German engineering giant Siemens has announced it will sell its mobile phone unit to Taiwanese electronics manufacturer BenQ after the business lost 500 million euros ($613 million) last year.
After talks with Motorola stalled, Siemens found a buyer in Asia
Siemens is selling its loss-making mobile phone business to BenQ, a spinoff of Taiwanese computer concern Acer. Siemens will book pretax costs of 350 million euros on the sale.
Full financial details were not disclosed, but the deal essentially means Siemens is paying BenQ to take the business, which is losing 1.5 million euros a day.
Workers will stay
BenQ CEO K.Y. Lee showing off a cell phone at a meeting in Bombay
Under terms of the deal, BenQ can use the Siemens brand name for five years. The Taiwanese company will take over the 6,000 people employed in the business "under existing contractual conditions," Siemens said. Siemens will buy 50 million euros worth of new shares in BenQ, giving it a 2.5 percent stake in the firm.
The takeover is expected to be completed by the end of September, the last quarter of Siemens' financial year. The company will remain headquartered in Munich.
"BenQ's and Siemens' mobile phone businesses complement each excellently other in terms of technology and geography as well," Siemens said in a statement. "This will give BenQ, which up until now has been very strong in Asia, access to the European and Latin American markets."
Falling market share
For months now, Siemens has been actively seeking a partner for its cellular business, which has booked hundreds of millions in losses over the past year. Siemens had been trying until the last minute to sell the business to Motorola, but the US firm finally pulled out of talks, newspaper reports said.
Siemens M65 cell phone
Siemens saw a severe decrease in market share over the past year due to price wars in the cell phone market and internal problems such as a serious software breakdown in its new models.
In the first quarter, the brand was in fifth place in the world cell phone market; by the time of the sale it had slipped to seventh place. The buyout with BenQ is expected to boost it to the fourth place in the worldwide market.
New focus at Siemens
The disposal accelerates Siemens's retreat from consumer electronics as the company focuses on industrial goods such as turbines, trains and automation equipment. Siemens follows other European manufacturers including Alcatel and Ericsson in giving up all or part of their businesses to Asian competitors to expand distribution networks and lower production costs
In addition to mobile phones, BenQ makes flat screens for computers, laptops, and CD-Rom drives. In terms of mobile phones, just a third of BenQ's production is under its own name; it produces the others for manufacturers like market-leader Nokia.