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March 20, 2007 11:59 pm

BenQ pledges to tighten its internal controls

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BenQ, the struggling Taiwanese electronics company, on Tuesday pledged to tighten internal controls to reassure investors that Lee Kun-yao, its chairman, is fit to lead the company following an insider trading probe.

Mr Lee offered his resignation Tuesday morning, but the board decided he should stay on to help BenQ regain profitability, in a sign that he still enjoys the support of Acer, one of BenQ’s largest shareholders.

As a response to the insider trading probe, Mr Lee has asked lawyers and accountants for proposals on how to improve corporate governance and educate staff on insider trading and other securities regulations.

Separately, the chairman set up an internal taskforce to look into how losses accumulated after its takeover of Siemens’ handset business.

The moves came as BenQ reported a T$27.61bn ($833m ) net loss for 2006. BenQ said the failure to turn the Siemens handset arm round and the subsequent decision to abandon it were the main reason for the loss.

Revenue in the fourth quarter of last year dropped to T$34.6bn, down 15 per cent compared with the third quarter, after BenQ cut off relations with the former Siemens handset arm.

However, analysts said investor confidence was unlikely to be easily restored until BenQ gives a clearer explanation of its plans for future mobile operations.

Computer and digital business operations are profit­able, but David Wang, deputy CFO, said handset operations would continue to struggle until the second or third quarter.

BenQ has started to separate its brand business from contract manufacturing operations.

Executives said it was starting to get new contract manufacturing orders as customers were regaining confidence that the company no longer had a conflict of interest. But it is understood that this positive trend does not include handsets.

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