"Psst! Hey, buddy! Wanna buy a cell-phone company? It's cheap -- so cheap, in fact, that we'll pay you to take it."
That's been the story of the life of Siemens' (NYSE: SI ) handset unit over the last two years. As you may recall, back in 2005 the German tech conglomerate got rid of the money-burning business by paying Taiwan's BenQ roughly 200 million euro to take it off Siemens' hands. And while that may sound like BenQ got itself a deal "too good to be true," well, you know what they say about such deals.
You see, the unit had racked up 500 million euro in losses for Siemens in the year preceding the deal, so despite selling at a loss, Siemens counted itself lucky to be rid of it. BenQ, however, was not so fortunate. The firm gambled that it could turn the business around (as, in fact, did Siemens, agreeing as it did to take a 2.5% stake in BenQ as part of the deal), but its dice came up snake-eyes. After spending 18 months trying to compete in a world where giants like Nokia (NYSE: NOK ) , Motorola (NYSE: MOT ) , Sony (NYSE: SNE ) , and Ericsson (Nasdaq: ERIC ) control 82% of the market, BenQ finally admitted defeat on Tuesday, telling a German insolvency administrator that it had been unable to find a new buyer for the unit, and intends to shut it down.
"Hope springs eternal" (or "a sucker is born every minute")
But wait! At the last possible moment, a lawyer from the law firm "Sibeth" stepped forward yesterday with glad tidings of a buyer interested in taking up where BenQ's losses left off. According to said lawyer, an "investor consortium" with "ties" to various U.S. IT businesses has offered to take the cash-burning business off BenQ's hands.
No word yet on who this anonymous masochist, or group thereof, might be -- nor, of course, of the terms of the supposed deal. And specifically, there's no news of how much BenQ might have been asked to pay to rid itself of its Teutonic albatross. Whoever it turns out to be, though, wish it luck.
Or if you're invested in any of BenQ's competitors, wish it a speedy demise. Because the longer this sickly business hangs around, the longer there will be a good 2% of the cell-phone market with nothing to lose by selling phones at a loss in hopes of gaining enough market share to become viable.
Read the backstory to this story in: "Siemens Can't Give It Away."
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