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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"It's a deal too good to be true for BenQ. They get the whole business and a decent brand for free." 1

- Daniel Wang, an analyst at brokerage Primasia Securities in Taipei in 2005.

"It's natural they (Siemens) act surprised, because it wouldn't be very ethical to say they knew the mobile division was going to go down so they wanted to get rid of it. I'm not saying they knew this, but [I'm] pretty sure they knew this [unit] wasn't doing very well." 2

- Brad Akyuz, senior analyst in the mobile devices division of Current Analysis in 2006.

"They (BenQ) waited until the Siemens money was used up and then simply turned off the tap." 3

- A sector analyst in 2006.

Introduction

In November 2006, BenQ Corp. (BenQ) announced that it would cut 400 jobs at its Shanghai, China plant. This unit had belonged to the mobile devices division of Siemens AG (Siemens), a major German engineering and electronics company, up until October 2005, when it, along with plants in Germany, Brazil, etc., and R&D labs in Germany, Denmark, and China were sold to BenQ. After acquiring the division, BenQ renamed it BenQ Mobile GmbH (BenQ Mobile). BenQ Mobile had, in September 2006, filed for bankruptcy protection after a year of heavy losses. BenQ was a prominent Taiwanese electronics and computer peripherals manufacturer. As of 2005, it was also the sixth largest manufacturer of mobile phones in the world.

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Though it largely acted as an OEM for global brands like Nokia, Motorola, etc., it also sold mobile phones under the BenQ brand. The company had big plans to expand its operations and build its brand all over the world.

In October 2005, it acquired the loss-making mobile devices division of Siemens. With the acquisition, BenQ planned to sell co-branded mobile phones (BenQ-Siemens) in addition to the BenQ and Siemens brands. Siemens started manufacturing mobile phones in the late 1990s. Despite producing high quality phones, it was unable to make a mark in the highly competitive industry, and the business began incurring huge losses. In 2005, after yet another year of losses in the mobile phones business, Siemens decided to exit the business. However, securing the future of its employees was high on its list of priorities. Therefore, it looked to sell the division to a company that would assure the continuity of the division's operations in Germany...

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1] "BenQ may be getting what it paid for," www.businessweek.com, June 20, 2005.

2] "Siemens funds former employees," www.redherring.com, October 03, 2006.

3] "BenQ's German workers blame former owners Siemens," www.dw-world.de, September 29, 2006.

 

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