Source: AFX International Focus
Time: April 11, 2006
Title: "Lite-On IT takeover of BenQ optical storage"

Summary: LITE-ON IT will pay 1.2 bln twd in cash and a 13 per cent LITE-ON stake in exchange for BenQ's optical storage manufacturing operations. LITE-ON IT will serve as BenQ's contract-maker of optical storage products while BenQ will focus on brandname optical storage business.

Analysis:

• The 1.2 bln twd cash consideration under the takeover deal with LITE-ON will help replenish BenQ's working capital but the amount is not significant given the company's scale of operations.
• LITE-ON IT will apparently benefit from BenQ's clientele but that does not guarantee it would be able to keep them for the long term or boost its market share, the analyst said.
• 'Such relationship does not mean that LITE-ON IT will definitely be BenQ's exclusive supplier given the possible risks for a brandname firm to have only one contract supplier.'
• LITE-ON IT has said the partnership with BenQ should increase LITE-ON IT's share of the world's optical drive market to 26-27 pct from 18-19 pct.
• But the analyst said such growth in market share can be real only when competitors do not expand their own share of the market and that BenQ consigns contracts on the product to LITE-ON IT exclusively.
• The analyst also added that this development may lead BenQ Corp to focus on its brandname business while scaling down its exposure to contract manufacturing.