe they have sufficient cash flow to ensure stable operations for the new mobile phone company this year.

The company is banking on the launch of several new mobile phones to boost its performance in the second quarter, including a model aimed at ensuring soccer fans don’t miss any highlights of the World Cup soccer tournament in Germany.

BenQ Mobile plans to be the first company to deliver a mobile handset designed to run on high-speed downlink packet access networks in time for the start of the games in June.

-Dan Nystedt, IDG News Service

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