Siemens - the last point in the sale of an unprofitable department

Siemens has officially announced getting rid of its unprofitable department responsible for mobile phones. A buyer is a Taiwanese company of BenQ known as a manufacturer of LCD screens, computer equipment and mobile phones distributed in Asian region. The mobile branch appeared after Motorola's order for manufacturing a line of models, and then the company got the technologies and the first experience. That was more than five years ago. With time the companies' collaboration finished, but BenQ still kept on manufacturing and developing phones. As against the main five makers, BenQ can't boast with any great achievements, the quality of its devices is really inferior even to Siemens' ones. Design developments are also poor. So, in the end, we have a typical Asian brand with no peculiarities and strong developing team.

The sale of the department took place against a background of decreasing company's sales and the loss of market share. Still, the company found it important to save its face, and a principal moment was to keep the trade mark. Here are the conditions of the contract.

• BenQ gets the rights for using Siemens brand for 18 months from the moment the contract is signed and joint rights for the BenQ-Siemens brand for 5 years
• Siemens gives the complete manufacture in Brazil, Manaus, and in Germany, Kamp-Lintfort
• For Shanghais manufacture and R&D center a joint company is established run by the partners in the persons of Siemens and BenQ. BenQ guarantees the work of the factory and its load for 3 years
• BenQ gets the Siemens's share of 8.4 percents in the Symbian consortium
• Siemens gets BenQ's stock for 2 percent for the sum of 50 million Euro
• Siemens invests 250 million Euro into the integration of its department and BenQ

How many contracts when a sold company pays a buyer do you remember? I failed remembering such facts. Now, problems of the Siemens department are so global and influence the total situation in the company that they decided to get rid of it. By selling its branch and financing the sale Siemens passes its developments in the field, but keeps the control over the new company. In particular, the whole management remains the same, and only regional representatives change the signboard. The central office stays in Munich, and practically the same people from Siemens work there. So, we face the fact the company really only changed the signboard with no management and market strategy changes.

We remember about the first two-year difficulties from the experience of Sony and Ericsson mobile departments' integration. Both companies invested not only intellectual property but great amounts of money, and only this year the situation started to improve. One should understand both manufacturers are very strong, especially Sony that has had perfect distributional channels on European markets. And if even these grandees couldn't stop the fall of the joint company market share and lead a fast integration then BenQ and Siemens are unlikely to manage it also.

Many of you may ask a question "what does BenQ do it for "? The answer is quite easy. When you are presented a company for hundreds of million Euros, you are unlikely to think about tomorrow and will accept the present with pleasure. You won't be confused by the fact, the Brazilian plant is not very interesting in short-term perspective, and shipping phones from it to Europe is expensive. And the absence of any developments for 3G is not an anxiety cause either.

Unfortunately, here is where Siemens' story finishes, and a new factory starts its one. It won't be successful in the nearest future, which won't give us a cause for being delighted with the new company's products. The products announced earlier will be launched till the end of the year, and joint products will appear from the second quarter of the next year. That is the very time for Siemens worshipers to find another manufacturer, since that is a logical end of the German mobile history.

Eldar Murtazin ([email protected])
Translated by Maria Mitina ([email protected])

Published - 10 June 2005

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