China's TCL, Alcatel jv restructuring positive move
This is a positive move and will may help the firm pull its earnings out of negative territory.
BEIJING (AFX) - TCL Corp's decision to restructure its handset joint venture with France's Alcatel, TCL & Alcatel Mobile Phones Ltd (TAMP), is a positive move and will may help the firm pull its earnings out of negative territory, analysts said.
This follows media reports that TCL will transfer the joint venture's R&D to China, with French R&D staff to be redeployed in Alcatel. In addition, the venture will merge with another unit, TCL Mobile -- the two units were originally meant to merge within three years.
'If they move R&D to China, the obvious advantage is that the R&D costs can be lowered, but the most important (improvement) would be synergy between (the venture) and TCL Mobile,' Wang said.
The new entity will be able to coordinate on R&D and on procurement, securing lower prices for materials and improving the company's competitiveness, he added.
Since its founding in August of last year, the joint venture had failed to live up to expectations.
It posted a loss of 282.97 mln yuan in 2004 and lost 378.20 mln yuan in the first quarter of this year. In May, TCL Communication bought back Alcatel SA's 45 pct stake in TAMP, turning it into a wholly-owned subsidiary.
Alcatel received a five pct holding in Hong Kong-listed TCL Communication Technology.
One major factor in TAMP's negative performance was a failure to integrate its personnel, management and R&D efforts, Wang said.
Mark Natkin, managing director of Marbridge Consulting, said that the downturn in China's domestic handset industry may have distracted the firm from the necessary work of integration.
'TCL had enough challenges to face on the homefront, that they probably invested less attention and energy towards successful integration,' he said.
China's handset makers have seen their profits shrink in the face of intensified competition from foreign rivals, leading several leading handset producers, including TCL, to post significant first half losses.
TCL booked a net loss of 692.61 mln yuan in the first half, against a net profit of 373.38 mln yuan a year earlier, largely due to the flagging performance of its handset unit.
Yesterday, TCL chairman Li Dongsheng, said TCL would return to profit at the beginning of next year, with the launch of about 40 new types of mobile phone in the second half of this year, 10 of which will be sold on the European and American markets.
Wang said he believes that it is possible the firm could return to profit in 2006, as TCL's first half results may have been especially low due to the firm's efforts to clear its inventory, which slowed down new product development.
He added that TCL has had steady sales of its mobile phones overseas.
TCL's overseas July handset sales more than tripled to 380,797 units, up from 101,268 units in July 2004.
This follows media reports that TCL will transfer the joint venture's R&D to China, with French R&D staff to be redeployed in Alcatel. In addition, the venture will merge with another unit, TCL Mobile -- the two units were originally meant to merge within three years.
'If they move R&D to China, the obvious advantage is that the R&D costs can be lowered, but the most important (improvement) would be synergy between (the venture) and TCL Mobile,' Wang said.
The new entity will be able to coordinate on R&D and on procurement, securing lower prices for materials and improving the company's competitiveness, he added.
Since its founding in August of last year, the joint venture had failed to live up to expectations.
It posted a loss of 282.97 mln yuan in 2004 and lost 378.20 mln yuan in the first quarter of this year. In May, TCL Communication bought back Alcatel SA's 45 pct stake in TAMP, turning it into a wholly-owned subsidiary.
Alcatel received a five pct holding in Hong Kong-listed TCL Communication Technology.
One major factor in TAMP's negative performance was a failure to integrate its personnel, management and R&D efforts, Wang said.
Mark Natkin, managing director of Marbridge Consulting, said that the downturn in China's domestic handset industry may have distracted the firm from the necessary work of integration.
'TCL had enough challenges to face on the homefront, that they probably invested less attention and energy towards successful integration,' he said.
China's handset makers have seen their profits shrink in the face of intensified competition from foreign rivals, leading several leading handset producers, including TCL, to post significant first half losses.
TCL booked a net loss of 692.61 mln yuan in the first half, against a net profit of 373.38 mln yuan a year earlier, largely due to the flagging performance of its handset unit.
Yesterday, TCL chairman Li Dongsheng, said TCL would return to profit at the beginning of next year, with the launch of about 40 new types of mobile phone in the second half of this year, 10 of which will be sold on the European and American markets.
Wang said he believes that it is possible the firm could return to profit in 2006, as TCL's first half results may have been especially low due to the firm's efforts to clear its inventory, which slowed down new product development.
He added that TCL has had steady sales of its mobile phones overseas.
TCL's overseas July handset sales more than tripled to 380,797 units, up from 101,268 units in July 2004.
