BenQ Mobile UK has filed for insolvency, 18 days after its Taiwanese owner withdrew support for BenQ Mobile GmbH.
At the time the UK operation was expected to survive, and a spokesperson told us: “It’s business as usual for us, as the UK office is a separate legal entity … The closure in Germany means that BenQ Mobile UK now reports directly to Taiwan, but it has had no other effect.”
In practice that meant BenQ Mobile UK would have to buy stock direct from Taiwan, and in the short term to deal with the German administrators to cover Christmas orders.
A valedictory statement from Philip Rambech, MD of BenQ Mobile’s UK, implied that that the terms were too inflexible. “Despite our best efforts there have been too many factors working against us and we have exhausted all avenues to ensure minimal impact on our joint plans for the Christmas quarter … [We had] found ways of securing deliveries directly from Taiwan and from the administrator in Germany … [but] we regret that yesterday we reached the stage where it is no longer possible for us to keep up the level of service needed in order to fulfill our ambitions”.
In retrospect it is clear that Siemens was the big winner in the affair. In a year under the BenQ banner, the handset business struggled to compete and watched market share slip to a little as 3% – Siemens had once had 10%. Despite a raft of good-looking new handsets, there seems to have been problems of matching the two working cultures – “the Taiwanese just couldn’t understand the pace the Germans worked at” as one insider put it to us. “Or the way the Germans thought they had jobs for life.”
In particular, BenQ people cite R&D delays in getting products to market on time. Here’s K Y Lee again: “Costs there were not falling as fast as we had expected, while the introduction of new products was lagging far behind schedule. As a result, BenQ Mobile failed to reach its financial targets for the past three quarters.”
BenQ’s announcement that it was “discontinuing” funding for BenQ Mobile in Germany certainly sounds a little bitter. “Since October 2005, we have committed and invested an inordinate amount of capital and resources into our German mobile phone subsidiary” said K.Y. Lee, BenQ Corporation Chairman. “Despite the progress achieved in reducing cost and expenses, widening losses have made this very painful decision unavoidable.”
Siemens paid BenQ e250m to take the troubled mobile division off its hands, but analysts estimate that the BenQ-Siemens had lost $315m in the second quarter alone. To offset that deficit, BenQ had to sell off another of its businesses, its optical drive manufacturing division. Over the year, BenQ poured e840m into its German handsets business, and when it pulled the plug it was estimating that around another e800m would be needed.
“The question was: Did we have confidence we could succeed?” BenQ’s strategy chief Rick Lei told Reuters. “If we’d known for sure 800 million euros would keep it alive, we’d have done it,”
Meanwhile BenQ still has the rights to use the Siemens name on handsets until 2010, if it wants to stay in the business. And the German insolvency administrator has said that his “highest priority” is to continue trading for the rest of the year, talking also of “unique technological competences which make the company attractive to investors”.
If there is a rescue plan, it appears to revolve around BenQ Mobile GmbH becoming an ODM for networks and others who want branded phones. But selling handsets under the BenQ Mobile name turns out not to have been among those core competencies.
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