BenQ Corp.'s Failed Acquisition of Siemens' Mobile Devices Division

            
 
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Case Details:

Case Code : BSTR250
Case Length : 17 Pages
Period : 2005-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : BenQ Corp. and Siemens AG.
Industry : Telecom
Countries : Worldwide

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Excerpts Contd...

Why Did the Acquisition Fail?

Many reasons were attributed for the failure of the new company. BenQ's acquisition of Siemens' mobile devices business was a rare case of a small entity acquiring a larger unit.

According to Y.H Yeh (Yeh), professor and director of Graduate Institute of Finance at Fu-Jen Catholic University, Taiwan, in cases where the buyer is smaller than the bought, it is essential for the acquiring company to be financially sound and have healthy operations. "That means growing strong comes before growing big. You must have enough money to deal with future uncertainties," said Yeh.

BenQ's August 2005 sales were 21% lower when compared to the same period the previous year.

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The fall in sales was mostly because of the loss of its biggest mobile phone customer - Motorola. BenQ's attempts to expand its branded business seemed to have affected its OEM business, with several customers starting to see it as a potential competitor...

The Aftermath

The bankruptcy of BenQ Mobile and the consequent loss of about 3,000 jobs created a furor in Germany. Both Siemens and BenQ were held responsible for the debacle. The German public felt that Siemens was guilty of creating false hopes that the loss making unit would be saved. "From an economic point of view, Kleinfeld perhaps acted in the correct manner, but his reputation as someone who can turn around companies in a tough but always fair way has been lost," said an editorial in Financial Times Deutschland. There were also reports suggesting that Siemens sold the division because closing it down would have tarnished its reputation...

Outlook

In June 2006, Siemens announced that its telecom network business would be spun off as a joint venture with Nokia. In October 2006, Siemens announced that it was selling its optical network terminal assets and intellectual property to TXP Corp. With BenQ Mobile filing for bankruptcy, its corporate customers started severing links with the company. T-Mobile, the company's largest customer, ended its outsourcing contracts. Later, Vodafone followed suit...

Exhibits

Exhibit I: Siemens' Business Areas
Exhibit II: Financial Information on Siemens
Exhibit III: Financial Information on BenQ
Exhibit IV: BenQ's Subsidiaries and Business Areas
Exhibit V: BenQ - Siemens Visual Identity - Squound
Exhibit VI: Some BenQ Siemens Mobile Phone Models
Exhibit VII: Competition and Market Share in 2005 - Mobile Handsets (All Standards)


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