Siemens Finally Finds A Buyer
By Carlo Longino, Tue Jun 07 18:45:00 GMT 2005

The months-long saga is finally over: Siemens says it's selling its mobile handset unit to Taiwan's BenQ.

Bringing some closure to a situation that's dragged on since December, Siemens today said BenQ will take over its handset unit. Siemens is paying BenQ 250 million euros and buying 50 million euros worth of BenQ stock -- an interesting reversal on the usual buyout scenario, solidifying speculation that Siemens was having trouble finding a buyer for the beleaguered business.

BenQ will assume the unit and its 6,000 employees, and gets the right to use the Siemens brand name for 5 years. The company's total revenue will more than double with the purchase, with BenQ looking to take advantage of the access to the European market Siemens can offer. While Siemens shareholders are likely to welcome the deal as an exit from an unprofitable business, BenQ faces a lot of work to make it pay off.

The company says it expects to see enough cost savings to break even by 2006, but beyond the immediate benefit of basically winning some immediate production contracts from Siemens, the brand it's buying is dwindling -- researchers Gartner recently said Siemens' first-quarter market share had slipped to 5.5%, its lowest level since 1999. Combining BenQ's and Siemens' first-quarter sales still wouldn't be enough to overtake LG as the world's fourth-biggest handset vendor, with 6.2% share.

The challenge for BenQ will be to revitalize the brand by expanding its range of products -- particularly in 3G handsets, where Siemens has lagged badly -- and inject some life into it. BenQ is already Taiwan's biggest handset manufacturer, so there's the possibility it will be able to lower production costs (though it will headquarter the business in Munich and retain all 6,000 Siemens handset employees). Its strength as an ODM and contract manufacturer may also help it make inroads with carriers looking for customized devices.

The brand is a trickier matter. Siemens is well-known, though perhaps without the cachet of some of its handset rivals, and it enjoys some high-profile sponsorships, such as of the Real Madrid football team. BenQ had been making some inroads in the West, not so much in mobile phones, but in other consumer electronics areas. Would putting the Siemens handset brand out to pasture, in favor of the new and malleable BenQ one, have been a better choice? And what happens to BenQ mobiles -- will they be rebadged as Siemens? For a Taiwanese company looking to break into the West with a number of products, splintering under multiple brand names is questionable. The baggage of the Siemens handset brand is heavy -- though BenQ is banking on it to be beneficial.