BenQ confident of recovery by early '08

By Sheena Lee

SEOUL (Reuters) - Taiwan's mobile phone maker BenQ Corp. (2352.TW: Quote, Profile, Research, Stock Buzz) expects its sales to rise 17 percent this year, higher than analysts' forecasts, thanks to its bread-and-butter contract manufacturing business.

"Sometime in 2008, we should see the company in very good shape," BenQ Chairman K.Y. Lee said via video-conference at the Reuters Global Technology, Media and Telecoms Summit.

The firm is also in the process of selling the two buildings of its Taipei headquarters to raise over $120 million, as it liquidates assets for more cash to help BenQ's financial state.

Lee said sales would reach $7 billion this year, compared with $5.96 billion in 2006, and the company would return to profit at the end of this year or early next year.

The company forecast is much higher than a $4.1 billion sales estimate from 12 analysts on Reuters Estimates.

BenQ supplies to the likes of Hewlett-Packard Co. (HPQ.N: Quote, Profile, Research, Stock Buzz) and Dell Inc. (DELL.O: Quote, Profile, Research, Stock Buzz) on its contract side, competing with Taiwan rivals like Asustek Computer Inc. (2357.TW: Quote, Profile, Research, Stock Buzz) and Hon Hai Precision Industry Co. (2317.TW: Quote, Profile, Research, Stock Buzz).

Its mobile phone business competes with brands like Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz) and Motorola (MOT.N: Quote, Profile, Research, Stock Buzz).

Lee said its revenue would rise significantly in the second half of this year as the firm gains contract orders from the four largest PC brands, and as it customizes mobile phones for global operators such as Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) in Europe.

BenQ is also in talks to produce cellphones for a major Japanese carrier, which would be the company's first attempt to make mobile phones for the Japanese market. He declined to identify the company.

"We are not focused on the low-end side of the market. I would say eventually our mobile phones' average price per unit would be more than $100 per set," he said.

Lee also added that the fixed mobile network sector would become a vital niche market for the company in the future.

Gross margins for its brand business would be at around 12 percent this year, while margins for its contract manufacturing side is seen at about 10 percent, said Lee.

The company, which lost around $1.2 billion after it failed to turn around the mobile phone unit of Germany's Siemens (SIEGn.DE: Quote, Profile, Research, Stock Buzz) it bought in late 2005, announced in April it would spin-off its struggling BenQ brand to refocus on contract work.

The firm said it would re-name itself to Jia Da Corp. and spin-off BenQ in September as a subsidiary under the newly named company.

INVESTIGATION WEIGHS  Continued...