Changes at Asustek, BenQ Met With Applause

Management and corporate reshuffling at two Taiwanese electronics companies have met with investor adulation in Taipei.

Asustek Computer Inc., the world's largest computer motherboard maker, announced Monday it will split in three by January to separate its name brand product business from its contract manufacturing operations, in order to avoid conflict of interest issues with customers and boost competitiveness. Electronics maker BenQ Corp. announced a number of management changes on Friday, and announced the name of its contract manufacturing business, which will also separate from its name brand business.

BenQ shares have surged 14 percent over the past two trading days on the Taiwan Stock Exchange to end at NT$14.2 (US$0.43) on Tuesday, indicating investors like the changes. Asustek shares rose 1.6 percent Tuesday, the day after its announcement, to end at NT$95.

"We think the market is likely to continue to re-rate Asustek, appreciating the company's efforts to resolve the conflict of interest issue between the [name brand] and [contract manufacturing] divisions," wrote Henry King, an analyst at Goldman Sachs (Asia) LLC. in a report issued Tuesday. He noted that the new name brand company will be able to choose suppliers for its laptop PCs and other products, which should lower prices and force the new contract manufacturing subsidiaries to step up their performance.

The change will become official January 1, 2008, if regulators approve it. Asustek's name brand business will continue to operate under the same name, while its PC-related manufacturing operations will become Unihan Technology Corp., and its casing, modules and non-PC contract manufacturing business will become Pegatron Technology Corp. The announcement comes after months of speculation over such a move and years after some rivals in Taiwan first undertook similar changes to avoid conflicts of interest with customers.

A number of Taiwanese companies produce IT hardware for huge overseas customers such as Hewlett-Packard Co., Sony Computer Entertainment Inc. and Apple Inc., in addition to their own-brand products.

BenQ on Friday announced a series of management reshuffles and a new name for its contract manufacturing arm, which is being spun-off as Qisda Corp. The reorganization is expected to be final by Sep. 1, 2007, at which time Hsiung Hui, an executive vice president at affiliate AU Optronics Inc., will become the new president of Qisda, and Conway Lee will become the president of BenQ. BenQ is the largest shareholder of AU Optronics, the world's third biggest LCD (liquid crystal display) panel maker.