BenQ’s plans to become a major handset player are in shreds after it pulled the plug on the former Siemens Mobile business. The Taiwanese manufacturer took on the loss-making mobile arm one year ago in a bid to broaden its manufacturing capabilities and its reach into Europe.

But despite receiving a dowry of £168m, BenQ failed to stem massive losses and has pulled out of the company. It announced last week that it will cover any further losses, leaving BenQ Germany – as the business is now known – heading for bankruptcy and 3,000 job losses.

BenQ’s decision has come as a bolt out of the blue and will have shaken the faith of operator and distribution partners, leaving it facing an uphill struggle to get its products ranged. At the time of the deal, BenQ was heralded as a white knight, especially by German unions. Most commentators had anticipated Siemens Mobile would have to cut jobs and reduce costs in order to survive, but BenQ said it could turn around the company without losing jobs.

Sources indicate that few in Germany had anticipated the move, with some staff even receiving ‘retention’ bonuses in recent weeks for having remained with the company.

For BenQ the deal meant a European base, considerable GSM intellectual property and a route into European operators. Siemens’ deal looked like the best option for the German industrial giant at the time. Paying £168m to BenQ looked to be a good chance of preserving jobs and at the same time avoiding the phenomenal liabilities of making 3,000, largely well-paid and highly trained employees redundant.

A well-placed source close to the transaction at the time told Mobile of the onerous responsibility of German labour laws for a loss-making business: ‘BenQ’s biggest issue is the overhead – the biggest overhead is Germany. You basically can’t fire anyone in Germany; it’s an impossible situation for BenQ.’

UK staff worry over BenQ Mobile’s future

The future of staff at BenQ Mobile’s Hemel Hempstead office is left hanging in the balance after last week’s shock news.

A statement from the company said: ‘Possible consequences for the other BenQ Mobile sites and regional companies still need to be evaluated.’

BenQ-Siemens’ market share has declined from an estimated 10% of the market to around 3%.
The company has ordered a complete news blackout from all of its regional operations, with UK MD Philip Rambech, and the rest of his team barred from speaking to the press.

Two schools of thought have emerged on the future for BenQ Mobile in its current form.

Dr Richard Windsor, top mobile analyst at Nomura, typifies the hawkish view: ‘There can be little doubt that this is the end of the road for BenQ’s ambitions to become a branded handset manufacturer. This is the second letdown for mobile operators and mobile phone distributors. We expect to see BenQ quickly struck from all of the catalogues.’

Others see BenQ as having neatly dumped the huge financial liability associated with the German business. With the massive losses incurred in Germany and the associated social costs soon to be a problem for the German taxpayer, rather than BenQ in Taiwan, it is left with a network of international subsidiaries ready to sell its products. Some have even suggested that this might have been the plan all along.

Europe stunned by Taipei message

This time a week ago, BenQ Mobile staff across Europe were shocked when they received the following message: ‘BenQ announced today in Taipei that there will be no further payments to BenQ Mobile GmbH & Co OHG. Both revenue and margin development will fall far short of expectations in the important Christmas quarter. Due to the discontinuation of further financial support from the parent company, BenQ, and the resulting lack of liquidity and implicated disruption to business, BenQ Mobile in Germany will file for insolvency at the local court in Munich within the next few days.’

The statement continues: ‘BenQ plans to continue its global mobile business under the brand of BenQ-Siemens, and continue to utilise its associated research and development facilities, as well as production facilities, in Asia.’

A mismatch in German and Taiwanese working culture has also been pointed out as a potential problem for BenQ and its German unit.

‘The biggest problem is that they’ve got [is] a work ethic problem. The Germans think they’ve got a job for life. They start at nine and finish at five and have loads of holidays. I don’t think the Germans really bought into the BenQ thing,’ said an insider.

Source- http://www.mobiletoday.co.uk