Siemens to hand over cellphone business to BenQ

7th June 2005, Comments 0 comments

7 June 2005, MUNICH - In a move criticised by workers but welcomed by investors, German electrical engineering concern Siemens announced on Tuesday plans to hand over its deficit-ridden cellphone operations to Taiwan's biggest mobile phone maker BenQ.

7 June 2005

MUNICH - In a move criticised by workers but welcomed by investors, German electrical engineering concern Siemens announced on Tuesday plans to hand over its deficit-ridden cellphone operations to Taiwan's biggest mobile phone maker BenQ.

The deal is expected to be completed by the end of September. The divestment is expected to cost Siemens some EUR 350 million and must still be approved by Germany's cartel authorities as well as by BenQ shareholders.

Under the takeover, the Taiwanese firm will use the Siemens brand name for a period of five years in what company chief executive Klaus Kleinfeld said would provide "a sustainable perspective for our mobile phones business".

Siemens employs some 6,000 people worldwide in its cellphone operations, about half of those in Germany. Under the deal, BenQ will guarantee the jobs up through the summer of 2006 under an existing wage and benefit cut agreement with workers.

But the issue of what happens after that was one which loomed large for German worker representatives.

Berthold Huber, deputy chairman of the metalworkers union IG Metall and a member of Siemens' supervisory board to represent employee interests, criticised the complete sell-off of the cellphone operations.

"I would have preferred Siemens to have kept the cellphone unit," he said. Now IG Metall will be working to try to get guarantees for the jobs in Germany for the period after the summer of 2006.

"There is still some time," Huber said. He noted that BenQ had a need for production capacity, something which "speaks for the production sites in Europe". He also said he hoped BenQ would have a better hand than Siemens had in end-user business.

Investors and analysts were encouraged by Siemens' decision, which falls in line with past strategic moves when the company sought outside partners when some business segments ran into trouble.

As of early afternoon on the Frankfurt stock exchange, Siemens shares were running 1.83 percent higher at EUR 62.33 as investors responded positively to the prospect that Siemens' balance sheets would no longer be hurt by the cellphone unit's red ink.

In fiscal 2004, Siemens' cellphone business lost EUR 280 million, with the losses continuing into the new fiscal year.

Taiwanese analysts saw benefits for BenQ in the linkup, saying it could help promote BenQ-brand cellphones on the world market and upgrade BenQ's capability in developing third-generation (3G) cellphones.

"Siemens cellphones are popular in the US and Europe, but not on the newly-emerging markets," Chyn Su-hsia, deputy director of the Market Information Centre, told Deutsche Presse-Agentur.

Chyn said BenQ lags behind Nokia and Sony Ericsson in third- generation cellphones, but that "after the takeover, BenQ can use Siemens' R&D talents to upgrade its capability to develop third- generation cellphones".

BenQ chairman K.Y. Lee said that "with the acquisition of Siemens' mobile phones business, we are rapidly approaching our goal to become one of the world's leading players in the mobile phone industry".

Lee said BenQ will issue global depository receipts (GDRs) to help Siemens to purchase its shares.

"We will hold an extraordinary shareholders meeting on 28 July to discuss the issuance of the GDRs," he said.

Despite the losses suffered by the German firm, Lee stressed BenQ decided to take over all assets and liabilities of the handset unit of Siemens on a debt-free basis.

Also, Siemens has agreed to "provide net cash payments of EUR 250 million for ongoing support of the business". In addition, the German firm will spend EUR 50 million to buy 2 percent of total BenQ shares, he said.

Lee said the takeover will enable BenQ to become the fourth largest handset maker in the world and the largest mobile phone technology company in Greater China, which covers Taiwan, Hong Kong, Macau and China.

DPA

Subject: German news

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