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Author: Dan Bieler
The Taiwanese electronics firm BenQ announced today that it will cease additional payments to its German mobile handset division BenQ Mobile. As a result of the cessation of these payments, BenQ Mobile is likely to declare insolvency over the next few days in Munich.
BenQ intends to continue operation of its handset business, but in Asia.
Comment: when BenQ acquired the mobile handset division from Siemens in June 2005, it inherited also 6,000 employees, 3,000 of which were in Germany. The Germany-based employees had existing employment contracts protecting them until the end of 2006. The timing of BenQ's announcement thus matches more or less the time horizon for which its BenQ Mobile employees enjoyed job protection.
With production moving to lower cost countries, BenQ now must prove that it has the right strategy in place to turn the handset business around. Since the departure from Siemens, the business has lost further market share from an already low level. Losses have mounted and margins suffered.
We remain unconvinced that the high-end segment is the right way to go for BenQ. Too many players compete in that space with well-established brands, multitasking devices, must-have brand image and large marketing budgets. We believe that BenQ would be better focusing on the low-end segment: handsets with voice and SMS functionalities and a decent design - for between €20-50. Growth markets in Africa and South Asia has many takers for such entry devices.
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