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BenQ Mobile aims to double handset market share

BenQ Mobile aims to double handset market share

BenQ Mobile aims to double its mobile phone market share in a few years, while cutting costs by Euro 500 million.

The new mobile phone company born from BenQ's acquisition of Siemens's mobile phone division earlier this year has set a heady agenda for itself, vowing to double its share of the global handset market within the next few years, turn profitable by the end of 2006, and reduce costs by Euro 500 million (US$604 million) without laying off a single worker.

BenQ Mobile GmbH, which is based in Munich, Germany, should be able to increase its global share of the mobile phone market to 10 percent over the next two or three years, from 5 percent currently, by increasing its marketing budget and launching new handset models, said Clemens Joos, chief executive officer of the company, at an investors conference in Taipei on Thursday.

BenQ Mobile executives also pledged to make the company profitable by the end of next year -- not an easy job considering Siemens' handset division had been losing market share all year and BenQ's was weak in the third quarter.

BenQ's handset sales dipped to 800,000 units in the three months ended Sept. 30 but will rebound in the fourth quarter to around 1 million units, said Sheaffer Lee, president of BenQ.

BenQ, which announced financial results Thursday, posted far weaker net income in the third quarter than expected due to the drop in handset volumes, just NT$20 million (US$602,000), down from NT$480 million in the second quarter. Its revenue rose to NT$34 billion.

The handset business had been so tough for Siemens that it agreed to pay BenQ Euro 250 million to take over the division and help the new venture succeed. BenQ officials have said they believe they have sufficient cash flow to ensure stable operations for the new mobile phone company in 2006, but have not forecast beyond next year.

Cost reductions will help ease the strain on the new company. Joos said BenQ Mobile can reduce costs by around Euro 500 million, mainly by squeezing component and materials suppliers for discounts, and through savings of about Euro 100 million each from research and marketing.

And the 7,000 employees at BenQ Mobile need not worry, apparently. The company does not plan to pare its work force because there is very little job overlap amongst workers, said Joos.

Terry Tsao, managing director of market researcher IDC in Taiwan, said the new company's strategy looks reasonable, but BenQ Mobile has to prove it can execute through upcoming product launches and business goals.

In the past, Siemens' mobile phone division suffered by being slow to respond to shifts in consumer demand for new handset designs, he said.

It will be also be important for Joos, and BenQ Mobile's Taiwanese chairman, Jerry Wang, to ensure cultural differences don't disrupt the combining of the handset businesses, Tsao said.

BenQ Mobile, with annual revenue of US$5.6 billion, has operations all over the world, including Aalborg in Denmark and Suzhou in China, and also in Brazil, Taiwan and Germany.


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