BenQ Archives ~ Business China : news for investors in China

CONSUMER: Midea Shopping Spree Moves to Germany

By newsdoug on May 18, 2016

Bottom line: Midea should limit its new plan to buy a major stake in Germany’s Kuka to a strategic partnership, and avoid temptation to help Kuka lower costs by moving major parts of its manufacturing to China.

A recent overseas M&A binge by top Chinese home appliance makers is taking a somewhat unexpected turn, with word that Midea (Shenzhen: 000333) is pursuing a deal to buy a major stake or even outright purchase Germany’s Kuka (Frankfurt: KU2). In this case the deal comes as something of a surprise, since Kuka isn’t an appliance maker but instead manufactures industrial robots that Midea is using to modernize its production lines.

This particular deal could carry a price tag of more than $1 billion, and would come just 2 months after Midea’s smaller deal to purchase the home appliance business of scandal-tainted Japanese electronics giant Toshiba (Tokyo: 6502). (previous post) This latest deal is logical, though could also carry a large degree of risk due to previous poor results for Chinese companies that bought manufacturers in the tough French and German markets. Read Full Post…

CELLPHONES: Lenovo Needs to Admit Motorola Flop and Move On

By newsdoug on August 18, 2015

Bottom line: Lenovo should write-off its Motorola investment as a failure, and focus its smartphone efforts on building up its own brand rather than relying on more acquired foreign names.

PC giant Lenovo (HKEx: 992) repeated a frequent pattern last year when it purchased a former global leader, Motorola, with plans to resuscitate the struggling brand to boost its own smartphone business. It repeated yet another pattern last week when it said that early efforts to revive Motorola were failing, undermining its own profits and sparking one of the worst sell-offs for its shares in recent memory.

Having learned once more the difficulties of reviving broken western brands, Lenovo should now take the bold step of considering a complete write-off of its $2.9 billion Motorola purchase, or at least relegating the brand to niche status. The setback also shows more broadly why Lenovo and other globally-minded Chinese companies need to abandon the strategy of buying struggling global brands at bargain prices, and instead should focus on developing their own names. Read Full Post…

COMPUTERS: 10 Years After IBM Buy, Lenovo Looks For New Relevance

By newsdoug on May 7, 2015

Bottom line: Lenovo has done remarkably well since defying skeptics with its landmark IBM PC buy a decade ago, and could stand a 50-50 chance of remaining relevant a decade from now in the fast-changing world of high-tech gadgets.

Lenovo celebrates a decade since landmark IBM buy

Global PC leader Lenovo (HKEx: 992) is commending itself on how far it has come since its landmark purchase of IBM’s (NYSE: IBM) PC business 10 years ago, setting it on a path that has made it the world’s top computer seller. (company announcement) I’ll admit I was a skeptic at the time of the IBM deal in 2005, and have become much more bullish on Lenovo since then. Still, the company hasn’t completely convinced me that it has the necessary skill and vision to move past its global PC crown, which is fast becoming yesterday’s news as traditional computers rapidly lose ground to newer devices like smartphones and tablets.

Before I look at the challenges that Lenovo is facing, I want to start by personally congratulating the company on its huge accomplishments over the last decade since it announced it would purchase IBM’s storied PC business for $1.25 billion. I and many others predicted at the time that Lenovo could stumble badly with the move, since it had no experience at running such a major foreign business that was clearly in decline and need of restructuring. Read Full Post…

Huaxin Chases Alcatel Office Phone Unit

By newsdoug on February 10, 2014

Telecoms history looks set to repeat itself, with word that a Chinese investor is in talks to buy the office telecoms business of struggling French networking equipment maker Alcatel-Lucent (Paris: ALU). On the one hand, I have to congratulate Alcatel for getting any money at all for the unit, which I suspect is either losing money or perhaps is marginally profitable. On the other hand, I honestly don’t understand why Chinese investment firm Huaxin Post & Telecommunication could possibly want this business, following a disastrous track record for similar European acquisitions by Chinese firms. Read Full Post…

Lenovo Results: Second Time the Charm? 联想在日德的收购会重蹈覆辙？

By newsdoug on May 24, 2012

Trouble ahead for Lenovo? Top Chinese PC maker Lenovo (HKEx: 992) has just announced some impressive results, saying recent acquisitions in Germany and Japan helped to lift its profit 60 percent in its latest fiscal quarter, as revenue rose an equally strong 54 percent. (Earnings announcement) But as a long-time China watcher, my first reaction is: I’ve seen this before, as the company’s results also got a quick boost back in 2006 after its ground-breaking purchase of IBM’s (NYSE: IBM) PC assets, which instantly gave its revenue a major boost with a large new global presence. But history watchers will also remember that honeymoon period was relatively short lived, and Lenovo later suffered big losses and launched a major reorganization after many of IBM’s former clients defected and it couldn’t efficiently run IBM’s overseas operations. So the question now becomes, are we going to see an encore performance of the IBM deal, which would see Lenovo’s fortunes rapidly fall and end with another reorganization; or will it learn from its previous IBM experience and this time do better, perhaps even achieving its goal of overtaking Hewlett-Packard (NYSE: HPQ) to become the world’s largest PC company? Before I gave my answer, let’s take a quick look at the big picture, starting with the latest acquisitions that saw Lenovo purchase German PC maker Medion and take over the PC operations of Japan’s NEC (Tokyo: 6701) last year. The US may have been a difficult labor market for Lenovo, but the challenges there will seem small compared to what it will face in Japan and Germany, the former due to its tradition of companies providing lifetime employment to workers and the latter due to its strong labor unions. Those kinds of labor issues were largely behind the failure of TCL’s (HKEx: 1070) purchase of a French TV maker and the purchase of Siemens’ (Frankfurt; SIEGn) cellphone assets by Taiwan’s BenQ nearly a decade ago. Lenovo was a little smarter this time in Japan, taking over NEC’s PC operations through a joint venture rather than an outright purchase, meaning NEC will remain as a partner to help to run the operation. But TCL also tried the joint venture approach with France’s Thomson, and clearly that didn’t work. In terms of customer defections, I would also expect those to start happening soon. In this case, the defections could be even worse, since Japanese and German consumers and businesses are especially quality conscious, and are unlikely to like the idea that they are buying computers from a Chinese company instead of a German or Japanese one. All that said, look for both of these acquisitions to run into problems, with labor issues likely to flare up in the next year and customer defections to accelerate as corporate purchasing contracts expire. The situation could become worse as many of Lenovo’s recent forays into new product areas are also likely to run into trouble, meaning the company could quickly see its new zooming top and bottom lines start to stumble, setting the stage for yet another reorganization in the next 2-3 years.

Bottom line: Lenovo could soon see history repeat, with strong results after 2 recent acquisitions setting the stage for integration difficulties and an eventual reorganization.

Sany and Yingli Take Different German Tacks 三一重工和英利的德国交易或前景迥异

By newsdoug on January 30, 2012

Sany, Yingli in new German deals I’ll start off today with a couple of news bits from Germany, one from the industrial equipment sector where Sany Heavy Industry (Shanghai: 600031) has made a major acquisition, and the other from the solar sector where Yingli (NYSE: YGE) has made a major sale. These 2 deals don’t really have much in common beyond the fact that both are in Germany, but for me the former illustrates a dubious approach for Chinese firms that want to enter Europe’s largest market, while the latter looks much more prudent. The first deal will see Sany acquire Putzmeister Holding, a concrete pump maker, in a purchase both companies say is the largest ever for a Chinese firm in Germany. (English article) The fact that they don’t give a price leads me to believe Sany didn’t give much cash for this deal, but rather is going to assume a big debt load for a company that may be marginally profitable or is more likely losing money. That would follow a pattern by other Chinese companies in Western Europe, including TCL’s (Shenzhen: 000100) purchase of the TV assets of France’s Thomson and the purchase of Siemens’ cellphone business by Taiwan’s BenQ, both of which ended in complete disasters and nearly drove their acquirers to financial ruin. In this case Sany looks equally unprepared for such a purchase, especially dealing with Germany’s tough labor laws and unions, and I see bad things ahead for both companies. In the other deal, Yingli has signed a deal to sell up to 200 megawatts worth of solar modules to a German company, IBC Solar AG, including 180 megawatts in 2012 alone. (company announcement) This kind of deal is of course much more traditional, involving a simple sale of products that has much less risk involved than the M&A approach being used by Sany. It also comes as Germany prepares to cut back many of its government incentives for installation of new solar projects, and looks like Yingli and IBC are racing to take advantage of some of those incentives while they can. (previous post) My final comment on these deals would be: Nice job on a big sale for Yingli, and, Look for stormy weather ahead, Sany.

Bottom line: Sany’s purchase of a German firm will see numerous problems in the next 2 years, while Yingli’s latest German sale looks like a major deal before government incentives are reduced.