Source: Financial Times
Time: September 29, 2006
Title: "BenQ Mobile files for insolvency"

Summary: BenQ Mobile is filing for insolvency after BenQ Corp decided to "not to put any more money into the business because if it had it might have threatened its own survival." This occurs less than a year after BenQ Corp took over the mobile business from Siemens in Germany.

Reasons:

• "BenQ said it had invested 840m ($1.07bn) in the affiliate and booked 600m in losses from it during the past year. Sheaffer Lee, BenQ president, said BenQ would have needed to invest another 500m in BenQ Mobile to turn it round by the second half of 2007."
• "That was more than we could afford without putting the parent in danger," Mr Lee said.

Effects:

• "Shares of BenQ Corp surged more than 5 per cent to T$19.2 in Taipei" by the day after the public announcement
• BenQ and Siemens now have disagreements over the terms of their original agreement, and they will seek arbitration over the issue.

Possible Effects:

• "Eric Yu, BenQ chief financial officer, said the move would "drastically reduce" losses at BenQ after the fourth quarter this year."
• "Given that this company has been kept alive by its parent, it would seem there is no alternative to liquidating the company," said one German insolvency lawyer.
• "BenQ said it expected the German government to shoulder the cost of dealing with BenQ Mobile once an insolvency administrator had been named."
• BenQ executives said its move was likely to hurt Infineon, the chipmaker that has remained a key supplier for BenQ Mobile. AFX, the news agency, quoted Infineon saying that it would now be "more difficult" to break even in four quarters time. Infineon shares fell as much as 7.4 per cent in Frankfurt on Thursday.

Quote:

"Siemens said in a brief statement: "We are very surprised about the attitude of BenQ to no longer give financial support in Germany and to steer [the subsidiary] into insolvency. We do not understand the intentions, nor the background." Siemens declined to comment on how the insolvency would affect its business."