BenQ pulls the plug on its mobile phone subsidiary

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By  Published  October 6, 2006

BenQ Mobile, a subsidiary of Taiwan’s largest mobile phone manufacturer BenQ, has filed for insolvency protection a day after its parent firm decided to stop funding for the unit.

BenQ Corporation announced last month that it had decided to stop funding the German unit it took over from leading European electronics firm Siemens AG less than a year ago.

“To stem unsustainable losses at BenQ’s mobile operations, BenQ Corporation’s board of directors convened and resolved to discontinue capital injection into BenQ Mobile GmbH & Co OHG, its German mobile phone subsidiary,” BenQ said in a statement.

“Since October 2005, we have committed and invested an inordinate amount of capital and resources into our German mobile phone subsidiary. We have worked alongside our German colleagues from the beginning and were able to achieve quite a number of milestones. Despite the progress achieved in reducing cost and expenses, widening losses have made this very painful decision unavoidable,” said KY Lee, chairman of BenQ.

Siemens paid BenQ approximately US$317million to take over the division, but the Taiwanese firm has been unable to restore it to profitability. BenQ estimates it has lost US$760million on the unit since the acquisition.

The German unit, which employs about 3,000 people, has offices in the cities of Munich and Bocholt and a factory in the western town of Kamp-Lintfort.

It was not clear yet what impact, if any, the decision will have on BenQ’s global operations. A spokesperson for BenQ said that the impact on its global operations for all regions was under evaluation. There are still hopes that the division may be saved. Martin Prager, the insolvency administrator for the unit, told Bloomberg that a sale to a rival “would be one of the best options to save the company”.

Siemens has since set up a US$44.6million fund for employees of BenQ Mobile in Germany.

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