Taiwanese electronics manufacturer BenQ announced today that it has lost NT$17.9 billion (about $600 million USD) during the first nine months of 2006, and plans to sell off non-core aspects of its business—including a plant in Jiandong and shares the company holds in Gallant Precision Machining—in an attempt to recover.
BenQ’s consumer electronics business is doing well by most measures: during the third quarter of 2006, the company’s core business did NT$40.7 billion (about $1.2 billion USD) in sales—but that’s excluding sales from it’s “Mobile German” unit, the cell phone business BenQ acquired from Siemens last year, and the source of BenQ’s financial woes. Siemen’s business was losing almost $1.5 million per day and had to pay BenQ a premium to take over the company. BenQ has been pumping money into the operation—over $750 million so far—but was forced to put the unit into bankruptcy last month. This week, the firm laid off about 2,000 workers in Germany, and now is discontinuing cash injections into the unit. BenQ plans to set aside about $355 million to handle expenses from its Mobile German unit—such as accounts payable and compensation to employees—and will then evaluate the impact of the unit’s failure on overall operations.
“Our priority will be to rebuild sales channels and boost customer confidence,” said Eric Ky Yu, BenQ’s senior VP of finance in a statement. By ceasing to fund lasses in the Mobile German subsidiary, “we are looking to lower the company’s debt level over the next few quarters by implementing a proactive debt-repayment plan. With the debt-reduction plan that we’re implementing, including monetization of non-core long-term investments and assets, I am confident we will quickly improve financial ratios, strengthen balance sheet, lower interest expense, and free up additional cash for further growth.”
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