BenQ blames management for $US1bn loss at mobile unit

BenQ blamed poor product management for racking up over $1.4 billion in losses and led to its decision to cut off funding from BenQ Mobile

BenQ blamed poor product management for racking up losses of over Euro 840 million (AUD$1.4 billion) at its mobile division, BenQ Mobile.

The poor management led to cost overruns and launch delays, and the losses prompted BenQ to cut off funding from the mobile division last week.

The Taiwanese company said it simply is not big enough to sustain such losses, which stretched from the time it took over the German handset division from Siemens last October through to the end of last month. BenQ's stock capitalization is only Euro 640 million, it said.

The company was in talks with Siemens AG about possible ways to save BenQ Mobile up to two weeks before the decision was made to stop funding it and let it file for bankruptcy protection in Germany, a decision announced last Thursday. Siemens paid BenQ Euro 250 million last year to take the mobile division off its hands.

"There have been some reports that said we 'just walked away.' This was a really tough decision, it wasn't at all easy to walk away," said Eric Lei, chief business strategy officer at BenQ, in a group interview on Tuesday with reporters.

On Monday, Siemens announced that it had set up a Euro 35 million fund to aid BenQ Mobile workers at risk of losing their jobs, and expressed shock at BenQ's decision to "put its people on the street."

The Taiwanese company said it believes there is workers' insurance to protect BenQ Mobile's 3,000 employees, and that it currently has no plans to put money into any kind of worker fund.

At the heart of the trouble with BenQ Mobile was an inability to turn around product management problems, BenQ said. The Taiwanese company stopped short of laying blame for the failure on any specific group, saying that some German handset projects went awry, as did some on the Taiwanese side, while poor communication between Taipei and Munich hurt other projects.

Without the product management issues, BenQ Mobile could have broken even, said Eric Yu, BenQ's chief financial officer.

Some news reports have alleged name calling and legal threats from both sides over the fate of BenQ Mobile workers after the bankruptcy filing. BenQ executives said there has been no official contact between the two companies and that the talk is mere speculation.

One point of contention that has been widely reported is that Siemens still owes BenQ money as part of the original deal to take over the handset division. Lei said the figure is over Euro 150 million, but would not be more specific. He said that BenQ expects that Siemens will honor the contract and pay the figure, some of which goes to BenQ and some which should go to BenQ Mobile. One news report had said Siemens was looking into ways to pay the entire amount to BenQ Mobile so that it could benefit displaced employees.

The German electronics giant said its decision to sell the mobile phone division to BenQ provided the greatest possible benefits to employees at the time of the sale, and that closing the business outright would have been a less expensive option. BenQ had presented a credible plan for operating and expanding the mobile phone division at the time of the sale, and Siemens believed it was sincere, it said.

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